Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Jan 6, 2026 5:09 PM

Dodd-Frank regulations, originally scheduled to take effect on July 16, are intended to create market stability. Instead, they are doing just the opposite.

Regulations aimed at financial derivatives, incorporated into the Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law last July, have recently been rescheduled to take effect on December 31. The regulations are aimed at reducing the risk of derivatives, a contentious issue among those debating the root cause of the financial crisis. A Reuters’ report suggests this legislation will create uncertainty and a legal void for the derivatives market. Fears that trades could be challenged or invalidated may send the market for swaps (over-the-counter derivatives) into “legal limbo,” according to NASDAQ News.

Scott O’Malia, missioner of the Commodity Futures Trading Commission, told Reuters,

I have concerns that this proposal will not provide the appropriate level of legal certainty, and if it is to last only a few months, will likely only serve to further confuse and frustrate the markets and market participants.

Legal delays and uncertainties are only a small part of a much larger problem. Saturated with 2,253 pages of confusing regulation, Dodd-Frank is considered to be the most drastic financial revision in 80 years.

Former U.S. Senator Judd Gregg, now an adviser to Goldman Sachs, says Dodd-Frank goes too far for our good. He argues the regulation will hurt job creation and smother economic growth:

The consequences will be a massive transfer of economic activity overseas and an equally massive contraction in the liquidity and credit that keeps U.S. petitive and vibrant.

Though intended to stabilize the financial market, Dodd-Frank is creating more uncertainty and instability at our liberty’s expense. Regulation will petition and stifle individual freedom. In an attempt to correct the immoral behavior on Wall Street, the government promising the dignity of the individual by reducing financial choices.

In mentary titled “Credit Crunch, Character Crisis,” Samuel Gregg, the Director of Research at the Acton Institute, discusses the financial and moral costs of similar risk-controlling regulation in the past:

A longer-term problem is that this failure may facilitate calls for more financial regulation, much as the Sarbanes-Oxley Act was a response to America’s 2000-2001 corporate scandals. The evidence is growing that Sarbanes-Oxley has proved extremely costly for business. Even Sarbanes-Oxley’s authors now concede many of its provisions were badly drafted.

According to a University of Pittsburgh study, Sarbanes-Oxley’s discouragement of prudent risk-taking and its generation of pliance-costs have contributed to many firms listing themselves in the City of London rather than Wall Street. This has also been facilitated by Britain’s Financial Services Authority’s shift away from Sarbanes-Oxley-like procedural approaches to financial regulation, towards principles-based regulation which focuses on (a) the behavior reasonably expected from financial practitioners and (b) good es.

In the end, however, no amount of regulation — heavy or light — can substitute for the type of character-formation that is supposed to occur in families, schools, churches, and synagogues.

These are the institutions (rather than ethics-auditors and business-ethics courses) which The Wealth of Nations’ author, Adam Smith, identified as primarily responsible for helping people develop what he called the “moral sense” that causes us to know instinctively when particular courses of action are imprudent or simply wrong — regardless of whether we are Wall St bankers or humble actuaries working at securities-rating agencies.

Perhaps the recent financial turmoil will remind us that sound financial sectors rely more than we think upon sound moral cultures.

Gregg’s economic and moral analysis suggests regulation cannot build character. The implicit goal of Dodd-Frank is to achieve moral ends on Wall Street through coercive means — expanding government oversight. We must remember virtue cannot be artificially manufactured by increased regulation; rather virtue requires freedom to choose the proper course of action. Moral character in the business world should be encouraged by a proper incentive structure, but even more importantly by the values taught in our social institutions.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
The Spanish tradition of freedom in the 16th and 17th centuries
The following article is written by Angel Fernández Álvarez and translated by Joshua Gregor. Juan de Mariana This October 31, I will give a conference entitled The Spanish School of the XVI and XVII Centuries at Harvard University, in order to explain in detail the “institutional framework” and the principles of growth upheld by the late Spanish scholastics. In the conference, organized by the Harvard Real Colegio Complutense, I will explain the importance of Christian humanism, which spread especially from...
Radio Free Acton: Was Jesus a socialist? The importance of poetry
On this episode of Radio Free Acton, Dan Hugger, Research Associate at Acton, speaks with Larry Reed, President of the Foundation for Economic Education, about the question that seems to be cropping up everywhere nowadays: Was Jesus a socialist? Then, Bruce Edward Walker talks to James Matthew Wilson about his new volume of poetry and on why poetry is important today. Check out these additional resources on this week’s podcast topics: Read “Jesus would have voted socialist, says Germany’s Left”...
How a Protestant pastor defended Brazil’s Catholics
It was in Brazil’s 2010 elections that the majority of the voters first learned about Silas Malafaia. It was also the election in which the left-wing president Lula da Silva reached the height of his political power. Lula was one of the most successful left-wing populist leaders of Latin America in the first two decades of the 21st century. He had all the pragmatism of a Tammany Hall boss. He could be applauded by a crowd of Communists one day...
The political manipulation of religion
The fact that something is political does not mean that it is not religious, says Paul Marshall. Instead of describing something as political, not religious, we might should describe it as the political manipulation of religion, or the insincere use of religion: This stress that events are not religion but politics can lead to misunderstanding the nature of both religion and politics. It can be akin to saying that a table is not round but red. But tables can be...
How the populist moment can become the liberty moment
Since the War of Independence, the American self-image has set individual liberty against oligarchic power. Abraham Lincoln encapsulated this when he described the American experiment as a government “of the people, by the people, for the people.” Perhaps it was inevitable that populism, in the form of the People’s Party, was born on U.S. soil – and that, as it experiences a modern-day resurgence, it begins in the United States. The original Populists described themselves as “the plain people” fighting...
William Penn on the three fundamental rights of citizens
Yesterday was the birthday ofWilliam Penn, the influential English Quaker and founder of Pennsylvania. This year also marks the 300th anniversary of his death. Although Penn was an Englishman, he became, as Gary M. Galles says, the first great champion of American liberty. As Galles notes, When Charles II died, a large debt to Penn’s father was settled in 1681 by granting him what would e Pennsylvania. Penn implemented his authority over the colony in his 1682Frame of Government, Pennsylvania’s...
The reason young people embrace socialism revealed
Why do young people throughout the West have an increasingly positive view of socialism? The answer has been ferreted out between the lines of a survey recently conducted for the Charles Koch Institute. Young people’s infatuation with socialism remains one of the most lamented (or celebrated) facts of the cultural landscape – but both sides agree, it is an undeniable fact. Americans under the age of 30 hold a more favorable view of socialism than capitalism, according to a Gallup...
Review: Bradley Birzer’s Russell Kirk biography invites us to reconsider conservatism
This is the fifth in a series celebrating the work of Russell Kirk in honor of his 100th birthday this October. Read more from the serieshere. During the twentieth century, one man in particular took it upon himself to make a project of defining and perhaps re-invigorating an American conservatism which the prominent cultural critic Lionel Trilling dismissed as “a series of irritable mental gestures.” I remember picking up a copy of Russell Kirk’s The Conservative Mindmany years ago. As...
The economics of choosing the right career
Note: This is post #97 in a weekly video series on basic economics. Warning for young people: having a college degree no longer guarantees you’ll be able to find a good job, much less have a promising career. Four-year college graduates with entry-level jobs actually earned more in 2000 than they’re earning today. Choosing a good career requires planning beyond getting a college education, says Tyler Cowen of Marginal Revolution University. In this video he explains why you’ll want to...
Alexis de Tocqueville, socialism, and the American Way
Tocqueville determined that the one defining factor in the United States was equality of condition, says John Wilsey in this week’s Acton Commentary. Tocqueville noticed that Americans apparently had the singular ability to prevent equality of conditions from yielding democratic despotism. Through voluntary associations, vigorous local government, a pursuit of self-interest rightly understood, and laws that were based on an accepted moral structure taught in disestablished church bodies, Americans were able to strike that critical balance between private interests and...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved