Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Jan 25, 2026 12:41 AM

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
Adam Smith and a life well-lived
Over at Law & Liberty I had the pleasure of reviewing Ryan Patrick Hanley’s new book, Our Great Purpose: Adam Smith on Living a Better Life. I highly mend it: Ryan Patrick Hanley’s latest book offers an accessible, erudite, and concise introduction to Adam Smith in full, the moral philosopher of wisdom and prudence. In Our Great Purpose, Hanley eschews the extensive reference apparatus and jargon that is so characteristic of contemporary scholarship. Instead, Hanley has taken an approach that...
Wealth creation and the Reformed confessional tradition
I have been working as part of the Moral Markets project for the past couple of years, and as the formal end of the project looms, some of the outputs of the project ing to fruition. This includes a recent article that I co-authored, “The Moral Status of Wealth Creation in Early-Modern Reformed Confessions.” This piece appears as part of a special issue of Reformation & Renaissance Review co-edited by Wim Decock and Andrew M. McGinnis on the theme, “Interconfessional...
Acton Line podcast: The morality of ‘Joker’; How Clarence Thomas is changing SCOTUS
The new super villain drama ‘Joker’ has shattered box office records and gained much controversial media attention along the way. Set to top $900 million worldwide, the dark film from director Todd Phillips and actor Joaquin Phoenix is already being heralded as the biggest R-rated movie ever. So why has ‘Joker’ been such a hit? Christian Toto, award winning movie critic and editor at Hollywood in Toto, breaks it down, explaining how the film touches on themes like mental illness,...
Alejandro Chafuen in Forbes: Young Europeans’ views of totalitarianism
Alejandro Chafuen, Acton’s Managing Director, International, wrote recently in Forbes to give his thoughts on a recent survey that examined young Europeans’ attitudes toward various strains of totalitarianism. Attitudes in different countries vary, of course, and – unsurprisingly munism is viewed more favorably in countries that were never behind the Iron Curtain than in many eastern ones where the historical memory of it lives on. I have been reading most of the fundraising appeals sent out by think tanks and...
Rev. Richard Turnbull: Parliament’s moral failure on Brexit
UK Parliament has twice denied Prime Minister Boris Johnson a vote on a Brexit deal favored by the majority of British citizens. The latest efforts to delay Brexit have created “a modern moral crisis in one of the world’s foremost democratic nations,” writes Rev. Richard Turnbull, director of the Centre for Enterprise, Markets, and Ethics (CEME) in Oxford. Turnbull chronicles the head-spinning events that have taken place in Westminster since Parliament’s rare Saturday session in a new article for he...
Ginsburg and Hale: Creating new laws from the bench
In a mentary, Trey Dimsdale looks at winsome celebrity jurists Ruth Bader Ginsburg and Brenda Hale, heroines of the left wing project to change how constitutional law is understood in the United States and the United Kingdom. The careers of these jurists raise questions about the proper role of those who sit on the bench, Dimsdale writes. The approach adopted by Hale and Ginsburg should be viewed with skepticism rather than celebration. Of course, injustice may be reflected in a...
Book review: ‘Apostles of Empire: The Jesuits and New France’
In a new piece published at The Catholic World Report, Acton’s Samuel Gregg reviews “Apostles of Empire: The Jesuits and New France,” by Bronwen McShea, Associate Research Scholar with Princeton University’s James Madison Program. In “Apostles of Empire,” McShea details the history of Jesuit missionary efforts that took place in North America during the seventeenth and eighteenth centuries and brings attention to how the Jesuits’ missionary efforts were coupled with the advancement of French political and economic ambitions. Gregg writes:...
Why you’re richer than you think (and Jeff Bezos is poorer)
One of the most plaints against capitalism holds that real wages have stagnated since the 1970s. Meanwhile, CEOs such as Amazon’s Jeff Bezos earn more money than ever. The charge surfaced as recently as the fourth Democratic presidential debate, last Tuesday. “As a result of taking away the rights of working people and organized labor, people haven’t had a raise – 90 percent of Americans have not had a raise for 40 years,” said Tom Steyer (whose earnings rank somewhat...
Rev. Richard Turnbull: Brexit deal, last step before freedom?
UK Prime Minister Boris Johnson has negotiated a new agreement to leave the European Union on October 31. A British observer, who has read the plan, says it embodies a significant improvement over the deal former PM Theresa May saw defeated thrice by historic margins in Parliament. “Overall, these improvements represent a real step in the direction of free trade and hence are to be ed,” writes Rev. Richard Turnbull, in a new essay written for the Acton Institute’s Religion...
Video: Andrew Klavan on reintroducing our culture to the truth
On October 15th, the Acton Institute celebrated its 29th anniversary with a dinner at the J.W. Marriott hotel in Grand Rapids, Michigan. The keynote address for the evening was delivered by Andrew Klavan, the award-winning author and screenwriter. Klavan shared the story of his journey from atheism to faith in Jesus Christ, and laid out his views on how to reach out to a culture that has largely abandoned not only Biblical truth, but the very idea of truth itself....
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved