Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Mar 25, 2026 8:35 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
Millennials Lacking Hope for Entrepreneurship
Today at the FEE (Foundation for Economic Education), Zachary Slayback has an excellent overview of the decline in entrepreneurship among those under 30 since the late 1980s. He writes, Between local, state, and federal regulations placed on everything from who isallowedto braid hairtowho can tell you what color to paint a wall and where to place a doorand a schooling culture and system that encourages young people to waste away the first 22-30 years of their lives away from the...
Whose Status Do You Want to Raise?
In a ment about neo-reaction (forget about that for now, this isn’t about neo-reaction), economist Arnold Kling says “a major role of political ideology is to attempt to adjust the relative status of various groups.” One e of this is that, … every adherent to an ideology seeks to elevate the status of those who share that ideology and to downgrade the status of those with different ideologies. That is why it matters that journalists and academics are overwhelmingly on...
A Gideon v. Wainwright Reminder
Over the past decade media coverage of the problems surrounding indigent defense has been increasing. For example, The American Civil Liberties Union (ACLU) is currently suing the state of Utah for failing to uphold that 6th Amendment which now provides opportunities for government provided criminal defense. The ACLU is claiming that Utah fell short of its obligation to provide attorneys to criminal defendants who cannot afford to hire one. While the merits of the case have yet to be properly...
Why Do You Need a License to Braid Hair?
There are numerous forms of crony capitalism, but one of the most subtle and damaging to the economically vulnerable are occupational licensing laws. For millions of Americans, occupational licensing continues to serve as a barrier to work and self-sufficiency. Take, for example,Melony Armstrong. When Armstrong began her hair braiding business, she was required tohave a cosmetology license, which required 1,500 hours of training and $10,000 in tuition. What makes this state occupational licensing requirement so unreasonable? None of the training...
McDonald’s as social enterprise: Capitalism’s community center?
We live, work, and consume within an increasingly grand, globalized economy. Yet standing amidst its many fruits and blessings, we move about our lives giving little thought to why we’re working, who we’re serving, and how exactly our needs are being met. Adam Smith’s “invisible hand” feels more invisible than ever. In response to our newfound economic order, big and blurry as it is, many have aimed to pave paths toward more munitarian” ends, epitomized by recentwaves of “localist consumerism,”...
Election Season in the Spiritually Vacant State
“When the value-bearing institutions of religion and culture are excluded, the value-laden concerns of human life flows back into the square under the politics of politics,” wrote Richard John Neuhaus, “It is much like trying to sweep a puddle of water on an even basement floor; the water immediately flows back into the space you had cleaned.”Although he made ment thirty-twoyears ago, the late Fr. Neuhaus could be describing the current election season. While there is much that could be...
Free Markets Are Necessary But Not Sufficient
To be a champion of free markets is to be misunderstood. This is doubly true for free market advocates who are Christian. It’s an unfortunate reality that many of us have e to accept as inevitable. That doesn’t mean, however, that we don’t attempt to clear up misunderstandings when we can. So let me attempt to clear up one of the most notorious misunderstandings: Few advocates of free markets (and none who are Christian) believe that free markets are a...
Lessons on Work as Service from a Hotel Housekeeper
When es to basic definitions of work, I’ve found fort in Lester DeKoster’s prescient view of work as“service to others and thus to God” — otherwise construed as “creative service” in For the Life of the World: Letters to the Exiles. Our primary focus should be service to our fellow man in obedience to God, whether we’re doing manual labor in the field or factory, designing new technology in an office or laboratory, or delivering a range of “intangible” services...
Recognizing the abused, disadvantaged, and invisible on International Widow’s Day
“Cursed be anyone who perverts the justice due to the sojourner, the fatherless, and the widow.” Deuteronomy 27:19a Today is International Widows’ Day (IWD), a day to recognize the situation that widows (of all ages) face internationally and at home. From the United Nations: Absent in statistics, unnoticed by researchers, neglected by national and local authorities and mostly overlooked by civil society organizations – the situation of widows is, in effect, invisible. Yet abuse of widows and their children constitutes...
Video: Magatte Wade On The Power Of Business
During her evening plenary presentation, Magatte Wade asked the audience to raise their hand if they cared about poverty alleviation; hands went up all over the room. She followed up by asking how many in the room had checked the doing business index recently; far fewer hands went up. It’s easy to forget that the most powerful poverty alleviation tool is a job, and that jobs are more plentiful in those parts of the world where it is easier to...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved