Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Sep 22, 2024 9:34 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
Verse of the Day
  Commentary on Today's Verse   Commentary on Psalm 32:8-11   (Read Psalm 32:8-11)   God teaches by his word, and guides with the secret intimations of his will. David gives a word of caution to sinners. The reason for this caution is, that the way of sin will certainly end in sorrow. Here is a word of comfort to saints. They may see...
Verse of the Day
  Ecclesiastes 2:10-11 In-Context   8 I amassed silver and gold for myself, and the treasure of kings and provinces. I acquired male and female singers, and a haremThe meaning of the Hebrew for this phrase is uncertain. as well-the delights of a man's heart.   9 I became greater by far than anyone in Jerusalem before me. In all this my wisdom...
Verse of the Day
  Psalm 42:2 In-Context   1 In many Hebrew manuscripts Psalms 42 and 43 constitute one psalm.In Hebrew texts 42:1-11 is numbered 42:2-12.Title: Probably a literary or musical termAs the deer pants for streams of water, so my soul pants for you, my God.   2 My soul thirsts for God, for the living God. When can I go and meet with God?...
Verse of the Day
  Commentary on Today's Verse   Commentary on Matthew 9:18-26   (Read Matthew 9:18-26)   The death of our relations should drive us to Christ, who is our life. And it is high honour to the greatest rulers to attend on the Lord Jesus; and those who would receive mercy from Christ, must honour him. The variety of methods Christ took in working his...
Verse of the Day
  Commentary on Today's Verse   Commentary on Proverbs 17:27-28   (Read Proverbs 17:27-28)   A man may show himself to be a wise man, by the good temper of his mind, and by the good government of his tongue. He is careful when he does speak, to speak to the purpose. God knows his heart, and the folly that is bound there; therefore...
Verse of the Day
  Proverbs 6:6-11 In-Context   4 Allow no sleep to your eyes, no slumber to your eyelids.   5 Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler.   6 Go to the ant, you sluggard; consider its ways and be wise!   7 It has no commander, no overseer or ruler,   8 yet...
Verse of the Day
  Commentary on Today's Verse   Commentary on Proverbs 17:10   (Read Proverbs 17:10)   A gentle reproof will enter, not only into the head, but into the heart of a wise man.   Proverbs 17:10 In-Context   8 A bribe is seen as a charm by the one who gives it; they think success will come at every turn.   9 Whoever would foster love covers...
Verse of the Day
  Commentary on Today's Verse   Commentary on James 1:19-21   (Read James 1:19-21)   Instead of blaming God under our trials, let us open our ears and hearts to learn what he teaches by them. And if men would govern their tongues, they must govern their passions. The worst thing we can bring to any dispute, is anger. Here is an exhortation to...
Verse of the Day
  Hebrews 4:12 In-Context   10 for anyone who enters God's rest also rests from their works,Or labor just as God did from his.   11 Let us, therefore, make every effort to enter that rest, so that no one will perish by following their example of disobedience.   12 For the word of God is alive and active. Sharper than any double-edged sword,...
Verse of the Day
  Romans 8:6 In-Context   4 in order that the righteous requirement of the law might be fully met in us, who do not live according to the flesh but according to the Spirit.   5 Those who live according to the flesh have their minds set on what the flesh desires; but those who live in accordance with the Spirit have their...
Related Classification
Copyright 2023-2024 - www.mreligion.com All Rights Reserved