Regulatory reform fails without a prior change in moral climate

Evidence

The recurrent financial crises are systemic moral failings, not just systemic financial failings. Morality cannot be mandated or legislated, but when it is supplanted by reckless ambition, new financial products designed to circumvent existing regulations will bring about future financial crises. You can plug the hole in a leaking water barrel but with disengaged morality enterprising individuals will drill another one. In wisdom born of a wealth of knowledge, Paul Volcker explains that “There is a certain circularity in all this business. You have a crisis, followed by some kind of reform, for better or worse, and things go well for a while, and then you have another crisis” (Uchitelle, 2010). Much creativity in the financial industry will, in all likelihood, be devoted to figuring out how to circumvent the new financial reforms with new schemes. Without a change in the moral climate, legislative reforms will continue to play catch-up with new financial transgressive creativity. — Albert Bandura, Moral Disengagement, 1611

Categorization

• ADDENDUM: Reinforces the theme of institutions (regulatory reform) failing absent self-policing moral norms — parallel to the medieval trade-institutions logic and the argument that structure alone cannot compel honest conduct.
• corroborated: 2 independent passages support this claim — Albert Bandura, Moral Disengagement: How People Do Harm…, 1611
• XREF: connects to: Tradeable emissions policies stayed dormant for decades due to moral and practical objections — Richard J. Lazarus, The Making of Environmental Law, 800; Passing a reform nominally can still leave it gutted in practice — Robert A. Caro, The Power Broker: Robert Moses and the…, 356