Liberty Requires Responsibility
“Give me liberty or give me death!”
Sunday, March 23, 2025 marks 250 years since Patrick Henry’s famous declaration. As America approaches its 250th birthday in 2026, R Street is celebrating our founding-era principles and how they intersect with today’s policy challenges. Explore more from our policy teams.
Freedom and liberty are as American as apple pie. Nonetheless, the U.S. government continuously inserts itself in places it has no business being, often in the name of doing things “for our own good.” This is particularly true in financial services, where government mandates and requirements lob billions of compliance costs onto financial institutions, unintentionally encourage consolidation, and lead to less consumer choice. That is why, in order to have a truly free society, consumers must be responsible.
Even those of a limited government mindset can argue that government has an appropriate role to play in the financial space. After all, many regulatory changes were made in the wake of the 2008 financial crisis due to risky practices occurring at some of the largest financial institutions. Certainly, the government contributed negatively to the crisis by sending incorrect risk pricing signals through its backing of mortgage debt, leading to a series of bank bailouts. However, it was ultimately necessary for government to step in and regulate some of the practices surrounding mortgage-backed securities.
A separate class of financial regulation stemmed from the Dodd-Frank Wall Street Reform and Consumer Protection Act, a piece of legislation aimed at preventing future crises. The actions of the time—and their impacts on everyday people—led legislators to create an entirely new agency called the Consumer Financial Protection Bureau (CFPB). In the ensuing years, the CFPB (along with regulators and legislators more broadly) has introduced and implemented myriad rules and regulations in the name of consumer protection, effectively creating a financial services “nanny state.” The core message from pro-regulatory folks is simple: We are here to protect you from the big banks, but also from yourself.
These rules ultimately suggest that consumers are incapable of making decisions or taking action without intense government intervention. For example, the CFPB imposed a rule that would forcibly cap late fees on credit cards. The regulators are essentially telling Americans, “We know you lack the responsibility and financial aptitude to always pay on time, so we will force the banks to lower your fees—for your own good.” Of course, this disincentivizes good financial habits by sending false signals to consumers regarding the consequences of failing to pay on time.
The root of the issue with financial consumer protection rules is that they degrade the responsibility necessary for freedom to flourish. Liberty cannot truly exist without personal responsibility, and consumers give up more of their liberty each time the government places a “pro-consumer” mandate.
There will always be people who are irresponsible or incapable of making good decisions. But implementing rules that protect the few at the expense of the many will always backfire, as they send incorrect signals about what behavior is good, bad, or acceptable. They also effectively create a more irresponsible society as they rely more heavily on government intervention and rules. A major point of contention in the big bank bailouts stemming from the 2008 financial crisis was whether banks would be held accountable for their actions. At the individual level, people who are not held accountable for their poor financial decisions will continue to make them, leading to further regulation and deeper government entrenchment.
Thus, to create a truly liberty-based society, we must come to terms with the realities of personal responsibility.