Regulation does not work

when the regulated cozy up to the regulators. Laura Unger, former SEC commissioner, tells CNBC's Becky Quick that Bernie Madoff went to great lengths to befriend government officials involved in financial services oversight.

Appointing a Regulation Czar or approving New Legislation is not going to work, folks. Government regulators will continue to miss by a mile sometimes.

Unless they are set up with the right incentives, insulated away from conflicts with the parties which they must oversee.

UPDATE: Larry Ribstein identifies two dangers with regulation:

1) First, it can make investors over-confident or over-trusting.

2) The second danger comes from fixing the first. A determined regulation advocate will insist that at some level we can really make investors safe. But even if that's true, the necessary regulation would seriously constrain the kind of risky activity that is necessary to grow the economy. We'd have to distrust all innovation, particularly financial innovation, and turn business people into bureaucrats. Just what we don't need right now.