Q. Why can regulation be worse than nothing?

A. Because regulators want to be above regulations like everyone else, but unlike everyone else, they have the power to grant themselves the exceptions.

UPDATE: Glenn Reynolds also links, saying:

Remember, when a private company wants to cover up billions in losses and the responsibility for them, that’s a major scandal and proof of the evils of capitalism. But when a government regulator does the same thing, that’s just how people are, these things happen, whaddyagonnado?