It seems that this is precisely the trap into which the UK government has fallen with regard to financial regulation.
The minister in charge of financial regulation is Mark Hoban – who was, at one time, a devotee of free market economics. But, before the election he said he wanted a much more intrusive regulatory regime by the Bank of England.
Every scandal or crisis in financial markets yields a response of more bureaucratic regulation and more boxes to tick. The consequences are increased costs, poorer regulation and reduced competition.
See also Does Britain Need a Financial Regulator? by Terry Arthur and Philip Booth