An additional problem with regulations is that the regulators are often completely blind to activity on the other side of regulatory boundaries. This was a pret

An additional problem with regulations is that the regulators are often completely blind to activity on the other side of regulatory boundaries. This was a pretty big contributor to the 2008 Financial Crisis - risky loans were sold off of the books of American banks, packaged up as AAA rated securities, and then sold to European banks which were allowed (by formula) extremely high levels of leverage for buying AAA rated debt.