That doesn't mean that we should avoid all regulation - government action is sometimes the only way forward when dealing with certain situations, especially given the industry's reluctance to self-regulate. Regulatory capture is a concern, but it's something that we should be actively trying to fight, as opposed to avoiding regulation entirely.
Every time this comes up as an excuse I have to ask: how is no regulation at all any better? Sure the regulation might get fucked up by "special interests" but at least you have some voice in it through the political process. Right now you have none.
I completely agree. The analogy I often use is a lock on your front door. Sure, the lock can be picked or someone can batter down the door. If someone robs your home exploiting one of these weaknesses you will probably respond by purchasing a more complex lock or stronger door. You aren't just going to leave your door unlocked from then on out because your previous attempt at protection failed.