Aren't the rating agencies a counter example of the success of this model? They have proved that private market "over-site" is just as susceptible to influence of the regulated.

A flavour of this idea already exists inside the government and it has lead to a race to the bottom not increased accountability. Large corps are free to choose whom their primary regulator is.

Interesting take on from This American Life on the effects of the Office of Thrift Supervision's efforts to market themselves to businesses as a regulator.

http://www.thisamericanlife.org/radio-archives/episode/382/T...