Joe Nocera makes a good point about this:

For all the talk these last few years about the risks to investors of "secretive, unregulated" hedge funds, they certainly haven't turned out to be the big problem, have they? [...T]housands of hedge funds lost, in the aggregate, hundreds of billions of dollars last year, and hundreds have shut down. But nobody in government is calling for a hedge fund bailout because hedge funds losses, however painful to investors, don't create systemic risks to the nation's financial apparatus. As it turns out, it was the big regulated entities, the banks and investment banks, that were the problem, not the unregulated hedge funds.

On the other hand, while hedge-fund systemic risk hasn't been a tremendous problem this time around, it has been a big problem in the past. (Long-term capital management, anyone?) And while the "big regulated entities" have managed to cause a lot of trouble, those big regulated entities do own small, unregulated hedge funds that have managed to muck up their share of the market. (Here's a story about one from Goldman and here's a story about one from Bear Stearns.)

More generally, my understanding is that the case for regulating hedge funds never hinged entirely on containing systemic risk. A lot of it hinges on basic transparency issues and a desire to protect the actual investors in the fund. I don't know how convincing that kind of argument should be (if there's little systemic risk, then why not let accredited investors throw their money onto whatever bonfire they want?), but Bernie Madoff has certainly supplied plenty of grist for that mill.