Are you just talking about grading on a curve? This happened to me in a graduate math class and I agree with you that it felt unnecessarily demoralizing. But it also seemed like a natural outcome of grading a hard class on a curve.
Really helped to shape my perception that grades are meaningless and ultimately political.
That wouldn't really be fair to the students who care about their GPAs, though.
You know it's the professor themselves that adjusts the grades? Of course the professor wouldn't fail the class if, as you suggest, it would make the professor look "useless".