"A wise and frugal government which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement," is Thomas Jefferson's summary of the economic and political philosophy that gave birth to a new nation. The founders were aware that a government is needed to set good rules and enforce them. They also knew that the government, being made up of self-interested individuals, was likely to abuse power in the absence of severe legal constraints.
Current economic hardships have made us forget the painful lessons learned by previous generations. Now that so many have embraced the idea of stricter government regulation of our private affairs, we need a reminder that a paternalistic government is a poor substitute for our heavenly Father. Historically, most government regulation has not been inclusive but exclusive. It has taken away the rights of racial, religious, and ethnic minorities. It has been the source of---not the solution to---monopolies. It has created obstacles for the creation of wealth, which hurt the poor more than the rich. It has granted privileges to special interest groups to the detriment of society.
Inviting politicians to "fix" capitalism is the best thing that has ever happened to Big Business. (Just as the War on Drugs is a blessing for organized crime.) Empowering the government to intervene in the economy makes it all the more easier to pull some version of the old mercantilist "in-the-national-interests" argument and lobby for protection against foreign competition. The government obliges select domestic industries and wins the respect of both right-wing nationalist and left-wing labor union votes with tariffs, quotas, tax breaks, and direct subsidies to boost inefficient production of steel, cars, cotton, etc.
Do you want to win an election? These days all you have to do is legalize plunder. An especially popular trick is to regulate our industries. You can claim that you are doing it to protect the consumer from "price gouging" and dangerous products. Such maneuvers enthuse the comrades who are known for their inability to connect the dots from noble intentions to terrible outcomes. Some of the most infamous cases of unhealthy relationships between regulators and the regulated include the past alliance of the Interstate Commerce Commission with the railroads and today's parasitic symbiosis of FDA with the big pharmaceutical companies. It will take a while for all the nasty facts to surface about the role of politics in the current financial crisis. In the meantime, the government has a great excuse---and the support of the naive population---to multiply the number of the unholy alliances between money and power.