The government has a role in a capitalistic economy, but that role is mostly to act as a referee to ensure that abusive and dangerous practices are limited/eliminated and that all individuals have equality of opportunity. Unfortunately, the vast expansion of the government into the economy actually increases the abusive and dangerous practices, and often creates artificial and arbitrary barriers that limits some groups opportunity.
Since people will dispute the cause of the housing bubble in the United States, all you have to do is look at Canada’s (soon to collapse) housing bubble to see how government interference leads to undesirable results. By the government insuring 40 year mortgages with next to nothing down they created an environment where banks could give out massive mortgages to anyone with little risk to themselves, and this has contributed to house prices doubling in most major centers (and in some cities being four times as expensive); and the net effect has made Canadian citizens one of the most indebted people in the world. This move was done to make housing "affordable" to lower income people, and with the insanely high housing prices they are priced out of the market; and (unlike before the change to mortgage rules) it is unlikely that they could ever save up enough money to make a large enough down payments on these homes to ever buy into a market that is this over-priced.
With the exception of a few very well run programs (in other words, no programs in the United States) government interference tends to create worse outcomes for those people they're trying to help. Certainly, education has the potential to be a net-benefit, but in the United States the average child would be better off if the public education system was closed down.
