In addition to the links posted in some of the comments, the following talks by Yaron Brook (president of the Ayn Rand Institute) and John Alison (former CEO of BB&T and a prominent objectivist) might be helpful:
While they do a better job than I can at answering your question, I will provide a brief answer for anyone who is not willing to invest 266 min listening to the talks.
a. Controls cause economic problems. Government controls over the economy inevitably cause economic problems because they destroy wealth, distort behavior, and cut the link between actions and consequences.
i. Wealth destruction. Production is the creation of wealth; force destroys wealth. Government is an agency of force, not production. Anything that the government does will entail force and will therefore waste wealth. Consider the following (non-exclusive) list of ways that government intervention in the economy destroys wealth:
ii. Behavior Distortions. The government tries to incentivize and disincentivize all sorts of activities through its regulations. The incentivized activities will always be inefficient (i.e. wealth destroying); if they were efficient, then people in the free market would have done them without needing the incentive. The converse is true for the disincentivised activities—people want to do them because they are efficient, and only the disincentive stops them, thereby stopping an otherwise efficient activity. These behavior distortions are the root cause of bubbles, which, as bubbles are want to do, end up bursting. Consider the “housing crisis.” The government engaged in myriad behavior distorting activities that resulted in many people buying houses when it was not economically advisable for them to do so. For example, interest rates (regulated by the Federal Reserve) were kept extremely low and federal housing policy demanded that more “sub-prime” (i.e. high-risk) mortgages be handed out so that poorer people could become home owners. The result? A housing bubble.
iii. Cutting the link between actions and consequences. If people know that they will not suffer the consequences of their mistakes, they have no incentive to avoid the mistakes. Government intervention often shields some foolish actor from the consequences of their foolishness (at the expense of the rest of us). Thus it should be no surprise that these fools continue to make the same mistakes. Consider the bail out of the “too big to fail” banks. What message does this send to the banks? Screw up in the future?—no problem—we will bail you out. Should we be surprised, then, when these same banks screw up in the future? In the long run, the government’s attempts to avert a short-term hardship (e.g., some banks failing), will only produce more economic problems (e.g., even more banks failing in the future).
b. Controls exacerbate existing problems. Government regulations are akin to putting all one’s eggs in one basket. Capitalism is the opposite; in a capitalist (i.e., free) system, everyone is free to go their own way and try out their own ideas. As a result, there is great diversity; for every person doing one thing, there is another doing something else. Therefore, successes tend to cancel out failures. But this is not all—if someone’s ideas work, then others can learn from them, and if someone’s ideas fail, then others can learn from that. As a result of this learning, successes tend to not only cancel out failures, they overshadow the failures. Under government regulations, however, one central authority is telling people what they can and cannot do. Instead of a multitude of successes and failures canceling each other out, all will succeed or fail based on whether the regulator got his regulation “right.” If he was right, then great; we have successes—at least for the time being. But if he was wrong, then the losses are catastrophic, because we are all losing together at the same time. Furthermore, we lose much of the benefit of learning from other’s mistakes, because we are all forced to do it one way, right or wrong. As an example, consider the interest rates set by the Federal Reserve. By keeping the rate too low for too long, the Fed pumped way too much money into the housing sector, resulting in a bubble that has now burst and caused havoc. This would not have happened if each bank set its own interest rates. If one bank was setting them too low, then it would go out of business while the smarter banks thrived.
I am not an economist, and this answer is not exhaustive. But it should give you an idea about some of the causes of the financial crisis.