As an aside, it should be noted that at least in the U.S.,
the government has always regulated pretty much everything
that was commercial in nature

Jaw-droppingly ahistorical. The Wild West was not characterized by regulation! For one thing, the de facto repeal of the Tenth Amendment and expansion of the Commerce Clause limiting the federal government had not yet happened in the early US. America's defining characteristic from 1776 to 1860 or so was extraordinarily low levels of government intervention; once Reconstruction ended, that was roughly true again till World War 1 or so. Just to give a taste of how freewheeling it was, the US had private monetary systems in the antebellum period:

http://www.businessinsider.com/history-of-the-free-bank-era-...

For a quarter of a century, America's states and
territories, and the institutions within them, began
circulating their own currency, as the agrarian mistrust of
centralized banking eventually climaxed in the destruction
of the Second Bank of the United States in 1832.

You do also realize that there wasn't even an income tax till 1913, and that most of the US revenue was provided by tariffs even through the 1800s? It is just utterly, stunningly false to state that the "the [US] government has always regulated pretty much everything that was commercial". I'm not trying to be rude, but it makes me doubt that you have studied any American history prior to 1900. Your claim is like stating that most Americans spoke French as their first tongue.

Now to your main contention:

The SEC exists for a reason. That reason is that the 1920's
demonstrated that the financial industry couldn't be
trusted to completely regulate itself

Can the SEC be trusted to regulate itself? You do know what career status is, right? Three years of noncontiguous service in the federal government and you are employed for life. You cannot be fired. And so you do this:

http://www.cnn.com/2010/POLITICS/04/23/sec.porn/index.html

SEC staffers watched porn as economy crashed. As the
country was sinking into its worst financial crisis in more
than 70 years, Security and Exchange Commission employees
and contractors cruised porn sites and viewed sexually
explicit pictures using government computers, according to
an agency report obtained by CNN. More than half of the
workers made between $99,000 and $223,000. All the cases
took place over the past five years.

Moreover, can the SEC be trusted to regulate the financial industry? The SEC is the definition of a captured agency, completely in thrall to large banks (as Elizabeth Warren recently showed). We can trust the SEC to harass Bitcoin, Paypal, and startups. We can also trust the SEC to be bribed or captured out of “regulating” the financial markets. Only real competition can regulate such markets, the competition that comes from eliminating barriers to entry and allowing folks like Angel List and Funders Club to disrupt clubby Wall Street.

and would use information asymmetries to its advantage to
bilk investors out of their money.

Caveat emptor is the only protection against bad investments. The idea that the SEC would protect investors from being bilked is laughable. The government is suing S&P in retaliation for downgrading the US debt!

http://online.wsj.com/article/SB1000142405311190359690457651...

There are other disturbing questions related to the timing
and the target of this federal civil prosecution. S&P's
attorney Floyd Abrams tells us that "things seemed to rev
up in terms of the intensity" of the federal investigation
after S&P's historic downgrade of United States credit
following Washington's debt-limit fight in 2011. Meanwhile,
a McClatchy Newspapers report says that it was around that
time that Moody's, which did not downgrade the government,
was dropped from the federal investigation. Ask any
investor and he'll likely tell you that Moody's was equally
awful in forecasting the mortgage debacle.

Does the SEC rate US Treasuries as comparable to junk bonds, with significant sovereign default risk? Does the SEC tell Americans that their dollars are being inflated away to be direct deposited in the accounts of large banks? Given the events of the last five years, it is only extraordinary ignorance or chutzpah that could lead someone to claim that the SEC protects investors. Only you can protect yourself against bad investments.

Similar lessons have been learned with regards to the food
industry, drug industry, manufacturing industries, etc.

No. This is just a rehash of the conventional wisdom. Without FDR’s regulatory state we would ostensibly be victims of those evil businesses, as we are incapable of judging product quality on our own. Therefore we need to give up our judgment as consumers to unelected regulators, who will intercede and corral industry on our behalf, naturally, despite the fact that they have zero accountability and literally cannot be fired. You mention drugs. We’ve talked about how the SEC is a corrupt failure. The FDA is also a corrupt failure. Here’s just the tip of the iceberg:

http://dealbook.nytimes.com/2012/03/05/ex-f-d-a-chemist-sent...

Ex-F.D.A. Chemist Sentenced to 5 Years in Insider Case

A federal judge sentenced a longtime chemist with theFood
and Drug Administration to five years in prison for using
confidential information about drug applications pending
with the agency to make nearly $4 million in illegal
trading profits.

http://www.nytimes.com/2012/07/31/us/dr-robert-smith-caustic...

Dr. Smith stood to profit from his accusations: he and
other disgruntled F.D.A. scientists had filed a lawsuit,
kept secret under court seal by law, against manufacturers
of imaging devices. After discovering the suit, F.D.A.
officials began to suspect his motives. Those suspicions
intensified when they learned that he had filed similar
whistle-blowing lawsuits against two previous employers,
Yale and Cornell.

http://articles.latimes.com/2002/jun/17/business/fi-imclone1...

Source of Tip on ImClone Drug Is Identified

Greenwood said he understood that Turner was formally
representing Bristol-Myers Squibb Co., ImClone's partner on
Erbitux, at the time he passed along the FDA information.
If that is true, the FDA official who gave Turner the
information, Richard Pazdur, almost certainly had a legal
right to do so, and Turner would have had a right to
receive it.

But that does not mean people who received Turner's
information had the right to sell shares ahead of the bad
news. Some members of Congress have said the FDA "leak" was
unwise at best. And it has fed investor suspicions of other
leaks at the FDA that are being used to earn unfair
securities trading profits. "Short sellers," investors who
bet a stock will fall, made millions late last year by
placing bets against ImClone's shares in the weeks before
the FDA rejected Erbitux.

One can go on like this indefinitely. Only someone who either (a) profits from the complexity of the regulatory state or (b) is completely unfamiliar with its workings could fail to be appalled by the level of corruption and incompetence that is its defining characteristic. These people can't be fired. They need to be.