A complete writeup on this has already been written, and I'm not in a position to give any comprehensive analysis of the FAA. I would, however, like to add something that I have recently discovered and found interesting. The FAA is quite different from an agency like the FDA that rigorously tests products and has high regulatory hurdles that aviation companies must jump.
Rather, the FAA, in practice and documented in its literature, delegates testing and regulation to private individuals whenever possible. For example, major corporations that make aircraft components have designated engineering representatives (DER's)--paid employees of the corporations--that can provide FAA approval for component alterations. There are also private consultant DER's for smaller companies that can't afford their own.
I have found that the FAA is unusually lax about this delegation process. The FAA openly acknowledges that it delegates a considerable amount of regulatory authority to people with a financial interest in the products they are regulating, which is the case for in-house DER's. Often the DER is one of the company's engineers, though there is nothing prohibiting that he be in marketing, litigation, or whatever. The FAA justification is that private DER's understand the particular engineering issues well and can make safety changes more rapidly. But obviously there is also a conflict of interest issue raised. In an NTSB aircraft accident investigation, for instance, the DER's of private corporations are responsible for investigation findings for their companys' particular components.