What DO we know about Capitalism?

Before I knew about politics at all, the bail-outs happened, and my wake-up to politics and economics was there. This is a quick story on how I was introduced to money and how well the government looked after it.

The main reason I became politically aware was that the TARP and stimulus package were released, in which over one trillion was awarded to banks, the auto industry, favored friends, etc. My thinking was that those people FORFEITED their chance for money, when they started making bad decisions or corrupt practices. Why was my money being given to them as a reward for their bad behavior? Or was it "punishment"?! So I lost faith in both parties after that. Now I read, study, and learn so I can ask them a few questions if I ever get to one of them. I have decided to become an anti-campist campist! Who's with me?
One of my favorite points of Capitalism; when an entity fails and proves it was unfit to compete in the market, it must be consumed by the younger healthier competition, like fertilizer. Where was my bailout? Why not give that same money to the people, let the banks go under, let the people spend, I'm sure someone would start a fresh bank (hopefully honest). Other point, that this is what would happen if Capitalism was used to cure the problem.Widespread hurt throughout the economy. It's the equivalent of pulling off the bandaid fast. If Capitalism had been in effect throughout, enough banks would have fallen and grown to keep a fairly level rate of growth and destruction of good and bad businesses to prevent monopolies and cumbersome large unhealthy companies.
I believe that is the American Dream though, you succeed or fail under your own power. Having your big brother standing there to pick you up when you fall is cheating, especially if the other guy isn't afforded the same opportunity.