The problem with Capitalism is that when it doesn’t work, everybody expects a quick fix.

My original thought in September was that the U.S. government should never bail out financial institutions, especially using taxpayer money.

But the Treasury can’t undo what’s been done, they can only consider what TARP is actually doing to relieve a one-year-old recession and a tumorous financial crisis.

If you ask me — and I’m sure if asked Adam Smith — Corporate America needs to lean from its mistakes and accept that a free-market economy has its pros and cons. The more we soften the collapse of embattled corporations, the less likely those business will ever make genuine changes in how they run their operations or how they cut corners to make a bigger profit.

And the more our government tries to clean up the mess, the more likely future generations of American consumers, businesses, banks and investors will make the same mistakes.

The intervention between JP Morgan and Bear Sterns was tolerable. It was less a bailout in my view than an aggressive push. But it also flipped open a Pandora’s Box.

TARP is becoming a well-recognized mistake and any similar initiatives given to the auto industry would show equally lame results. Yet the Big Three have their open palms out now.

Goldman is sinking. Citi is imploding. And U.S. taxpayers are out $700 billion. Why would Ford, GM and Chrysler prove any different?

Here’s a solution: Take all that bailout money, put it towards education and start teaching finance and economics to kids in elementary school. Make it part of the core curricculum in all public and private schools all the way up to high school.

So, Lloyd Blankfein has decided that Goldman Sachs’ top management will forgo their yearly bonuses this year, bringing the “will they or won’t they” argument to a close. Now the others are expected to follow suit.

Smooth move, Lloyd: Please Washington by taking a hit at the top; let the “little people” take home their bonuses; and Wall Street and Main Street are finally reconciled.

Goldman’s “goodwill” move has prompted executives at UK-based, Barclays, PLC, Germany’s Deutschbank AG and Switzerland’s UBS AG to abandon bonuses for senior managers. But executives at Morgan Stanley, Citigroup and AIG aren’t lining up to fall on their swords. In fact, John Mack and Brady Dougan are conspicuously silent on the matter while Vikram Pandit has decided to eliminate the bonus question altogether by slashing jobs.

Everybody should take home a bonus this year, even if I’m not. It’s kind of crazy for Americans in general to expect that, just because they’re hurting, everyone else should hurt too. Congress can mask their little witch hunt as an effort to curtail corporate excess but, seriously, no one went after hedge funds at the peak of their profitability. Nobody targeted Exxon when they announced that they made over $14 billion in the third quarter of this year. So, now, making money is a problem?

Absurd.

Yes, exposure to toxic mortgage-backed securities ruined the global economy. And Wall Street should take the blame. But what is the Street supposed to do: repay investors out of the money that would have gone to bonuses? That’s not free-market capitalism. Moreover, nobody on either side of the Atlantic has mentioned that as an option.

Every economy in the world will have to limp through this recession. And — I’ll admit — some people need to go down for this. But making everyone poor won’t do anyone any good. Besides, if Blankfein — who made more than $50 million in 2007 — is an appropriate model for the typical Wall Street manager, taking a haircut in a bad year won’t hurt those at the top anyway.

If it were my decision, I wouldn’t give a dime to Wall Street to pay for CEO bonuses. But, as we all know, it’s not up to me.

I saw a segment on “The Early Show” this morning that posed this very controversial question to the experts, which made me decide that I really don’t care if these CEOs get their bonuses or how much the bonuses are–the thing I mostly care about is: Where is the money coming from?

Goldman Sachs and Morgan Stanley each have $6.8 billion and $6.4 billion, respectively, set aside for bonuses. However, U.S. taxpayers are saying that these bonuses should be eliminated.

“I may not understand everything, but I do understand common sense, and when you lend money to someone, you don’t want to see them at a new-car dealer the next day,” said Ken Karlson, a 61-year-old Vietnam veteran and freelance marketer in Wheaton, Illinois. “The bailout money shouldn’t have been given to them in the first place.”

On the other hand, Massachusetts Sen. Barney Frank says that none of the money from the bailout will be given to bonuses and that “all of the money is to go into new loans.”

While I don’t feel too strongly about either side on this issue, I think it’s a moot point. Losing a bonus is a much nicer gift than losing your house or losing your job.

Here’s the CBS piece I talked about earlier.

My favorite line in this piece is: “If firms don’t pay out the big bonuses, they’re afraid they might lose the top talent.”

Which leads me to ask: Would it be so bad to lose the people that got us into this mess in the first place?

A bit of an understatement on the day that the Dow dropped another 733 points, eh?

Peter Goodman at The Times noted Mr. Bernanke also made this curious observation at his Economic Club of NY appearance:

The real concern that we have is that we have got and developed, in this country, a very serious ‘too big to fail’ problem. And that problem, we’ve just recognized now in the current situation, how severe it is.

Just recognized? That’s right. I forgot the banks just kinda merged themselves.

Or has this all just been a red scare?

These cartoons of Comrades Paulson and Bernanke come courtesy of Bill Perkins, 39, a Houston-based venture capitalist at Small Ventures USA who has run all three as full page ads in the New York Times and other media recently.

Sez Stephen Colbert: “Garfield, the bar has been raised.”

The story goes that Perkins had made $1.25 million betting that Goldman Sachs had better fundamentals than its peers. He cashed out after Paulson announced the bailout plan and pledged to use his gain to campaign against the bailout.

“The stock did OK because the government came in and said, ‘No one can fail,’” he told the Journal. “It’s capitalism on the way up and communism on the way down.”

He commissioned an art collective called Otabenga Jones & Associates to draw cartoons for the campaign.

Why cartoons?

“I felt like a bunch of words on a piece of paper – people wouldn’t read, but with a picture, people get it right away,” he said.

Of course, the bailout passed anyway. And the government could yet commit hundreds of billions more to banks.

In an email, Perkin’s assistant said that they are considering the possibility of running more ads, but haven’t finalized anything at this time.

I hope they do. I’m fed up with the NY Times not having a comics page.