Capitalism might or might not work only if and when you could keep corporations out of the government.
The greatest amount of all the debt is banks lending back and forth to each other to create balance sheet entries. Much of the debt is old- rolled over and over; its point long forgotten.
Allowing investment banks and securities firms access to taxpayer deposits, ref: the 1999 Glass-Steagall repeal (Gramm-Leach-Bliley Act), and liberating the derivatives trade, ref: the 2000 Commodity Futures Modernization Act, are the two pieces of law that directly led to a situation in which banks were allowed both to 1) become as big as they are now (too big to fail) and 2) to leverage their bets as much as they have (which wiped out their capital).
And you don’t really have to be all that smart to realize that both acts are de-regulatory, and made the markets more, not less, free.