I'm back.
[T]he market place [is] revaluing assets inline with their true values.
This begs the question of how the assets became overvalued in the first place. The answer, though hard for market apologists to swallow, is that the market did it. We can't simply presume that every good thing that happens is due to the market and every bad thing is some unexplained phenomenon.
[T]hat is not the fault of capitalism but the fault of people playing silly buggers.
This is the No True Scotsman fallacy. We can't say that "True Capitalism" would have fixed this, but people playing silly buggers are the cause of all the trouble. News flash: The market is composed of people playing silly buggers! This is the very crux of the point. "True Capitalist Markets" may always value assets best when unregulated, but "True Capitalist Markets" don't exist. Classical free markets are a mathematical construct in which all the agents act rationally but with imperfect information. Real markets are real constructs where the agents are silly stupid human beings with all their irrational beliefs and psychological frailties. This is why there is an emerging field called "Behavioral Economics." This is why there was an article by Paul Krugman featured here the other day about why real markets failed English Cuisine for a century or more.
The point can be beautifully summed up in a joke I read once: An economist and his granddaughter were walking along when the granddaughter saw a $20 bill on the sidewalk. Anxious for moral guidance, she tugs on her grandfather's shirt and asks, "Should I pick up that $20 bill?"
"Nonsense," replied the economist. "If that were a real $20 bill someone would have picked it up already."