We are living with a painful disconnect between Wall Street on the one hand and Main Street and Washington on the other. Unfortunately, this disconnect has tarnished the reputation of banking generally and made it harder for the industry to collaborate with the government.

Many "steady Eddie" banking operations have supported their communities and customers for decades, including through this crisis. The popular media tends to cast all financial issues, particularly the negative ones, as "banking" issues. Well-run traditional banks that carefully gauged risk and always put customers first are being lumped together with wild-eyed risk-takers.

Bonus pay is part of the disconnect. Rising unemployment fuels populist sentiment, so it is no surprise that banker bonuses are grabbing headlines. Over the past decade the disparity between top compensation packages and the incomes of even middle-class Americans has become a chasm, particularly in the eyes of the unemployed.

But that isn't the only reason the industry has lost credibility with Main Street. Failed and failing financial organizations drained the FDIC's coffers. The mortgage debacle upended the lives of hundreds of thousands of Americans. The recession has been laid at the feet of the financial industry, and bankers have got to make every effort to restore the industry's reputation. There is no silver bullet to accomplish this, but here are some steps that would help.

First, industry leaders would do well to set up blue-ribbon groups from within the ranks to study the origins of the financial crisis and suggest public policy actions to minimize the likelihood of a repeat. Some industry associations have taken steps and are to be commended.

However, the industry would do well to take this effort up a notch, tying such a study to the goal of long-term health for the industry and the economy and creating meaningful job opportunities. Such a study would be helpful, because the industry has a much better story to tell than is currently being told. After all, systemic crises like the one we are living through are caused not by individual private-sector misdeeds, but by governmental policies or lack of policies. To a critical degree the mortgage crisis, for example, was a failure to regulate mortgage brokers.

Such an industry-led effort could lead to recommendations for improvements in policy approaches that would enhance government debate on a variety of banking issues. While the government means well, it is not well informed about the workings of the private sector. In this regard, it would be useful to read a defense as to why trading activities benefit the economy as a whole, including Main Street. Done properly in the context of a financial institution, trading is not a casino game - it is a useful way for financial institutions to share and mitigate risk. If trading is to continue, the financial services industry should articulate an appropriate role for the activity that takes stock of the public policy implications of gains, losses, and exposures.

A virtue in a democratic society is that we should be able to benefit from a variety of voices. The private sector should be a a voice that is clear, thoughtful and informed by high-level study.

Second, this is a good time to put the pedal to the floor on civic-minded activities for the industry. Particularly where companies are earning sizable profits, long-term shareholder value is enhanced not just by dividends but by efforts on the part of the enterprise to assist those less well off in this crisis. Moreover, as in days past it would be helpful if groups like Social Compact gave proper credit and recognition for those projects that prove especially helpful.

Finally, community and regional banker compensation levels or practices aren't driving the compensation issue. It is centered on headline-grabbing numbers from entities that, fairly or not, are perceived as having benefited from government largess during the crisis and on compensation for traders perceived as one of the causes of the crisis.

Banking trade groups and some industry leaders have done a very respectable job drafting compensation guidelines that make sense, even in advance of government efforts. Several industry leaders have tied their own compensation to the lasting soundness of their enterprises.

Now with pronouncements by the Financial Stability Board and by the Federal Reserve, it is much clearer what government will expect in this area. It would behoove individual institutions that have not already done so to heed these guidelines by tying remuneration to the long-term well-being of the bank, including with the use of claw-back measures where warranted. Banks whose compensation policies no longer reflect the tenor of the times should consider revising the policies.

Now more than ever the private sector has to make its voice heard in the public arena. Though the banking industry's reputation has suffered largely undeserved setbacks, the onus is on the industry to rehabilitate its image. Banking executives can start by articulating convincingly and clearly the ways in which a healthy banking industry is vital to a healthy Main Street - and vice versa.

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