It is populist fodder to stand up on a soapbox and say that Wall Street fat cats and bankers led the nation's economy to the edge of the abyss and grossly enriched themselves while doing it. It is also painfully and simply the truth.

And for those of us who have been ardent believers in "free market" capitalism it poses some very challenging questions.

The question of "too big to fail" is the central issue behind our economic meltdown and the most critical issue we have to solve to avoid a future one. The fact that the failure of any one of a handful of organizations could devastate the entire economy is a question of national security. This is what the current and former Treasury secretaries and the chairman of the Fed are telling us almost happened.

This issue is unique to the financial services industry. Given the interconnectedness and interdependence of money-center banks and the largest investment banking firms, the failure of one could cause the failure of all. After all, we have seen the failure of large companies before and economically survived them. A GE failure, for example, would wreak havoc on the economy and cause massive job loss, but not have the secretary of Treasury talking about financial apocalypse or paralysis.

2008 was not about survival of the fittest in the financial services industry. That would have required the entire species of the Wall Street banks to become extinct. Instead, it was a system of select intervention. The process wasn't consistent and it wasn't fair. It bet favorites and helped friends. It certainly wasn't laissez-faire capitalism. Many have criticized this, but few, perhaps none, of these critics can articulate an alternative strategy, or at least one that would not have resulted in permanent economic devastation.

Some of the loudest critics of the banks' loose lending practices were the ones who have been criticizing the banks for too-stringent lending guidelines (the same debate continues today). But the blame game offers no concrete benefit. It offers no solution that will prove to be practical in avoiding a similar catastrophe. It is time for a fix and that means reform. To have meaningful reform we need to understand what went wrong.

Many of the brightest minds in the financial services industry thought that spreading risk across the balance sheets of several companies and entities was a positive innovation of the last quarter of the 20th century. Very few people saw that if you got complacent about the risk because you relied on the fact that it was spread out, then you might begin to not understand the risk you absolutely have. And then if you had a company that was going to insure that risk, but you were funding the company that was insuring that risk … well, it just gets too complicated to really understand.

Then, there is this phenomenon of too big to fail. We know now that if the wrong institution fails, it brings down the whole industry. This is the primary problem that regulators and lawmakers should be focused on. Compensation is just a smoke screen. We need to protect the industry and its role in supporting the economy. The cause of this economic devastation on Main Street was the failure of Wall Street.

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