Washington Post business columnist and Pulitzer Prize-winner Steven Pearlstein reminds investors that a complex financial crisis will not be solved by a simple solution.

Hence, Pearlstein's offered a four-part solution that he believes will get the United States back on the road to financial health.

The first involves a limited guarantee against default by the federal government for packaged loans that circulate in the "shadow" banking system, such as the way Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) do with conventional mortgage-backed securities. The FDIC is working on plan to do the above, he said, funded by either bank fees or via a modest contribution from the $700 billion TARP.

Second, the FDIC, via a new program that covers $1,000 in refinance closing costs, should be able to encourage more banks to renegotiate at-risk mortgages, greatly reducing the number of home foreclosures that are at the root of the bad bond/toxic asset pipeline.

Comment: The view from here argues that had the FDIC under chairwoman Sheila Bair been allowed to implement a version of the above program a year ago, the U.S. would have been that much closer to reducing foreclosure rates. The previous presidential administration did not act swiftly on Bair's proposal -- an unmitigated policy error that the current administration inherited. Hopefully, the Obama administration will correct it.

Washington Post Business Columnist Steven Pearlstein does not 'hold it all in,' as they say, regarding who he thinks is most to blame for the financial crisis.

Pearlstein cites the ineptitude of Wall Street and the nation's financial regulators. The crisis would have occurred whether Lehman Brothers was saved or not, because bad debt had overwhelmed the global financial system. A government intervention was inevitable, essential, and an act of leadership, in Pearlstein's view.

Conversely, Wall Street's top executives have shown little leadership, if any, he said. Their silence and invisibility throughout the crisis "attests to their moral and political bankruptcy," Pearlstein said, a perfect match for the financial bankruptcy they caused for investors, creditors, and customers.

Further, Pearlstein is particularly angered by Wall Street's top executives unwillingness to commit to a plan to enable borrowers to refinance mortgages into government guaranteed mortgages set at 85% of current market value of the property, and at the executives' utter lack of comment before the cameras, particularly regarding credit lines to businesses.

Political & Economic Analysis: Columnist Pearlstein clearly lays the blame for the financial crisis at the feet of Wall Street's top officials. Still, the mortgage process -- and the failure of a substantial portion of the subprime/Alt-A mortgage market -- involved many players: bank executives/lenders, mortgage brokers, appraisers, securitization specialists, ratings agencies, and borrowers.

Washington Post business columnist Steven Pearlstein does not mince words: too many people just don't get it.

Moreover, yours truly is not one to alarm, and typically views 'sweeping and dramatic statements' with a journalist's skepticism and a scholar's critical review.

But when the best economists you talk to, and business executives, and others in financial and investment circles, start reaching the same conclusion, from decidedly different vantage points, the dramatic statement begins to take on more weight, becoming more compelling.

'The reality of the facts on the ground'

Further, as Pearlstein incisively points out, there are reasons why a considerable portion of the American people are not 'getting it' regarding how serious the current situation is. Politicians are more concerned about ideology, partisan posturing, and teaching people a lesson -- if you can believe that they could be so irresponsible (my astonishment added, not Pearlstein's). Financiers have been very slow to admit to greed, arrogance, and incompetence. And foreign government leaders still view the financial crisis as 'an American problem.'

But none of the above changes what Pearlstein, and what my closest economist colleagues (David H. Wang, Richard Felson, Peter Dawson, M. Chandler, and Glen Langan) all argue is "the reality of the facts on the ground," to borrow a phrase from Israel's former Prime Minister and Defense Minister Ariel Sharon. Namely, that a massive, global deleveraging is taking place, and that absent a systemic rescue/intervention by the U.S. Government, in conjunction with interventions by other governments around the world, the world risks the bursting of a credit bubble that threatens to bring down the global financial system.

Washington Post business columnist Steven Pearlstein sheds some light on the current financial state of things, one that will hopefully also inspire public officials in Washington to put away the rhetoric and the partisan posturing and get down to business to solve the nation's most pressing problem.

Pearlstein argues that you can try to prevent a financial catastrophe or you can teach Wall Street executives a lesson, but you can't do both at the same time.

He's right, as he is about the current obsession with Wall Street executives' compensation. Total every stock option, bonus, liquid lunch, and town car ride in the past 10 years and you still have a drop in the bucket, a splash, compared to the consequences of a global financial calamity.

The nation, and, if they choose, the world's other major economies, can address executive salaries and compensation later, after the crisis has been resolved and markets have normalized.

And right now, markets are hardly normal, something that all in Congress and those inside the beltway need to remain focused on.

It seems hard to fathom, but some in Congress believe their local economies on the plains of Kansas or in suburban Indiana won't be affected by a potential financial panic the world has not seen the likes of in more than 50 years. Well, for those who need it, here's a refresher. Banks continue to hoard cash and are increasingly hesitant to lend to one another. Credit is drying up. Soon, citizens won't be able to get loans for auto purchases, new student loans will become scare, and small businesses will not be able to get any credit. Many large corporations will not be able to access capital for operations. This means fewer people shopping, fewer students going to school, a cutback in employment at small businesses, and many other negative consequences. And this will occur in small towns in the Midwest, on the plains of Kansas, as well as in the suburbs around Boston.