Nearly three years after the financial system began to melt down, America continues to suffer the effects of the worst economic crisis since the Great Depression.

Millions of Americans have lost their jobs, homes and retirement savings. Although some key indicators are beginning to move in the right direction, many families still are struggling and the economic damage is slow to heal on Main Street.

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On Wall Street, however, it has been back to business as usual.

Last year, Wall Street's largest firms handed out record bonuses totaling nearly $146 billion, an 18 percent increase from 2008. Meanwhile, overall U.S. per-capita income declined 2.6 percent.

So it's little surprise that Wall Street financiers are not enthusiastic about reforms that would change the way they do business. In fact, some of them claim that Wall Street just has a few potholes that need fixing.

Instead of fixing potholes, what Wall Street really needs is more stop signs at the intersections and some good traffic cops.

As the Senate debates Wall Street reform, here are some key problems and solutions:

Problem: Shadow financial system

Solution: Transparency and accountability

There's a lot more to the modern financial system than meets the eye, including the eyes of regulators. In recent years, a vast unregulated market has sprung up based on derivatives, financial instruments whose value is determined by the future price of something else.

Companies dealing in commodities, like agricultural goods, have long relied on derivatives to hedge their risks. But Wall Street financial speculators turned it into the Wild West. When the shooting was over, brand-name companies like Merrill Lynch, Bear Stearns and Lehman Brothers were dead on the ground.

Derivatives, when used properly, play a crucial role in our economy as many Minnesota companies know. They can provide businesses and manufacturers an important tool to manage their risk. But when irresponsible financial institutions are allowed to make unconscionable bets hidden from the view of the market and its regulators, the stability of our economy can be threatened.

This shadow financial system needs to be brought into the open, with derivatives traded through a regulated clearinghouse. With transparency comes accountability. With accountability comes more responsible and less risky behavior.

Problem: "Too big to fail"

Solution: Early warning system

The domino effect of financial companies toppling one another shows the problem of systemic risk, otherwise known as "too big to fail."

Problems at deeply interconnected financial firms like insurance giant AIG didn't just create economic ripples. They sent a tsunami wave surging through the entire economy. We can't let it happen again.

One strong proposal is to create a Financial Services Oversight Council, led by the Federal Reserve, that would have expanded powers to hold these systemically-important companies to higher standards.

Problem: One-size-fits-all ineffective regulations

Solution: Smarter regulations, better oversight

Families weren't the only ones who got overloaded with debt.

While our Minnesota community banks stayed away from the complex financial products that brought down Wall Street, many Wall Street financiers got involved in risky deals. Although these investments looked highly profitable, they disguised enormous risks. Supposedly neutral credit rating agencies were complicit as they systematically minimized these risks.

When the housing bubble burst, these investments turned toxic.

This experience shows the need for smarter regulations, tougher oversight and going after the shadow banking industry. But it also means taking account of smaller banks' needs, and making sure they continue as pillars of economic credit in our Minnesota communities.

Finally, too much easy credit was being thrown at consumers during the past decade with subprime loans, adjustable-rate mortgages and credit card offerings overflowing the mailbox. Cheap credit, as many found out the hard way, can get very expensive.

Nobody forced consumers to take on credit they couldn't afford. But a fair share of the blame belongs to non-bank businesses that engaged in unfair, deceptive and abusive practices, like predatory subprime mortgages.

Reform legislation should include provisions to look out for the best interests of consumers by educating them about their financial choices, ensuring they have access to less-risky products and protecting them from abusive sales practices, including from non-bank lenders.

Boiled down to essentials, the financial crisis was about risks that everyone thought they could manage but that instead got wildly out of control. Three years later, Wall Street is still operating by the same old rules, which means the same risks are still there. It's time for reform because we literally can't afford another financial crisis.

Amy Klobuchar is a Minnesota senator.