The global financial meltdown has been marked by shortages -- of oversight, due diligence, moral fortitude and common sense. Today, approximately two years after the housing bubble burst and world stock markets collapsed, possibly the only surplus left from the crisis is that of finger pointing and blame.

"The question of blame has been one that's been on a lot of people's minds," said Wharton Dean Thomas S. 

Robertson, introducing a panel discussion this week titled, "Responsibility and the Financial Crisis of 2008." Attempts to pinpoint who or what caused the global financial crisis usually results in a long list of suspects: The Federal Reserve, government regulators, credit rating agencies, the Securities and Exchange Commission, subprime lenders and borrowers, and even business schools have found themselves at the end of an accusing finger. "Whether they bear some responsibility or not," Robertson said, "We have an obligation to immerse ourselves in the question, 'Where do we go from here?'"
'A Race to the Bottom': Assigning Responsibility for the Financial Crisis

The panel of professors from Wharton and the University of Pennsylvania spread the responsibility around. The possible culprits they identified ranged from global capital imbalances to outdated regulatory structures. Some found fault with the private sector and greed on Wall Street, while others argued that the government had not been held fully accountable for its failures. Perhaps the only common ground was a belief that there are no simple solutions. Oversimplification of complex problems is dangerous, some warned, and in itself might have contributed to the crisis.

According to Wharton finance professor Franklin Allen, there hasn't been enough focus on the real causes of the financial crisis, which he traces to loose monetary policy and global capital imbalances. "The public sector has done a very successful job of pushing blame to the private sector," he said. "So for example, there's a lot of debate about consumer protection, but not the Federal Reserve.... There is little talk of reform of the global financial system.",

The immediate cause of the crisis was clearly the housing bubble, Allen said. From 1890 to 1996, real housing prices rose 27%, whereas between 1996 and 2006, they rose 92%. "That's more than three times as much. And that's the problem." The more important question is what caused the bubble. In Allen's view, subprime mortgages were not to blame, because other countries without subprime mortgages also suffered housing bubbles. Rather, the problem was that the Fed kept interest rates too low for too long, and imbalances in global capital flows allowed people to borrow large amounts at low rates. "It became a very attractive arbitrage to borrow and buy houses," Allen said.

He traces the global imbalances back to the Bretton Woods Agreement of 1944 and the Asian financial crisis of 1997. Since Bretton Woods smoothed financial conflict after World War II, the world's financial system has been dominated by the United States and Europe. As a result, Asia had little representation at the International Monetary Fund when its financial crisis unfolded in 1997. Unable to get the loans they needed during the crisis, Asian countries subsequently piled up safety stashes of $4 trillion in foreign reserves, money that ended up being invested in U.S. debt and contributing to the housing disaster.

The U.S. now borrows more money than any other country in the world, noted Wharton management professor Mauro F. Guillén, who also saw global capital imbalances as one root of the crisis. Guillén argued that the crisis "should be seen in the wider context of what is going on in the world." For example, from a regulatory standpoint, one crisis contributor was the fierce competition between London and New York about who would have the lowest financial regulations -- what Guillén called a "race to the bottom" in regulatory terms. London began to compete aggressively in the 1980s to woo financial firms back to England. The U.S. responded by easing financial regulations in the 1990s, eventually repealing the Glass-Steagall Act -- a Depression-era law that barred commercial banks from engaging in investment-bank activities, and vice versa -- in 1999. But the easing of regulations in the U.S. included no reform of its regulatory structure, which remained a hodge-podge of agencies inherited from The Great Depression. The result was "regulatory fragmentation," Guillén said. "No agency had a 360 degree view."