Being an investment banker has become a lonely occupation. The newspapers run articles about how you blew up the financial system of the largest nation in the free world. Commentators on business television are quick to decry the avarice that led you to do it. The administration has a person whose responsibility it is to limit the compensation of you and all your colleagues, regardless of what you do, if you work for a financial institution that has received federal monies. While the investment banker is the clear loser at the moment in today�s fiscal crisis �blame game,� will laying the blame at the foot of investment bankers hold up to scrutiny?[IMGCAP(1)] Loop Capital has been in business since 1997. We have never traded a collateralized debt obligation (CDO), originated a subprime mortgage, or sold a credit default swap. Perhaps more importantly, Loop has never received a dime of federal bailout money of any kind. You can imagine my bewilderment at the scorn being heaped upon investment bankers so indiscriminately when Loop Capital, and undoubtedly many other financial services firms, has nothing to do with creating the fiscal crisis, and, as a Troubled Asset Relief Program institution selected by the Federal Reserve, everything to do with helping to fix it.Let�s stop for a second and ask, who started this mess? The fiscal crisis was born in Washington, D.C., in the administrations of President Bill Clinton and President George W. Bush, both of whom pressured Fannie Mae and Freddie Mac to accept more subprime mortgages in order to boost homeownership beyond the 65 percent level that it had been stuck at for decades. With the government fully supportive of this new, untested, subprime mortgage product, the environment was ripe for aggressive lending institutions to market subprime mortgage loans to people who wanted the American dream of home ownership, but in truth, really could not afford it.The mortgage industry had �evolved� to an originate-to-distribute model. In other words, take your profit and sell the loan out, or �pass the trash.� It does not take a genius to realize that a business that, at its origin, involves no incentive to maintain lending standards will generate massive problems as the toxic mortgages wind their way through the financial system.What is really the purpose of a �no doc� loan except to ensure that you don�t have in writing proof that mortgage applicant can�t afford the mortgage? Firms were ready and willing to scarf up these dubious mortgages, form CDOs with them, have them rated by the principal nationally recognized statistical rating organizations, and sell them to sophisticated investors who bought them based solely on the AAA �Good Housekeeping seal of approval� of Moody�s and Standard & Poor�s. The investment bankers may have put these time bombs together, but salespeople sold them, traders traded them, risk managers assessed their apparent lack of risk, and rating agency analysts approved them as AAA-rated based upon their proprietary models. When things were going well there were a lot of different firms, different occupations, standing in line to take their cut of the action.So, if it wasn�t the investment bankers, to whom do we assign blame?Well, the mortgage origination market is a regulated market by both states and federal agencies including the Securities and Exchange Commission and the Federal Reserve System. The bulk of these actors who provided regulatory oversight were asleep at the switch. The Fed under Alan Greenspan had never put much stock in regulating market activity, and the new market for subprime loans was considered a good thing since it had given access to housing to people who previously did not have a chance to have it. It was, in Greenspan�s view, an innovation! States, which scrutinize the insurance companies and other financial service firms operating within their jurisdiction, had little interest in the aggressive sales practices of subprime lenders even after evidence of predatory lending began to surface.The publicly traded Wall Street firms involved the creation; sales and trading of the securities that used the subprime mortgages as an input were all governed by boards of directors. Where were they? Every board has to form an audit committee. Where was the audit committee of Lehman Brothers when a firm that had its roots in the 19th century filed for bankruptcy? In a system that is founded upon the premise of strong corporate governance, the boards of these firms, the investor firms, the rating agencies, and on and on were AWOL, leaving the financial system at risk.The rating agencies somehow managed to model the CDOs so completely incorrectly that securities previously deemed AAA-gilt-edged-rated went into default. How is this possible? The only explanation can be that the incentives of the marketing and sales staffs of these rating agencies so overwhelmed the ratings process that the firms were blinded by the profit opportunity. Last, and perhaps most important, the nation�s consumers, homeowners, lenders, investors, regulators and directors were so intoxicated by the �get rich quick� opportunism provided by the burgeoning mortgage security markets that all reason and responsibility was abandoned in favor of short-term incentives. Not only was there no one to pull the punch away before the party got interesting (to channel a former Fed chairman), but there was no one to stop the indiscriminant pouring of wood alcohol into the mix while no parental authority was in sight.The financial crisis that we are in the middle of is too critical, too costly, to seek refuge in simple-minded scapegoating and blamesmanship.Because there are going to be many changes to our financial system, it is important that the blame be deposited at the right doorstep lest Congress and the administration devise the wrong solution to the wrong problem.Jim Reynolds Jr. is chairman and CEO of Loop Capital Markets � www.loopcap.com �the largest minority-owned investment banking firm in the U.S.