"And state-of-the-art risk measurement is what failed to prevent the current problems."
As with any crisis, we see lots of angry people pointing fingers. One way to think about the current issue is to imagine a family get-together: All the adults are gathered around the kitchen table talking over coffee, and we can hear the kids playing off in another room. Everyone's having a great time, when we suddenly hear a crash from other room, and the kids come flying in. "Joey broke Grandma's vase!", "No way, Eric knocked it over; I saw it!". Sure enough, Grandma's irreplaceable antique vase has been smashed to irreparable bits. The adults start yelling at the kids, and it goes downhill from there....
The US consumers, businesses, and government/regulatory-types play the adults, while the kids represent the finance industry. Assume that kids will always push their limits and rough-house; the wall between the adults and kids then becomes the problem as it prevented the adults from seeing that the kids were rough-housing too close to Grandma's vase. So, what's that wall, and how can we get rid of it?
Not too long ago, large companies held just stocks and bonds of various types. Companies periodically updated shareholders with the relevant variables ( how many shares in what company, how much debt paying what interest rate due in how many years). If you knew the basics of investment valuation, you could see how much risk exposure the company had. In this old scenario, you had no wall preventing you from groking the risks at hand. If a company was taking on too much debt or buying non-sensical stocks, the shareholders and debtholders would see this and throw management out (or just sell their shares).
Current accounting rules do not require the disclosure of the relevant variables for other newer (20-years old) financial instruments (basic derivatives like swaps, options, futures, or pooled and tranched securities). Companies just declare their market value and that's it. Were we given the valuation impacting details, we could determine a risk profile for the firm (even with aggregate data). We don't have this info, so instead all we have is a big Wall, a broken vase, and whole slew of angry people.
You still want someone to blame? Kick out your congressman; they (failed to) oversee the Financial Accounting Standards Board. Improperly disclosed derivatives have been blowing up companies for over 20 years....