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This essay will discuss about what cause the global financial crisis in 2007 and who have to be blamed. By looking this assignment, we will find the point where the global financial crisis was caused whether corporate greed, regulatory failure, or some other factors. We will find some issues and evidence regarding this topic and see how it can cause the global financial crisis.
This essay consists of introduction, body, and conclusion. On the introduction, I will brief explain about the background of global financial crisis and state my point of view towards the problem. On the body, I will discuss more about the global financial crisis and describe the theories of social responsibilities and regulation which have relation to the topic. Then, I will use these theories to discuss the crisis, its cause, and decide who is the most responsible towards the crisis. I will also find some evidence and supporting ideas that relates to the topic from newspaper, articles and some other sources that might be relevant. On the conclusion, I will summarize all issues that discussed in this essay and decide who have to be blamed for causing the global financial crisis.
Financial crisis was 'introduced' in U.S during 2008. There are many causes that trigger global financial crisis. Some say it because of failure in banking sector; the others say it is due to the corporation that make it happen. There are no correct answers to respond what the major cause of this problem. However, the impact is definitely huge toward the financial system over the countries in the world. For instance, during the crisis, the stock markets in U.S were stagnant and tend to decrease towards bust  . These impacts also spread to all over the countries. To counter the wild spread of the crisis, government in many countries had taken some actions to counter the crisis. One of the actions that government choose is introducing fiscal stimulus to the economy. This action may offset the reduction in private sector demand caused by the crisis 
From the issues that we are going to be discussed, I believed that the primary cause of the global financial crisis was because of regulatory failure, corporate greed and some other factors that might be relevant. Although the question state that I have to choose one of those primaries causes, however, I think that all of them are taking part of the global financial crisis.
Global Financial Crisis
There are many issues regarding the sources of global financial crisis. The crisis itself began in 2008 where at that time lots of American and European companies were bankrupt following the sub-prime mortgages. During September 2008, two American firms, Fannie Mae and Freddie Mac were nationalised by government, following the bankruptcy of Lehman Brothers and Merrill Lynch couples of weeks later. Due to these bankruptcies, it causes a major instability on the global stock markets with major decrease in market value of stocks. 
According to Johnson, this crisis was initially started due to the collapse of the housing market in U.S  . Sub-prime mortgages are also taking part on this destruction. Back in 1990s, housing price in the U.S rose at compound annual growth rate of 8% per annum. By 2006, the average home cost nearly four times compared with the average of family income  . The ordinary situation would be demand decrease as the price increase; however, the actual situation was the demand excesses its supply. It is because of easing lending requirements through sub-prime mortgages that leads to more and more people were affordable to buy houses. Many people were taking advantage from this situation, especially those who had bad credit ratings. As the result, people began defaulting especially those who have sub-prime mortgage. This situation leads to pricing houses starting to burst and pushing the housing prices down substantially causing global financial crisis  .
Another cause of the crisis is due to corporate greed which done by mortgage lending industry. As per Juurikala, the problem is not the credit, but, how credit was traded from one hand to another on an unprecedented scale. This was done through financial innovations called derivative  . Derivatives allow people to transfer their credit risks to the third parties.
According to Jordan, by using derivative, it allows money to transfer more freely and offers more protection against the risk of financial loss. In addition, it also offered 'fair' returns to investors who are willing to take that risk  . If derivative are used properly, it may allocate risks efficiently which might benefits to all parties, if not, then it just a tool to build greed. For instance, derivative could be used to avoid regulations that protect investors and public. In addition, derivative could make many institutions made a speculative bets without being regulated  . As the result, the firms could generate supernormal profits, managers generate high bonuses and investors generate high return if it is succeed, otherwise, they may experienced a huge losses. Now, we can see from evidence that derivative generates more losses than its benefits and it is due to greed done by lending industry who invented the derivatives which creates the crisis.
Regulatory failure and deregulations also takes into account as a cause of financial crisis. According to Andrew Lo, there is a positive relationship between loosening of regulations on banks during the late 1990s and early 2000s and the most recent financial crisis  . Back in 1933, there is an act named Glass Steagall Act (which also known as Banking Act) that regulates abuse and control the level of risk through separation between commercial banks and investment banks. However, in 1999, this act was taken from legislation and opened up competitions among banks  . This creates the commercial bank could also act as investment bank and investment banks could also act as commercial bank. Moreover, there are not enough rules and regulation to regulate the financial system.
As the example:
During 2004, the Securities and Exchange Commission deregulates the net capital rule. As a result, investment banks are able increase in huge amount of debt and raising the growth in mortgage-backed securities and subprime mortgage  .
There is no regulation for financial institution in the shadow banking system same as depository bank which allowing them to assume additional debt obligation relative to their capital  .
In addition, signing a new act also contributes to faster the global financial crisis to happen. One of the examples is the ratification of Commodity Futures Modernization Act by government. This regulation considered as a failure regulation as it creates the derivatives market unregulated  .
Social Responsibilities Theories
There are 2 models from the theories of social responsibilities which may relate to this topic. The theories are: The 'narrow' view or shareholder view and the 'wide' view or stakeholder view.
'Narrow' / Shareholder View
The 'narrow' view or shareholder view was introduced by Milton Friedman which states that business is responsible to maximise profits for its shareholders and should also conduct the business within the rules of the society  . Those shareholders are the people who are the 'owner' of that company who having shares and mutual funds from that company  .
The idea of shareholders view was originated by Adam Smith's argument of invisible hand. According to Smith, people are continuously exerting themselves looking for the best return. His argument supporting the utilitarian view for free market system  . Accordance with Adam Smith theory of free market system, Friedman has developed neo-liberal in the economic policies in twentieth century  . Friedman also agrees with Smith's view that the market is in efficient level.
Nonetheless, Friedman argument's is criticised by Arrow. According to Arrow, he believes that market is not in efficient level  . For instance, pollution created by business activities and asymmetric information between buyers and sellers. This argument justify that regulation may leads to the greater efficiency  .
'Wide' / Stakeholder View
On the other hand, the 'wide' view or stakeholder view was introduced by Ed Freeman and states that a business is not only responsible to its shareholder but also have to responsible with their stakeholder  . Stakeholders are those people without whose support the organization would cease to exist  . There are 2 categories regarding the stakeholder: Primary and Secondary. Primary stakeholders are: employees, customers, suppliers, etc; and secondary stakeholders are: media, competitors, government, and interest groups  .
There are 2 models regarding stakeholders view: Strategic stakeholder and Multi-fiduciary stakeholder
Basically, strategic stakeholder model is likely same as shareholder view where a business have to maximize their profit to shareholder. However, on strategic stakeholder, a company should also pay attention to those other stakeholder groups that may influence the company in maximizing profit 
On the other hand, multi-fiduciary model implies that all the stakeholder interest have to be treated equally while decision making are made. In addition, management of particular company has fiduciary duty to all stakeholders and profit maximization does not always come first over the interest of other stakeholder groups 
Regulations are made to counter the bad side of free markets. As I mentioned before, free markets is not in efficient level but rather inefficient. Pollution, monopolies and negative externalities are the evidence that shows the market is inefficient. That is why regulations are important to create greater efficiency  . However, creating regulations are not easy as there are some limitations while creating regulations. As example, players who are the subject of the regulation are have more knowledge than the regulators. Thus it may result in lack of consensus in values and in cause and effect which may creates the regulation unenforceable and not supporting value  .
There are many forms of regulation in this society such as: legal regulation, self-regulation, ethical codes, etc. These regulations are used to create greater efficiency in the market. Common regulation that we usually know is government regulation. Legal or government regulations are regulations made by government by which a business is required to externality enforceable standards of business behaviour  .
Self regulation is the regulation that regulates that business itself. This is done through trade association, social regulation (e.g. norms), co-regulation and market regulation  .
However, self regulation might produce some problems:
There is a divergence between corporation's interest as a competitor and as a member of the community. For instance, as a community, corporations accept a cleaner environment. As a competitor, company accept cleaner environment since they want to minimize their pollution control cost.
Prisoner's Dilemma 
It is the strategy done by company of not contributing the cost of public goods as the company will be better of if they do not contribute
Assurance Problem 
Each corporation resist their contribution for public goods because they could not obtain the assurance that other company will contribute on the same level.
The Relation between Facts and Theories
Relating to the case, it seems that the executives of company only prioritize shareholder's interest rather than community's interest as a whole. Former Prime minister of Australia, Kevin Rudd also said that community have lost many things because of the crisis which was not of their making but rather because of the financial executives surrendered any pretence of social responsibility in their blind pursuit of absolute greed  . As per shareholder view, company should maximise profit for shareholder and comply with rules and regulation, however, by looking at the facts of global financial crisis, it seems that the company, especially the executives, concentrating too much on maximising profit which more likely toward greed. This situation makes the company does not maximise shareholder value anymore as the greed creates the crisis and suffered the shareholder.
In addition, as per stakeholder view, company should also responsible to stakeholder (i.e.: community) while doing business. But, in this case, the company giving trouble to the community by introducing derivatives to the market at use it as a tool to reap the maximum benefits and creates the crisis. Thus, in this case, the company
to greed done by lending industry who invented the derivatives which creates the crisis.