Placing blame for the subprime crisis has become a priority among politicians and pundits, right up there with preventing another financial meltdown.

The spread of securitization and a fall in lending standards have been easy, if hard-to-visualize, targets. But some commentators have dangled the possibility that much more tangible actors are to blame: the government and its zeal for deregulation.

"We are in a worldwide crisis now because of excessive deregulation," Democratic Representative Barney Frank of Massachusetts, the chairman of the House Financial Services Committee, recently told the Washington Post.

Particular scrutiny is being paid to the decision a decade ago to tear down the walls that had separated commercial banks from investment banks for more than six decades.

In 1999, the Republican-controlled Congress repealed the Glass-Steagall Act, a Depression-era law that forbade insurers, deposit-holding commercial banks, and underwriting investment banks to venture into one another's businesses.

The law was enacted in response to excessive speculation in the 1920s. Amid a technology boom driven by widespread electrification and industrialization, banks took on huge risks in the hope of ever-bigger payoffs. Conflicts were rife, with banks making unsound loans to companies whose shares they'd underwrite, then urging their retail banking customers to buy the stock.

The logic behind repealing Glass-Steagall was that today's more-responsible and risk-savvy financial firms could significantly reduce costs by merging redundant business divisions while giving consumers the opportunity to get all their finance needs—from banking to investing to insurance—in one place.

Deregulation did indeed foster the creation of "financial supermarkets," led by Citigroup and including J.P. Morgan Chase, Bank of America, Wachovia, and others. But critics charge that it also revived conflicts of interest that the newly freed commercial banks were unprepared—or unwilling—to manage.

It also helped some banks to become so huge and so interdependent that even staunch free-market advocates consider them too big to fail.

After regulations were rolled back, banks big and small, under investor pressure to match the returns of their most profitable rivals, couldn't help but wade into the profitable world of underwriting and trading mortgage-backed securities—the investments behind the current financial crisis.

These bondlike instruments were very lucrative, especially for the investment banks that packaged them, but they weakened the link between risk and reward. A bank could arrange risky loans to high-risk borrowers through one side of its business, then turn around and repackage the loans into pools of debt that were sold to investors on another side of the business.

In theory, the much larger number of good loans would dilute bad loans in these pools. In reality, it set up a system where banks made money from fees charged to set up loans, not from actually collecting payments for 15 or 30 years.

The risk of borrowers defaulting was shifted to investors who bought the mortgage-backed securities; we now know that they often didn't have a clear idea what was in them.

Today, with a growing number of people falling behind in their payments and a mountain of foreclosed homes helping to drive down house values, uncertainty about how many loans in these pools are bad or will become bad has undermined investor confidence in the entire market.

But it wasn't just commercial banks that have been criticized.

"We let investment banks get into a much wider range of activities without regulation," which helped create the subprime crisis, Frank told the Washington Post in his interview.

Frank isn't alone in calling for reregulation of financial services, nor are the Democrats. Not long after he engineered the federal bailout of a largely unregulated investment bank, Bear Stearns, Federal Reserve chairman Ben Bernanke called for "a more robust framework for the prudential supervision of investment banks and other large securities dealers."

If, as now seems likely, the next president and the next Congress do act to rein in Wall Street, what should it do? Resurrecting the Glass-Steagall Act to separate commercial banking, investment banking, and insurers would be an easy option, but the truth is that even if Glass-Steagall had never been repealed, it's very likely that, all else equal, the subprime market would still have imploded.

First, in many ways the repeal of Glass-Steagall was a symbolic move. Over the years, commercial banks had been allowed to expand beyond their traditional deposit and loan business.

In 1986, for example, the Federal Reserve, over the objection of then-Fed chairman Paul Volcker, voted to reinterpret a section of Glass-Steagall to allow commercial banks to earn up to 5 percent of their revenues from investment banking—that is, underwriting securities.

Second, research published in 2006 found that banks' revenues, costs, and risks didn't change noticeably immediately before and after the repeal of Glass-Steagall. This means that either the gains from Glass-Steagall had occurred earlier, or that the synergies between different types of banks and insurers wasn't enough to make a material impact on the bottom line.

Third, while Citigroup, with its $55 billion in write-downs, might be exhibit A for why one-stop shopping for financial needs doesn't work, rival J.P. Morgan Chase, which has weathered the downturn in much better shape than its competitors, is an argument for the opposite.

Fourth, there is evidence that banks are taking upon themselves to break up their businesses. On Tuesday, UBS announced that it was separating its investment and private banking units; pressure is mounting for Citigroup to break apart its businesses too.

And finally, even if commercial banks did abuse their new freedom, that was only one of many failures that led to the subprime mess, economists Adam Ashcraft and Til Schuermann of the New York Federal Reserve said in a recent paper.

Other factors that fed the crisis were predatory lending by mortgage companies, the failure of credit agencies to correctly rate new products, and herd behavior, which had too many investors not doing enough due diligence.

If there is blame to be placed on the politicians who discarded Glass-Steagall, it may be that they didn't push for new regulations for the wild world of derivatives that were about to mushroom into a $300 trillion time bomb.