By Michael A. MacDowell — President, Misericordia University

Newswise — From Wall Street to Main Street USA, it is fair to say that few people have been immune to today's financial crisis. The fallout has affected 401(k) plans, may cause unemployment and certainly has damaged the psyche of the American consumer who fuels our economy.

While there is plenty of it to go around, blame is not a singular issue here. Where was the regulatory oversight of the banking and brokerage industries? Why didn't the banking regulatory policies of the Federal Reserve and Treasury remain ahead of financial entrepreneurs? Did bond insurers forget that their role is to advise people and institutions about risk and not to stimulate the sales of mortgages? How did brokerage houses approve the buying and selling of risky bundled loans? Was it well-meaning politicians who passed the Community Reinvestment Act in 1977 to help low-income people achieve the American dream of owning a home? Did unscrupulous mortgage agents convince people to take out loans they knew their clients could not repay? Or, was it the people themselves who took on unrealistic debt?

The answer to each question above is yes.

But pointing fingers will do little good now except for one important fact: How many more companies will ask Secretary of the Treasury Henry M. Paulson for a bailout? How many bailout plans will it take? Market systems work when people and companies are allowed to exercise risks and are rewarded for those risks. It only works, though, when people and institutions also bear the negative consequences of these ventures. AIG, Fannie Mae, and Freddie Mac took risks, but are not fully bearing the costs of their actions. Such bailouts may encourage others to do so the same going forward.

Of course, the Federal Reserve System and the Treasury, in general, have a "psychological" role to play in these times. Bailing out those companies responsible for these mistakes sets a very bad precedent to all others in business. However, not helping those companies may destroy the economy itself. The choices are bad and worse.

Hopefully, the plan developed by Secretary Paulson, and modified substantially by Congress, will mitigate the short-term impact of poor decision making. The strategy is to buy up mortgages, thereby collateralizing them. Eventually, these mortgages will be sold back when the housing cycle stabilizes and turns itself around — as it inevitability will do. The eventual profit from the future sale of bundled mortgages can then be returned to the Treasury. Warren Buffet believes there may be a 15 to 20 percent "upside'' to these newly purchased mortgages.

Granted, government intervention is a risky proposition. Officials have a tendency not to optimize purchase prices and they have a propensity to spend profits before they are realized. But this so-called bailout may be the only way we can staff off an economic recession in the short run.

Our nation's colleges and universities are doing an excellent job in educating tomorrow's business leaders in the basics of management, accounting, marketing, human resource management, etc. But is higher education integrating these basic concepts with the most crucial element of all " ethical decision making? Misericordia has decided the answer is oftentimes no. Along with a select few other institutions such as George Washington University in St. Louis, Misericordia's new MBA program stresses the moral and ethical underpinnings of business. This MBA strives to develop individuals who are not only competent as managers, but enter the business world with an understanding of what a principled decision entails.

It is easy to stand by ex post facto and point fingers at ethical lapses. It is quite another to make morally sound decisions at a time when many others are doing exactly the opposite.

In retrospect, bundling mortgages and selling them as investment instruments, falsifying income statements and convincing people to buy a $500,000 home when a $250,000 one is their financial limit is ethically, if not morally, reprehensible. We must all learn from our mistakes. To prevent similar circumstances from happening again, all business education programs in our colleges and universities must stress ethical decision making as the foundation of all business.

Dr. Michael A. MacDowell is the President of Misericordia University, in Dallas, PA, where he occasionally teaches economics.