It's ridiculous to blame the Black-Scholes model, the Black-Scholes equation, or the Black-Scholes formulas. There are two groups of individuals responsible for the crash, even if the corporate press refuses to acknowledge it: bank executives who knowingly did ridiculously risky things and the ratings agencies that gave them the cover to do it. It's also ridiculous to refer to the crash as the "subprime crisis," because the problem most definitely was not subprime mortgages. The sum total of all the subprime mortgages was on the order of a few hundred million dollars, but the damage done by the crash was in the tens of trillions of dollars. The bailout of 2008 amounted to over one-and-a-half trrillion dollars, which was enough to pay off all the subprime mortgages several times over, and yet it didn't solve the problem.
Let's start with the ratings agencies. With winks and nudges to their friends running the banks, the people at the ratings agencies gave ratings of AAA, which means "as close to risk-free as you can get," to packages of mortgages in which they knew many were "subprime" and many, many more had been given by unethical lenders (who later sold them off in packages) who did not check the ability of their customers to pay. In some cases, the AAA rating was even extended to complex derivatives based on the mortgage packages, despite the fact that the people at the ratings agencies didn't understand those derivatives well enough to give a rating at all. It's worth mentioning that among those customers were many middle-class and wealthy individuals counting on the obviously unsustainable growth of real estate prices in the US market so they could take out mortgages to buy properties, hold on to them for 6-18 months, and then "flip" them for a huge profit. Also among them were many companies. So don't go blaming the lower-middle-class and poor holders of "subprime" mortgages, who only represented a small fraction of the number of bad mortgages. Anyway, a rating like AAA should only be given to things that are as risk-free as a government bond. Since wealthy people and economists love to talk about there being "no such thing as a free lunch," it's worth pointing out that that idea is a basic principle used in things like pricing assets. In that context, it's called the "no-arbitrage principle." Arbitrage basically means "risk-free profit." The idea behind the no-arbitrage principle is that if there were an opportunity for risk-free profit, somebody would have already taken advantage of it and driven prices to the point where the opportunity no longer existed. In today's world of high-frequency trading, the no-arbitrage principle actually works pretty well. A classic example of arbitrage would be a stock that's sold in two different exchanges. If the price is lower in one and you can buy it quickly enough, then sell it quickly enough in the other exchange, where it's worth more, then you can make a profit with basically no risk. The thing is that if anyone notices and tries to do that, it drives up the price (buy increasing demand) in the exchange where the price was lower and brings the price down (by increasing supply) in the exchange where the price was higher. The prices are thus driven rapidly toward equilibrium. And in fact a crucial step in the derivation of the Black-Scholes equation is an application of the no-arbitrage principle, equating a risk-free return to the rate paid by government bonds.
Additionally, when heads had to roll at the banks for, y'know, breaking the world economy, you know the execs wanted to protect themselves and their own and put all the blame on their quantitative analysts, but they couldn't because the quants had done a good job of covering their own asses by sending e-mails to their superiors warning that there were all kinds of risks not being controlled or managed, and that there were even new risks introduced by modeling that could lead to problems. So the execs were fully aware that they were trading in assets that were giving returns as high as tens of percent per month while pretending they actually believed those investments were as risk-free as buying government bonds. If you believe that the execs didn't know, I have a prospectus on some excellent investments I'd like to show you. The thing is that when some banks are giving their investors these enormous returns, under the cover of ratings that say there's almost no risk involved, the execs in other banks have two choices: protect the bank and its investors and clients by sticking to legitimate risk management practices or pretend along with their peers that the packaged mortgages and the derivatives based on them were nearly risk-free and thus get huge returns while not setting off any alarms among people looking for risk on the banks' balance sheets. Since the execs' bonuses in a given quarter only depend on the result for that quarter, they basically didn't give a rat's ass if the bank or the world economy was going to break at some point in the near future, because all they wanted to know was how much they'd be getting in bonus that quarter.
Summarizing, the following parties were not responsible for breaking the world economy: poor people getting home loans, quantitative analysts doing the analysis their bosses told them to do, or Merton, Black, and Scholes. The following parties were responsible for breaking the world economy: bank executives and ratings agencies.
