Recriminations mounted in Davos yesterday among some of the world’s most powerful and influential economic figures over where the lion’s share of blame should lie for a failure to prevent much earlier the build-up of financial stresses that now threaten a severe world downturn.

The US Federal Reserve, as well as the International Monetary Fund, were singled out by expert critics as likely culprits responsible for failing to eradicate the root causes of the mounting global financial crisis and economic dangers.

The Fed in particular came under withering hostile fire from heavyweight former policy-makers who charged the US central bank with fostering a series of destabilising “bubbles” in markets for assets from shares to US housing by tolerating financial excess and running a lax interest rate policy.

Critics said that the Fed should not have permitted runaway gains in shares, and then US house prices, that by reaching excessive levels had encouraged American consumers to borrow and spend irresponsibly.

The Fed ought to have taken pre-emptive action to quell runaway asset price booms, the critics said. It should also have spotted and stopped unsustainable “sub-prime” lending to US households with scant financial worth, they added.

Sir Howard Davies, director of the London School of Economics and former chairman of the Financial Services Authority, said that the Fed now reminded him of Corporal Jones in Dad’s Army, shouting “don’t panic”.

Professor Larry Summers, the former US Treasury Secretary in the Clinton Administration attacked the recent record of the Fed and other central banks.

“It is hard to give central banks a high grade over the past two years on recognition of incipient bubbles, or on their action to address them in either a regulatory or a policy sphere,” he said.

“And it is hard to give them a high grade in the last six months hen the bubbles have been bursting - when they have been consistently behind the curve.”

John Studzinski, a senior executive at Blackstone’s the leading private equity group, was among leading business figures to call for stronger leadership for governments and financial authorities.

“The thing that markets are desperate for right now is leadership, whether globally or regionally, and it seems this is lacking,” he said.

“Until the markets see a lot more leadership on a proactive basis rather than a reactive basis you are going to continue to see this great anxiety and feel this frustration. The Fed is perhaps showing apprehension.”

Stephen Roach, a star economist from Morgan Stanley, accused the Fed of again caving in to Wall Street and market pressure with this week’s emergency US interest rate cut, and risking sowing the seeds of a future with the potential creation of a new financial bubble.

“We've got prima facie evidence that we have a central bank that is being goaded into action just by what the markets are doing,” he said. "It's time to put an end to this, what I think is a very reckless way of running American monetary policy. I'm quite astonished that they did what they did yesterday.”

Lord Levene , Chairman of Lloyds, the insurance market said the lessons had still not learned from the fall of Barings Bank, which collapsed in 1995.

He said: “When Barings went bust, you had these new and highly complex financial products … but the board had inadequate understanding. Financial innovation is only a good thing if the products that come out of it are very transparent and very easily understood.”

Lord Levene said that Governments had shown themselves poorly prepared for crises compared to the insurance industry. “If we ran our businesses like that, if I said, ‘Wait a minute, there's a hurricane happening, we have got to give it some thought', we would not stay in business very long. “

Other expert delegates also laid into the IMF for failing to identify and more clearly warn of the dangers from US sub-prime lending, securitisation of debt through complex instruments, and widespread financial excess.

Professor Summers said: “We have got a bunch of people with substantial role as a ‘sheriff’ [for financial markets] but for a whole variety of reasons they have been averting their gaze.”

Fred Bergsten, director of the influential Peterson Institute for International Economics, said: “The IMF has been asleep at the switch.” He called for a new “steering committee of the major economic powers” of the US, Europe and China - a ‘G3’ .”

George Soros, the billionaire financier said that the present crisis marked the end of an era of US excess built on the foundation of the dollar’s status as a global reserve currency. He also said the IMF had neglected it duty to police global economies and financial markets.

Explore World Economic Forum

• Davos 2007

Times Recommends

• Brown targets fat cats after nationalising banks
• US shares soar on global banking rescue
• Europe follows Brown to head off meltdown