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CFO Survey

Survey: CFOs Place Credit Crisis Blame on Lenders and Brokers

  • Economic Confidence Hits Three-Year Low Due to Recession Fears and Inflation Concerns

  • U.S. Companies Expect Lower Year-end Bonuses

  • Companies Plan 2.3 Percent Price Jump Over the Next 12 Months

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FLORHAM PARK, N.J. and NEW YORK, October 16, 2007 — American companies view mortgage brokers and lenders as the primary culprit for the subprime mortgage mess, according to a recent survey of CFOs conducted by Financial Executives International (FEI) and Baruch College's Zicklin School of Business.

When asked in the 2007 third quarter "CFO Outlook Survey” who, in their view, was to blame for the subprime mortgage defaults, 86 percent identified brokers and lenders.  The second most named offender in this scenario was the credit rating agencies which were cited by 40 percent of CFO respondents. Other responses in descending order were credit rating agencies, investment dealers, investors, and the Federal Reserve.

Many believe a related effect of the global credit crisis to be the decision by the Federal Reserve’s Open Market Committee (FOMC) last month to lower the federal funds rate 50 basis points to 4.75%.  Nearly 80 percent of those CFOs surveyed agreed with the Fed’s decision, and the majority (62 percent) does not anticipate the cut to impact their company’s current borrowing position.  While respondents do expect the federal funds rate to continue to be lowered over the next twelve months, the mean expectation by CFOs for the Federal Funds rate in September 2008 is only slightly lower at 4.50%.

"We are experiencing a challenging market environment characterized by uncertainty and turbulence around interest rates and credit markets, the value of the dollar, and employment and therefore, increasing anxiety about recession and/or inflation," said John Elliott, Dean of the Zicklin School of Business at Baruch College. "With economic confidence at a three-year low, CFOs face real and perceived challenges in coming quarters.”

Economic Optimism Drops

The CFO Optimism Index for the U.S. economy, which was 62.85 for this quarter, dropped 4.4 points from last quarter, reaching a three-year low.  This quarter, 56 percent of the CFOs are more concerned about recession than last quarter, while over one-third (34 percent) report being more concerned than they were last quarter about inflation over the next twelve months.
CFOs’ outlook toward their own companies also decreased this quarter, as the Optimism Index of CFOs’ own companies sank to 71.68, the lowest level in 39 months.

"The ripple effect from the sub-prime mortgage meltdown is undoubtedly being felt by both companies and investors in the global marketplace," said Michael P. Cangemi, FEI President and CEO.  "We have left behind a period of easy credit, apparently too easy, which led to excesses. The challenge for the Fed is to manage a balance." 

Additional Data: CFOs Give Cox a "B" Rating

Overall, American CFOs view Christopher Cox’s performance as satisfactory.  When asked to rate his performance to date as chairman of the Securities & Exchange Commission, over 50 percent (52.2%) issue him a B grade for his overall performance while another 41 percent give him a C rating. When asked about specific issues, such as Sarbanes-Oxley or markets competitiveness, a strong majority of CFO respondents neither strongly approve nor strongly disapprove of Cox’s performance, instead falling somewhere in between on the approval/disapproval spectrum. 

Lower Bonuses Expected

On average, responding CFOs anticipate year-end bonuses to decrease by over three percent (mean) compared with those issued in 2006.  By industry, CFOs in retail wholesale businesses anticipated the largest drop by thirteen percent.

Big Four Firms Seen as Too Expensive

Almost 80 percent of the companies surveyed reported purchasing services from non-Big Four audit firms. Of that 80 percent, the majority purchase tax (74 percent) and auditing (68 percent) services. Some of the specific reasons listed for using these alternative audit firms are that the Big Four firms are no longer interested in this type of audit work or that their prices are too expensive.

Companies Expect Greater Price Increase

CFOs plan to increase product prices at their own companies 2.30% in the next 12 months compared to 1.85% last quarter and 2.07% in the first quarter of 2007. Companies expected a price increase of 2.53% in the third quarter of 2006.

About the Survey  

Full survey results are available at   or from Jamie Renninger at   For more information, visit

This quarter, the CFO Outlook Survey, conducted by Financial Executives International and Baruch College's Zicklin School of Business, interviewed 220 corporate CFOs electronically the week of September 24. CFOs from both public and private companies and from a broad range of industries, revenues and geographic areas, including some off-shore companies, are represented. Survey respondents are members of Financial Executives International.  
FEI has been conducting surveys gauging the country's economic outlook from the perspective of CFOs for the past nine years. 

About FEI  

Financial Executives International (FEI) is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy- making positions as chief financial officers, treasurers, and controllers. FEI enhances member professional development through peer networking, career planning services, conferences, publications, and special reports and research. Members participate in the activities of 86 chapters, 75 of which are in the United States and 11 in Canada. For more information about FEI, visit  

About Baruch  

Baruch College is a senior college of the City University of New York. The Zicklin School of Business at Baruch College is the largest and most diverse AACSB accredited collegiate school of business in the nation. Baruch has a long tradition of producing accounting and finance graduates who become leaders as CPAs and CFOs.   MEDIA CONTACT: Jamie Renninger / Kristen Crofoot of FD 212-850-5658 / 5692