When it comes to the subprime debacle, CFOs are pretty certainthey know who is to blame. In the 2007 third-quarter CFO OutlookSurvey, conducted by Financial Executives International (FEI) andBaruchCollege's Zicklin School of Business, about 86% of the 224CFOs responding identified brokers and lenders as the primeculprits behind the recent wave of defaults on high-risk mortgageloans and the credit crunch that is currently disrupting themarkets. The second most culpable group was the credit ratingagencies, which 40% cited in the poll that allowed them to chooseall groups that applied. “We are experiencing a challenging marketenvironment characterized by uncertainty and turbulence aroundinterest rates and credit markets, the value of the dollar andemployment and, therefore, increasing anxiety about recessionand/or inflation,” explains John Elliott, dean of the ZicklinSchool of Business, in interpreting the results. “CFOs face realand perceived challenges in coming quarters.”

Indeed, the convergence of concerns helped push the CFO OptimismIndex down to its lowest level in three years, according to FEI.The index stood at 62.85 compared to 67.60 in September 2006 and67.46 at the end of the second quarter. In the third quarter, 56%of the CFOs admitted to being more concerned about recession thanthey were in the second quarter, and 34% reported being moreconcerned about inflation. “The ripple effect from the sub-primemortgage meltdown is undoubtedly being felt by both companies andinvestors in the global marketplace,” says Michael Cangemi, FEIpresident and CEO. “We have left behind a period of easy credit,apparently too easy, which led to excesses. The challenge for theFederal Reserve is to manage a balance.”