A recent survey of 582 chief financial officers by Duke University and CFO Magazine shows broad support for the government intervention to rescue the beleaguered mortgage entities, Fannie Mae and Freddie Mac.
(The entire Duke/CFO Magazine quarterly survey will be released Tuesday, with a 12:01 a.m. Wednesday, Sept. 10 embargo. See www.cfosurvey.org).
Survey director John R. Graham, a professor at Duke's Fuqua School of Business, said 65 percent of CFOs are generally opposed to financial market intervention by the government, he said.
"Their general opposition to intervention is consistent with their views on the Bear Stearns bailout," Graham said, noting about 40 percent of CFOs supported the Bear bailout.
However, "It seems that not all government interventions are the same, because the CFOs certainly have a different view of Fannie and Freddie" said Campbell R. Harvey, a Duke professor and founding director of the survey. "An overwhelming majority, close to 70 percent of CFOs, support the government intervention."
The survey was conducted from Aug. 26 to Sept. 4, and therefore closed before the government's announcement that it would take over Fannie and Freddie. "While I am sure the CFOs support this intervention, I am also sure that many would have issues regarding the specifics of the intervention," Harvey said.
"I think the story here is simple," Harvey said. "Government intervention, in this particular case, has two results that favorably impact Corporate America.
"First, with this intervention, any lingering uncertainty about a possible financial Armageddon has been expunged.
"Second, the intervention should reduce mortgage rates. While there is still a large housing inventory overhang, the intervention reduces the chances that real estate markets will get worse. Corporate America knows how important the housing sector is to the U.S. economy. Without some stabilization in the housing sector, there is little chance for growth in consumer demand. Hence, the CFOs' support for the Fannie and Freddie intervention."