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U.S. Sub-prime Mortgage Crisis: Central Banks Responded Well to a Potentially Serious Ongoing Situation
A Weekly BDO Dunwoody CEO Business Leader Poll by COMPAS in the Financial Post

The CEOs and business leaders on the COMPAS panel view the sub-prime economic crisis as at most moderately serious for the present but quite possibly worsening somewhat in the months ahead, as shown in table 1. (see complete survey)

The central banks in both Canada and the United States get plaudits for their handling of the situation but panelists are worried and not entirely sanguine about the future (see tables 3 and 4 in complete survey).

The following verbatims provide some nuances in the perspectives of respondents:

• I'm concerned that the financial problems with credit in the US will lead to a down turn in the manufacturing sector, starting with consumer goods.
  
  
• I think a far bigger problem for Canada right now is ABCP. The Banks, the central bank and DBRS are complicit in this crisis.
  
  
• It was a courageous move from U.S. Fed's governor to reduce interest rate and bring some calmness to financial market.
  
  
• This is a good lesson for the Bank of Canada that besides setting an inflation target in the long run, sometimes the market needs short-term sacrifice in exchange of long-term stability.
  
  
• Regarding subprime mortgage - The US Government should have learned from the Savings and Loans fiasco. Their lending institutions need to be regulated. The notion that "the market will correct" the problem in a capitalist system may be directionally correct - but at what cost?
  
  
• The best solution would have been for the Fed to regulate the maximum amount that can be insured on those mortgages. [They could've] kept the bubble from rising so high before it popped.
  
  
• There are still many sub prime mortgages that will face refinancing with lower equity values. This will add to the glut of real estate on sale and subtract from disposable income.
  
  
• The US feds should reduce the prime so that some, at least, can keep their homes.
  
  
• These shocks to the financial system will keep getting worse and worse over time - perhaps not in the next six months.
  
  
• The underlying USA fundamentals are of course based on cheap energy like all of our fundamentals are. Given the size of the US debt, the coming energy crisis and the effects of global warming we will keep seeing these types of crises more and more.
  

These are the key findings from the current web-survey of the panel of CEOs and business leaders undertaken for the Financial Post under sponsorship of BDO Dunwoody LLP.