New York Event Brings Together ACCA, IMA Members and Organization Leaders
On Thursday evening, February 28, 2013, more than 100 IMA® and ACCA (the Association of Chartered Certified Accountants) members gathered in New York City for the first joint chapter event between members of the two partnering organizations. The event was planned in tandem with a special U.S. visit by ACCA CEO Helen Brand.
Following a warm introduction by IMA regional vice president Marc Palker, CMA, RTRP; and ACCA’s NYC Metro Area Chapter head Fuad A. Karimov, director of Transactions & Restructuring Services at KPMG LLP., members enjoyed a regulatory issues update by Ms. Polley, representing FAF. As the independent oversight body for the Financial Accounting Standards Board (FASB) and the Government Accounting Standards Board (GASB), FAF has an important responsibility to ensure the development of sound accounting standards that are relevant to stakeholders.
Pictured left: Helen Brand, ACCA CEO, welcomes an audience of IMA and ACCA members, the first joint chapter event between the two organizations.
“IMA has long echoed FAF’s belief that constituent input is a vital factor for creating the best possible accounting standards,” said Mr. Thomson. “IMA and ACCA are honored to have Ms. Polley join us for this landmark chapter event.”
“Successful partnerships are all about the relationship, shared values, and inspired visions. In the first year of our strategicpartnership, IMA and ACCA have delivered valuable research, thought leadership, and educational opportunities to our members around the world,” said Mr. Thomson “The two organizations share a wonderful partnership centered around the common philosophy of delivering value—to professionals, organizations, and society.”
The New York event was so well received that IMA is exploring the possibilities of organizing other joint events, either in New York or with ACCA’s 10 other U.S. chapters.
“ACCA is immensely proud of the work it does alongside IMA. Both organizations have a long history of seeking innovations in finance and accounting, recognizing that a strong global profession needs to innovate to be relevant in a fast-changing world. I look forward to working closely with IMA in the future and I am confident that together we will make an excellent contribution to the development of the accountancy profession around the world,” said Ms. Brand.
To learn about the latest initiatives of the IMA/ACCA strategic partnership and recent joint research reports, visit the partnership web page at www.imanet.org/acca.
When should a small business owner hire a CFO? While there is no right answer, there are certain indicators. I spoke with Marc P. Palker,CMA, about this topic. Marc is Director of CFO Consulting Partners, LLC – a firm that provides interim and part-time CFO services to small and midsized public and private companies – and a member of theIMA (Institute of Management Accountants) Board of Directors.
This interview has been edited and condensed.
Jeff Thomson: What are some internal indicators that a small business owner should hire a CFO?
Marc Palker: An important internal tipping point is when information that helps the business make timely and important decisions is not being prepared. Business owners make decisions at the pace of the business and must be able to rely on the accurate and timely information provided by CFOs. It‘s never too late to make a change.
In many small- to medium-sized companies, the CFO is responsible for the interpretation of the results, cost control measures, capital acquisition, and forward-thinking due to economic, industry, tax, government regulation, social issues and sometimes even looking into methods that will mean the small business can compete with the giants. In some cases, the CFO can also be the OFO, or Only Financial Officer, and must rely on bookkeepers for accurate processing of financial information. The CFO must also be critical of the banking relationship – there can be no slip-ups.
MP: It will largely depend on the business and/or industry. A company generating $10 million in revenue might be ready for a CFO while a company generating $20 million may not be. One client could sell its product for $1.5 million each but only sells five units in one year, while another client might need 28,571 transactions to reach $10 million with an average transaction of $350. The complexity of the transactions can also determine the need for a higher level of experience or knowledge. The type of business you are running is also a vital tell because if you grow so big that you need to relocate then that could be a sign you need help with finding london office rental and the finances of it.
Rapid growth is another important indicator. Growth requires an expansion of automated systems to handle the growth, and additional capital and/or financing to finance the growth. A CFO is best suited to handle rapidly increasing growth due to the complexity involved. He or she must be able to interpret the investment and technology, and the terms of acquiring capital.
One final indicator is when a business is preparing for a merger or acquisition. In this situation, the CFO must be able to choose the correct team to evaluate a target acquisition. In many cases, that will result in outsourcing to a firm to perform the financial and regulatory due diligence. The CFO is the best person to interpret the report issued by the due diligence team so the terms can be tailored to the findings. A very important skill required of CFOs is the ability to feed a potential investor or lender. Preparing the information and anticipating their questions will shorten the process and eliminate further digging.
JT: What specific responsibilities should the CFO of a small business have?
MP: A CFO in a growth-oriented small business must be hands-on. Being in the weeds is critical to controlling growth and communicating results to those with money at stake. That could be the owners or shareholders, banks, insurance companies and – let’s not forget – the employees. As growth occurs, the company and its key customers, suppliers and employees will face new risks. Managing risk involves not only having insurance, but the CFO must also protect the company from regulatory, environmental and human capital risks.
This column offers CFOs and their teams insights and ideas related to challenges of the position, in light of market demands and global economic conditions. Jeff Thomson, CMA, is president and CEO ofIMA (Institute of Management Accountants), one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Follow IMA on Twitter and visit IMA’s YouTube channel.
By Valentine Ejiogu, Director, CFO Consulting Partners
Late last year, the FASB and IASB released an exposure draft on the proposed new accounting standard, Topic 840. This will be the first significant change in lease accounting since FAS 13 was released in 1976.
If finalized, the exposure draft would converge FASB’s and IASB’s accounting for lease contracts in most significant areas. The few remaining differences pertain mostly to discrepancies with other existing standards.
Companies would face significant changes in how they account for leasing transactions if the exposure draft is adopted. For example, today if a company enters into a multi-year year lease for premises, the lease payments would normally be expensed evenly over the life of the lease. If the exposure draft is adopted, that lease would be capitalized, which would result in amortization and interest expense, with more interest expense recognized in the early years and less in the remaining years. Therefore, the Company’s income statement will suffer in the early years. Further, lease expense, which is now normally considered operating expense and which is included in EBITDA, would be shown after the EBITDA line.
Lessees would be required to perform significantly more monitoring and recordkeeping, particularly for leases currently classified as operating leases. Lessees will also need to apply lease requirements to all outstanding leases as of initial application (comparative periods would need to be restated). Lessees will need to apply the proposed transition requirements to leases currently accounted for as operating leases.
- All leases are to be capitalized. That is, all leases would result in asset and liability recognition. There is no exclusion from capitalization for short-term leases; though the Boards will permit leases with a total maximum lease term of 12 months or less to be capitalized at the undiscounted value of the rents. The exposure draft proposes the lessee recognize an asset for right to use the leased asset and a liability of its obligations to make future payments and in addition, amortization of the right-to-use asset and finance expense arising from the liability.
- The interest rate used for present valuing the rents and recognizing interest expense is the incremental borrowing rate, except that the “the rate the lessor charges the lessee” may be used if known. This is referred to as the implicit rate, which must now include contingent rents.
Definition of a Lease
A lease is a contract in which the right to use a specified asset (the underlying asset) is conveyed, for a period of time, in exchange for a consideration.
At the date of inception of a contract, an entity shall determine whether the contract is, or contains, a lease on the basis of the substance of the contract by assessing whether:
- The fulfillment of the contract depends on providing a specified asset or assets (the underlying asset); and
- The contract conveys the right to control the use of a specified asset for an agreed period of time
- The proposed requirements would affect any entity that enters into a lease, except that they would not apply to:
- Leases of intangible assets
- Leases to explore for or use minerals , oil, natural gas, and similar non regenerative resources
- Leases of biological assets
- Certain service components of leases
- Contracts that represent a purchase or sale of an underlying asset.
Impact on Accounting by Lessees
The following are the major differences for lessees in the new exposure draft:
- Cash payments for leases are considered financing activities in the statement of cash flows
- Existing operating leases will be capitalized by present valuing the remaining rents as of the date of application. Lessees will adjust the right-of -use asset for any existing deferred/prepaid rent liability or asset.
- Similar to FAS 13, the liability is amortized using the interest method; the asset is amortized like other property, plant and equipment. Interest and depreciation expense are reported separately from other interest and depreciation, but in the same place on the income statement. Lease expenses would no longer be recognized on a straight line basis, but rather replaced by amortization and interest expense.
- Initial direct costs are to be added to the asset to be depreciated over the life of the lease.
- The exposure draft provides that lessee disclosure in the financial statements should include:
- Description of leasing activities, including assumptions and judgments for valuing contingent rentals, sale and leaseback transactions and information about significant future leases.
- A reconciliation of opening and closing balances for right-of-use assets and lease liabilities.
- A maturity analysis of future rents, by year for 5 years and all remaining years combined. Minimum lease payments are to be separated from contingent rentals, termination penalties and residual guarantees.
- Initial indirect costs incurred during the reporting period.
Impact on Accounting for Lessors
The lessor would recognize an asset representing its right to receive lease payments and, depending on its exposure to risks or benefits associated with the underlying asset, would either
- Recognize a lease liability while continuing to recognize the underlying asset (performance obligation approach) or
- Derecognize the rights in the underlying asset that it transfers to the lessee and continue to recognize a residual asset representing its right to the underlying asset at the end of the lease term. (Derecognition approach).
- The derecognition approach is similar to the current accounting for sales-type leases under GAAP. However, the amount of the upfront profit recognized, as well as the measurement of the lease receivable and the residual asset, may be different from that recognized under the sales-type lease.Effective Date
The Boards are yet to determine the effective date.
By Eileen Xethalis, Director and Head of Entrepreneurial Services Practice, CFO Consulting Partners LLC, April 26, 2011
CFO Consulting Partners is often retained to fix broken Accounting and Finance functions. When a prospective client requests an exploratory meeting to gauge whether we can help, the request typically is the result of many months of frustration on the part of the CEO/COO in dealing with the Finance and Accounting area.
Our active practice with growth companies has yielded some common traits that we believe are the root cause of untimely and unreliable management reporting, and/or high audit fees due to a lack of preparation for the audit.
Here are my ten painful oversights: The Company:
1. Has a chart of Accounts that grows organically- lack of planning when setting up the chart of accounts results in a higher work load in producing financial reports.
2. Does not keep a record as to the changes to the chart of accounts- A lack of record keeping as to changes in the chart of accounts is a red flag for lack of controls at the IT level.
3. Never closes the books- Leaves the door open to current events being booked in prior periods.
4. Does not adequately train staff on the proper use of accounting software and accounting related applications- Not training the accounting staff may lead to many problems such as; incorrect inventory, incorrect payroll records, incorrect billing. To prevent these issues from harming your business, you may want to consider checking out something like a Payroll Processing Company who specialize in payroll so that your company doesn’t have to.
5. Does not have a closing calendar- Closing impinges on the rhythm of the daily work load. A calendar provides direction for the staff.
6. Does not adequately describe the assets being depreciated (start date, number of months of depreciation and so forth) and the company does not maintain easily traceable support documents. Support for the depreciation schedules facilitates smooth financial, income tax and sales tax audits.
7. Does not register to pay use tax on out of state purchases- The Sales & Use tax return is frequently overlooked; many companies do not deal with a retail customer and mistakenly believe they have no liability.
8. Never set benchmarks to evaluate the adequacy of the finance staff- Growth companies frequently go bare bones at startup with accounting staff. When to add? Who to add?
9. Never setup a tickler file to remind it to file annual registrations- Timely filing of annual reports maintains a good standing status and the ability to do business within a State.
10. Never sets up a tax calendar- A tax calendar is crucial when you have a presence in multiple locations; inclusive of federal, states and city filing dates.
©2011 CFO Consulting Partners LLC/ Eileen Xethalis all rights reserved
By Joe Barkley, Director, CFO Consulting Partners LLC
Information Technology (IT) is the second largest cost – after Human Resource – to most firms. It is often misunderstood and can be ineffectively managed. IT is a business within the business, and it has significant bottom and top line impact.
Chief Financial Officers (CFOs) may regard IT as a “black box:” difficult to fully comprehend exactly which technologies are worth spending money on and how to properly utilize them. Firms and management can be enticed by the latest technology because it looks slick without understanding the full capabilities and controls involved.
Ask a CFO who is responsible for the management of the IT costs and the answer is usually the Chief Information Officer (CIO), or some equivalent position. While it is imperative that the CIO have a say in IT budgeting, the CFO has ultimate control and must be involved in IT cost management as well.
There is need for adequate, effective, and efficient control process for all aspects of IT. When fully implemented, each IT process needs to include budgeting, financial reporting and accounting, capital budgeting, project management, program management, acquisition approval,and control of IT procurement of equipment, services and personnel. This is in addition to the management of the IT specific facilities such as data centers, operations centers, and ancillary facilities. This financial control needs effective benchmarking and measurement to both internal and external standards.
The development of a successful, well-managed IT Financial Management program is a multi- phase process. Along the development path, there must be a controlled and logical progression of steps and decisions. Start by identifying all of the IT costs, resources, and effective reporting on those activities. This is not a trivial task. Progress reports on what is learned should be provided to Senior Management in a consistent and routine manner because numbers should and will change as more information is discovered.
Move on to budgeting, both operational and capital, including approval and authorization processes. Get control of the maintenance activities and costs, and the personnel approval processes for both internal and external resources. Consider building a specific set of job classifications for IT units and functions.
Continue building the IT control and management processes, measurements, and reporting phase by phase until there is a comprehensive program. The detailed program should be understood and reviewed by the firm’s senior management, who should have adequate authority and resources in the IT function to sustain the operation.
Remember the adage from Lou Gerstner, “Sooner is better than perfect.” Resist the temptation to jump to a sophisticated strategic prioritization process until the organization is mature enough to do it right.
CFO Consulting Partners specializes in developing and fixing these functions and processes. We can parachute in and have “wingtips on the ground” within days and begin to understand, listen, and build. Contact us to see how we can help improve the financial management of your firm’s Information Technology.
By Allan Tepper, Senior Managing Director, CFO Consulting Partners LLC
Should the CFO be at the table when the CEO is meeting with his executives? Apparently, according to the NY Post article by Keith Kelly on March 19, 2011 (page 25), some senior staff people at Time Inc. think so. See article at http://www.nypost.com/p/news/business/jack_last_stand_siRYOg7chEA54VzUCJCkcJ
Time Inc. CEO Jack Griffin, was dismissed after six months for apparently have a fight with General Counsel Maurice Edelson, who was speaking on behalf of himself, CFO Howard Averill and Editor & Chief John Huey. The confrontation was why the three were not invited to a meeting that Griffin was having with Time’s key revenue producers.
On the surface, a confrontation over being at meeting doesn’t seem plausible, but many senior staff people feel they need to be at the table when the discussion is likely to center around key strategic issues. In fact, not being at these types of meetings can often lead to communication issues within a company and ultimately to subpar company performance. It may also devalue the position of the CFO in the eyes of his or her peers.
So, the question in my mind is – should the senior staff people at Time Inc. have asked to be at the table? I think the answer is an absolute YES. What shouldn’t have happened is an altercation between the CEO and his direct report. The key takeaway is that the CFO is an important player in the organization, needs to be at important meetings, and he or she should argue for that right.
By Allan Tepper, Co-founder and Senior Managing Partner, CFO Consulting Partners LLC
January 27, 2011
CFO Consulting Partners is often retained to “fix” broken Accounting and Finance functions. I am often asked what critical elements, or success factors, are needed for the CFO to be successful. If the CFO does not do lots of things right, then his or her job may be at risk. I believe being a CFO is one of the most important, and yet one of the most short-lived jobs in corporate America. Articles I have read list the average tenure for a CFO at just 3 to 5 years. This turnover is due to many reasons – sale of company, new CEO wants his own CFO, CFO leaves for a better opportunity, bankruptcy, etc. But at least some of the reasons for turnover relate to how the CFO is perceived by the CEO and by the peers of the CFO.
To help the CFO evaluate his or her chances of long-term success, I have developed the following ten questions. While there are no guarantees, a good number of YES answers may be an indication of longevity with one’s present company. Alternatively, these questions could be viewed as a roadmap to success. These questions are addressed directly to the CFO. A note of caution – To get a meaningful result, be really truthful when answering.
1. Are you an active and respected member of your Senior Management Team?
2. Can you and do you talk frequently and fluently to the senior management team about the key drivers of your business (i.e. volumes, ratios, pricing, and so forth), and about the external variables affecting the business (i.e. about the economy, and the industry trends, the competitors, the risks and so forth)?
3. Is your department adequately staffed with high quality people, and is the staff viewed as efficient and internally client driven?
4. When you report bad news, are you criticized? Another side of the same question is, Have you put practices in place to identify and mitigate risks, so that when bad news happens, it is a reported as one of the identified risks that went south?”
5. Is your day-to-day department well managed? A corollary to this is, Do you provide your services quickly and in a quality manner? Another, Is your own office neat and well organized? Yet another, Do you consistently work more than 10 hour days?
6. Do you feel like more like a guiding light to growth and profitability than a policeman in your company?
7. Do you or your Senior Management Team ever lose track of the fact that internal and external customer satisfaction is Job Number 1?
8. Do you think your boss would say you think like a business person – growth, profitability, ROE, empowerment, motivation, a prudent amount of risk taking, etc.? A corollary would be, Would your boss say you strike the right balance between the big picture and the details?
9. Have you implemented a sound planning, budgeting and forecasting process? If so, do you have monthly or quarterly meetings with the profit center leaders to review results and identify risks?
10. Is your audit completed within three months after the end of your fiscal year?
Marc Palker, director at CFO Consulting Partners LLC in Princeton, NJ, has been working as an interim CFO since 1996. He is a CMA and member of the Institute of Management Accountants, and his company provides interim CFO, part-time, CFO, and CFO consulting services to a variety of businesses. “What we provide are services to companies of all different shapes, sizes, industries, public, non-public, not-for-profit,” said Palker.”
Palker’s particular niche area is small to medium-sized publicly-traded companies, and in working for these companies on an interim basis, he can draw on his experience as a CFO for four different companies. In addition to more than 30 years of experience, Palker relies on some of his favorite tools to help get the job done.
The CFO needs to have access to Securities and Exchange Commission rules and regulations having to do with financial reporting and filings by public companies. “This is tool you have to have a click away,” said Palker. “Same thing with the new accounting regulations or rules that have been codified. The codification came out in July 2009, and that is the authoritative U.S. Generally Accepted Accounting Principles. Knowing how to use that and having that a finger click away is very important.”
Palker’s favorite part of the job is the relationships he has formed with CFOs. “I have become their trusted advisor, not only on strictly accounting issues but all other issues that may come upon their desk,” he explained.
A typical assignment for an interim CFO depends on the function, but usually lasts from three to nine months. “You’re there to bridge the gap between the CFO who was there and the CFO that will be there.”
“We go in and we stabilize the company, as far as its financial departments, and its financial reporting. We improve anything that we see that can be improved, and then at some point in time after everything has leveled out, and become calm, we begin the search for our replacement to become the permanent CFO at the company. ”
On a typical interim CFO workday, Palker says first thing he is concerned about is cash, where all the bank accounts stand, what’s the status of moneys that are supposedly coming in, and what bills need to be paid.
After working with cash, the next typical assignment is to turn to an analysis of the transactions that have occurred and determining what information you as the CFO have to relay to the president, CEO, or other operating managers so they can proceed with their own tasks.
“Finally, you’re going to always deal with the phone call, the emergency, special project, depending on what’s going on with the company at the time. It may be an audit from the accounting firm, it may be an acquisition in progress, it may be strictly working on lease of a building that the company’s going to be renting. That’s a typical day,” said Palker.
Palker finds the most annoying part of his job is the never-ending parade of people who come to the CFO’s office with questions and problems that they ought to be able to solve for themselves. It’s easier to just walk into the boss’s office and get the answer, he explains. These interruptions can create a break in concentration that is frustrating.
The biggest challenge the interim CFO faces is keeping the company from stopping. Palker’s job is to make sure that everything keeps moving in the proper direction.
Palker advises that the interim CFO should not be afraid to admit that he alone doesn’t have all the answers. He prides himself on knowing what he doesn’t know and taking advantage of the tools that are available to him to help solve problems in the proper time frame. “There is so much information available now because of the Internet, and there are so many experts out there that you can tap into if you’ve developed a good networking group that you can rely on.”
If you were to rank Palker’s desk on a range from 1 to 10, with 1 being an empty desk and 10 being a desk that looked like a tornado swept through, Palker’s desk would be a 2 or 3. “You have to have your desk organized for when that phone rings, to be able to get your hands on what you need. Part of our filing system now is no longer paper; it’s knowing where to get it in your computer so you can access it that way. I would say that if I went back 10-15 years, my desk was like a 10, but technology has cleaned it up quite a bit.”
Palker’s advice for someone starting out in this business is to network, network, network, and network. His clients come from referrals and his referrals come from his network, and primarily from accountants and attorneys. “Everybody knows an accountant and everybody knows an attorney, and that’s where your referrals are mostly going to come from.”
FEI (NYC Chapter) Professional Development session November 18, 2008 By Eileen Xethalis
When Al Clapp, a leader for professional development seminars for Financial Executives International’s New York Chapter, first asked me to speak at a forum on ethics and to spike the speech with my view from the trenches as the former CFO of a Mortgage Bank & brokerage firm, I thought we have traveled so far from ethical behavior that the best course of action was to revisit the definition of Ethics.
The American Heritage dictionary defines Ethics as a set of principles of right conduct. For our lawyers in the room the very definition is fodder for discussion! I also discovered a cynical quote from Mason Cooley, a U.S. Aphorist, “In ethics, prudence is not an important virtue, but in the world it is almost everything”
And we don’t want to go down the path of defining a prudent man, that’s a 108 page legal definition! Let’s suffice it to say that Ethics is the balancing act that tempers greed in the prudent man. And, when that doesn’t work we have regulation.
During the inflation of the mortgage bubble, we had neither Ethics nor regulation. The codification of regulations was well known within the industry, but the recognition of why the regulations were necessary started to slip away. Soon we found that the due diligence normally done on appraisers by a staid banking system slipped away. Many real estate appraisers maintained their standard of conduct but, where there is opportunity to make extra money, the dishonest prevail. The loan processing departments of the past would not accept appraisal from appraisers with shoddy reputations. As the market heated up, many firms including Country wide, Indy MAC and to a lesser extent, WAMU did not reject questionable appraisals or appraisers. Hugh loan volume also contributed to lesser scrutiny. You may recall Indy MAC lost 80 million dollars on a group of loans that had a two tier fraud; inflated appraisals and owners (straw buyers) that were duped into signing mortgage documents for homes outside their state.
Add to this process the misuse of products, such as Stated Income, the “liar’s loan”, or Stated Stated, now you get to embellish both income and assets! A stated income loan requires only that you declare how much income you earn. Reputable lenders asked that you sign an IRS form 4506 for verification; but even reputable lenders rarely checked. Stated Stated loan is no verification on assets or income. The really problematic loan, in my opinion, is the Interest only loan ( IO). Many borrowers were sold this type of loan in conjunction with 80/20 loan, and many IO were ARMS. An 80/20 loan is actually a first and second mortgage, the second being a HELOC with a sustainably higher interest rate. With an 80/20 loan the property is 100% financed! From day one the buyer is in a negative equity position of roughly 5%.
However, with rapidly appreciating values in the 20% appreciation range, within a year they were no longer in a negative position. Borrowers were encouraged to take an IO because the rates were falling. While many people could qualify for a 5% fixed 30 year mortgage, they were routinely advised to take the IO, the rates will go down some more, or use the IO Loan on an 80/20 and use what would have been a principal payment to pay down the HELOC, the 20% loan. (The reasoning went, you could invest the down payment at higher rates or instead of buying the traditional starter house, skip starter and buy the second house) The IO was the favored loan in a rapidly appreciating housing market. Many speculators entered the market with an IO loan. Many a family, whose house is their biggest asset missed the opportunity of their life time to lock in a 5 or 6% fixed rate for thirty years. Prudence did not prevail!
It was not uncommon to see the same borrowers from the same branches cashing out the equity in their homes on the dual premise that the house would continue to appreciate and the rates would continue lower. The practice created a constant income stream for lenders, just as the IO’s were creating another constant income stream. In the pre- hot market, multiple refinancing within short periods of time would have been viewed as not only as a questionable practice, but also a red flag for the banking department auditor.
The sub-prime market, because of all of these lending practices, enveloped more than people with credit scores lower than 620; when the market stopped appreciating borrowers with IO’s & 100% financing were also caught in the sub-prime net. In late 2004 early 2005, I estimated that somewhere between 25 – 28% of the loans written by the small mortgage bank I was associated with fell into this precarious category. During this same period, the press was touting Sub-Prime at only 5%. That was true if you defined Sub-Prime as loans with borrower’s credit scores of 620.
Many a consumer was playing Russian roulette with the cash value in their homes, constantly refinancing, mostly to pay down credit card debit in the range of 25,000 to 45,000, each refinancing increasing the amount of money borrowed. The press liked to refer to this as the piggy bank. (You may remember the front page of the business section of the NY times with a house, a slit in its roof to swipe the credit card the credit card sticking out of the roof.) The press had, in a back handed way, made this practice look chic. And not unlike the Dot.com Bubble, the press is equally culpable in inviting the speculators to the block party!
Where homeowners duped? Some, however many went down the yellow brick road with their eyes wide open unable to understand their own money psychology. Where financial institutions blindsided by greed? Yes. And the practice of securitization left no one interested in the long term value of paying the loan off. The originator had the loan off their books and would most likely generate more fees from the same borrower within the next 13 months. No one was responsible.