refocus on freeing up consumer and small business credit. Specifically, he said, the Troubled Asset Relief Program would not be used to buy up toxic mortgage-backed debt from companies that had invested in these securities.

That particular development was a blow to the commercial real estate industry, which had been counting on the federal government to move these securities off of investment banks' balance sheets so they would begin lending again. The new focus on consumer lending, it seemed, would come at the expense of the commercial real estate industry.

That was then, though. Yesterday, Paulson revealed new plans for the remaining funds that had been made available to Treasury to bolster the economy. And true to his words earlier this month, it is focused on consumer lending, with the launch of a $200-billion facility to support student, auto, and credit card loans and loans backed by the federal Small Business Administration. However one CRE subsector--multifamily--also received a new financial boost from Treasury and the Federal Reserve Bank. The Federal Reserve Bank plans to buy, up to, $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. It will also buy, up to,$500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

The consumer ABS facility is not going to have a direct impact on multifamily, David Cardwell, vice president of capital markets and technology of the National Multifamily Housing Council, told GlobeSt.com. "But it will benefit [the multifamily market] indirectly because consumers will have greater access to credit." Also, he concludes, the $500 billion of mortgage securities purchases will primarily benefit the single family home market.

Multifamily, though, will receive a significant boost from the government's $100-billion plan to buy the GSE's direct obligations, he said. "There is a direct correlation between the obligations that are purchased [and] the capital costs that are part of the mortgage rates provided to both the multifamily and single family borrower," Cardwell says.

These obligations, he explains, are the equivalent of corporate paper. "What has happened is that the market--to purchase those obligations--has dried up since Fannie and Freddie went into conservatorship." Since then, rates and overall activity have not been where the government would have liked, he adds. Because the Fed will begin purchasing these obligations through auction very soon, the impact will be felt in lower rates within a few weeks. "I cannot say by how much the rates will be reduced--but there is bound to be an impact," he said.

The purchase of $100 billion in direct obligations of Fannie Mae and Freddie Mac--as well as MBS backed by Fannie and Freddie--will result in a short-term reduction in spreads on these obligations, Neil R. Shapiro, a Herrick, Feinstein transactional real estate attorney, agreed.

Shapiro, who has a sub-specialty in multifamily development and finance, tells GlobeSt.com, "Due to the current lack of liquidity for typical purchasers of these obligations, it is a buyers' market now and--without governmental and Fed intervention--spreads will only get wider in the short term. This $100 billion will provide the government-sponsored enterprises with additional liquidity, which they will then use to provide much-needed credit in the housing markets."

Shapiro adds that although the impact of these funds will have a positive impact, he is skeptical whether private investors will follow the Fed back into the market. "Private investors are likely to view this Fed action as an aspirin intended to alleviate the situation in the short term, rather than as a long-term solution worthy of investors following with their own capital."

For more on the Federal Bailout, read Real Estate Forum's Can $700 Billion Unclog the Credit Spigot?"

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