One of the complaints about the Troubled Assets Relief Program is that the banks that have tapped the $350 billion do not appear to be lending it out again. Certainly, there is plenty of anecdotal evidence to suggest that banks are using it to shore up balance sheets and finance acquisitions. Little of that money has been used to loosen credit for commercial real estate lending. When TARP was first set up, it was understood that Treasury wanted the banks to lend out the money--but there were no prescriptive measures put in place to demand banks do so in exchange for the funds. Treasury has argued, with merit, that the banking system needed the capital infusion just to continue to exist.

Now that it appears the banking system has stabilized--albeit not as solidly as most would like--Treasury under the Obama administration is going to put more pressure on banks to lend this capital. According to news accounts, Neel Kashkari, TARP's administrator at Treasury, has written to the 20 or so banks that have thus far used government capital asking for information on their business and consumer loans--as well as purchases of any MBS or ABS.

Furthermore, there are signs that the regulatory apparatus in Washington does appear to favor some level of toxic loan bailout--even though the prospect has been killed and then revived more times to count. For the CRE industry in particular, this is seen as an important measure to jump-start lending. In recent testimony to Congress, John Bovenzi, deputy to the CEO of FDIC, says that even with the various forms of government assistance that have already been provided, troubled asset relief will still be necessary. "This program should be made available to banks of all sizes, rather than just large financial institutions, to address financial stresses that may be occurring at the regional and local levels," he says.

"However, because of the sheer volume of troubled mortgages, as well as the large number which are locked in securitization trusts," Bovenzi says. "it also is vital to institute a specific program aimed at foreclosure prevention."

It is easy to see why many have become disillusioned with the government efforts thus far, Adam Weissburg, a partner in the Los Angeles office of Cox Castle & Nicholson, tells GlobeSt.com.

"The track record on the governmental efforts to shore up liquidity and free up credit has been less than ideal." he points out. "At some point, the pessimists in the market place, with their claims that the efforts are too little and too scattered, have some merit."

What those pundits fail to consider is the depth to which fear has invaded and undermined the market place, he adds. "While fundamentals may be something that can be discretely and more quickly targeted, fear is harder to manage."

Weissburg says, "We are now really only three months into the concerted effort to affirmatively address fear. And there are now signs of improvement. The market appears to have hit a floor, and many economists are saying that the third and fourth quarter will be more healthy."

With regard to the latter, Weissburg says, whether the economists are right is really not the main issue. "The main issue is whether there is a general acceptance of the worst is over--or at least if there is more to come, it is manageable. That appears to be happening, and with it credit should slowly appear in the market."