(Read more on the debt and equity markets.)

NEW YORK CITY-More than 220 attendees turned out for today’s RealShare Investment & Finance Summit, most presumably hoping for answers about the current hiccup in the credit market. But as uncertainty lingers, industry pros are asking what happened to liquidity and, more important, when the market will return.

Ethan Penner, principal of private equity firm Lubert-Adler Partners LP, tackled the issue head on in the keynote address. He stated his belief that the situation is beyond the capacity of the Federal Reserve to solve. “The Fed has very limited capabilities,” he explained. “It can’t call bond buyers and tell them to buy bonds. The Fed can’t call lenders and tell them to give loans.”

But Penner was clear on the source of the crisis. Rating agencies made a mistake. “They decide what is a good loan and what is a bad loan,” he said. “The same standards should apply no matter where the markets are.”

He called for a solution to the dependency the market has on the rating agencies, which he said are “ripe for re-evaluation. Yesterday’s AAAs might no longer be considered AAA. We are closer to a meltdown than we have been since the depression, and although I don’t think we are going to have a depression-like situation, until the market has settled into more strict underwriting guidelines, it’s difficult to see how liquidity will return to the levels necessary to return to a healthy marketplace.”

Bruce Cohen, CEO of Wrightwood Capital, who served on the panel of the opening session “The State of Real Estate, Investment, Finance and the Capital Markets” agreed with Penner. “The credit markets are locked up. There’s been an enormous amount of reliance on the rating agencies and people are now waking up to that,” he said. “Government intervention is needed.”

Panelist Gerard Mason, executive managing director of Savills Granite, explained that “we can’t see the difference between the equity and debt markets right now.” Mason went on to predict that “we will begin to recover around second quarter of ’08.”

Lending standards have changed, Penner explained, noting that what was considered a good loan two months ago is not the same today. “Standards have changed and prices have changed,” he said. “What happens when pricing changes is that things freeze.”

Panelist Suzanne Martinez, SVP of Jones Lang LaSalle, concurred, noting that higher priced buyers are now retreating. “What used to set the high standard is no longer because they can’t get leverage to work.”

Securitization is dead today, Penner noted, adding that the capital markets are just on strike. “Securitization has its flaws, but it’s the best system and it will come back,” he said. “This is just a wake-up call.”

Although there is light at the end of the tunnel, for now, it is still dark, he noted, predicting no less than six months and no more than three years for a turnaround. “We will come out of this, but we are just at the beginning at the bad part of the cycle,” he said. “Ultimately fear will give way, and entrepreneurs will come in and make money pushing fear aside.”

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