[IMGCAP(1)]NEW YORK CITY-The credit crisis has continued for more than a year now, and some insiders say the good news is that we are getting to the main event. The “main event” they speak of is dealing with the condition of the banking system, which Massey Knakal Realty Services chairman Robert Knakal says is essential to do, “if we are going to pull ourselves out of this mess.”

Hugh Finnegan, an attorney in the real estate group at Sullivan & Worcester LLP, agrees with Knakal, noting that financing is the biggest problem in the credit crunch. “The market was irrational a year ago because of what was being allowed to happen. It is irrational today on the opposite end of the spectrum.” He adds that “the risk factor has swung back the other way. The appetite for risk is minimal at best.”

[IMGCAP(2)]The free flow of easy credit helped turn the financial markets upside down and the lack of available credit is hurting our institutional property sales sector, according to Knakal. No matter what the state of banking today, he says, “those of us in the real estate industry can take heart in knowing that banks are in business to lend money.” He further notes that none of the 117 banks on the Federal Deposit Insurance Corp.’s troubled bank list are New York City banks. “Banks with the ability to make loans today are in a position to make very safe, selective and profitable loans. Their position is aided by the low interest rates that the Fed has supported as the Federal Funds rate stands at 2% and it seems likely to stay that way into 2009.”

Finnegan tells GlobeSt.com that he isn’t surprised that New York City banks aren’t on that list because “they are so disciplined. When you read about these failures, it is mostly one big borrower who focuses on one particular type of customer,” he explains. “New York City lenders are very savvy and have a much more diversified portfolio.”

Finnegan says that unless there is another turn in the market, he believes New York City mortgage lenders will get through this unscathed. “I think the mezzanine lenders have been, and will continue to be the ones to get hurt.” He says that if the fourth quarter continues to bring bad economic news, particularly in the retail area, then the credit crisis may go on for an extended period, “maybe 2010 and beyond, depending on how bad it is.”

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