While these clarifications may enable banks to place a higher book value on their debt securities, the true impact of FAS 157 may be lost in the shuffle of an alphabet soup of federal programs intended to clear toxic assets off the books of financial institutions and jump-start lending. Of more importance to the eventual thaw in the capital market are the TARP, Public Private Investment Fund (PPIP) and Term Asset-Backed Securities Loan Facility (TALF).

Gary Gabriel, executive director of Cushman & Wakefield's Metropolitan Area Capital Markets Group in East Rutherford, NJ, says that FAS 157 could strengthen banks' balance sheets, thus making them more willing to lend. Yet by doing so, they may be less likely to sell their assets at the discounted price the market wants to see, thus postponing what many in the industry say is necessary for the return of an active trading arena.

"On the one hand, healthier banks and financial institutions are a net positive for the market," he says. "The flip side is, however, they won't be forced to sell those particular assets on their balance sheet, which is not necessarily a great thing. One of the things we've been looking for is a market-clearing event that will cause these assets to be liquidated quickly. This particular move forestalls what some might say is the inevitable, which is actually clearing these assets off of banks' books."

Bill Campbell, a partner in the real estate practice of Stroock in New York City, says that the initial reaction from the industry has been rather cool toward the FAS 157 revisions. "If you are not going to force banks to truly mark these assets to market, then it's a further reason for them to keep them on their books, not sell them, and we will continue to have a backlog for unsold CMBS," he says. "This will delay, or at least drive up the yields on new issuances of CMBS--an important funding source for new commercial loans."

Campbell also says the industry may be "overreacting" to how FAS 157 will affect whole loans. "FAS 157 applies only to securities and loans originated or purchased for re-sale or securitization," he explains. "Accordingly, FAS 157 should have no affect on how banks are required to value a large portion of the loans held on their balance sheets."

As James J. Maurer, president of Cofinance Inc. in Hackensack, NJ, sees it, the changes to FAS 157 have come too late. "At this point, banks are trying to gain their health and continue to be stingy about their lending to real estate assets," he says. Moreover, the FAS 157 clarifications have come at the same time that the government has introduced a slew of programs to rid financial institutions of troublesome assets and stimulate the economy.

"I don't think lending is going to get back to where it has been because of FAS 157," Maurer says. "It's a combination of all these programs and how they affect and cancel each other out that will determine which one is going to work."

Recently, the Federal Reserve decided to expand TALF to include newly issued, highly rated commercial mortgage-backed securities as eligible collateral, a move many in commercial real estate had vigorously supported. Yet for some, despite that inclusion, confusion still reigns in the marketplace.

"Right now, there is too much noise in the market," Maurer says. "No one is making a move. I'm a buyer, and what I'm finding is that everyone is just sitting tight. People are waiting to see what the impact all these changes will have. But the government keeps changing them. We're all waiting for it to calm down and to see how it all plays out. Right now, it's difficult to determine."

Maurer also points out that changes to an accounting law will have little impact on the underlying cause of the slump in commercial real estate. "FAS 157 is not going to create employment," he says. "You have reported unemployment at 8.5%, but effective unemployment is closer to 10%. That all translates to space back on the market, which translate to vacancies, which has a negative effect on pricing."