The Treasury Department’s two-pronged rescue plan of troubled financial institutions, totaling $950 billion, may not unfreeze the lending market any time soon.

The massive undertaking is expected to proceed slowly. The first plan, announced in September, allocates $700 billion to buy troubled assets from financial institutions. The Treasury has assembled a team of asset managers to execute the bailout, led by Ed Forst, former CEO of Goldman Sachs. But the work of reviewing each troubled asset and executing the transactions will not be a rapid-fire process.

“It’s going to take weeks and months before any real significant changes occur,” said David Ledford, vice president of housing finance for the National Association of Home Builders. “[They] have to systematically review these portfolios, so even if things went as fast as they possibly could, it’s going to take some time just for the logistical process to occur.”

Complicating this effort is the fact that the bailout is a voluntary process. Each ongoing financial institution has a fiduciary responsibility to get the best value they can for these assets, to act in the best interests of its investors, which may lead to protracted negotiations.

The second part of the bailout, injecting $250 billion of liquidity into troubled financial institutions, may not have an immediate impact as well. Banks still gun-shy over the credit crunch may sit on this new infusion of capital until sunnier times.  

The market for construction lending in particular will take awhile to come back. The recent disappearance of Wachovia and Washington Mutual, two of the largest lenders in the multifamily industry, may signal further bank failures and consolidation in the fourth quarter and the first half of 2009.

Construction loans are “not an asset that would be easy to sell into the Treasury program, and these aren’t the kind of assets generally put into securities either, they’re very difficult to package,” said Ledford.

While Fannie Mae and Freddie Mac are still providing short- and long-term debt, construction financing, which grew increasingly tougher to procure throughout 2008, will likely dry up further in 2009. “New projects are going to be halted nationwide, if not globally,” said Dan Fasulo, managing director of market research firm Real Capital Analytics. “Overall, I think next year is going to be a rough year for new development.”