Keep Your Eye on the Little Guy

With the current upheaval in the capital markets and the news that Citigroup, Merrill Lynch and Morgan Stanley have written off $70 billion in loans, it is interesting to note a whole cadre of financial institutions that are doing gangbusters.  According to an article in the 2/19/08 USA Today, smaller banks which avoided the enticement of lowering underwriting standards and issuing subprime loans, are on average, only 6% off their 52 week high.  Most of these names are unfamiliar — Danvers, First Merchants and Oriental Financial.  As the heavily leveraged buyers retrench and the access to bridge loans and mezzanine financing pulls back, could we see a number of well capitalized small cap financial institutions step in to fill the void in the commercial real estate investment market?