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Cadwalader, Wickersham, and Taft, one of the larger law firms in the country, is cutting 96 lawyers from it’s payroll.

Why is that important for a real estate blog? Glad you asked.

The attorneys are coming out of their real estate finance and securitization departments. The firm will still retain 150 attorneys in that division in hopes of a rebound, but the demand for real estate securitization has plummeted.

From 314 billion dollars securitized last year to an anticipated 60 billion in 2008.

That is the credit crunch.

When a law firm that is probably the biggest player in the space is throwing in the towel, you know that mortgage securitization will not occur like it has in the past. That combined with numerous bank closings indicated to me that tight credit will continue for a while yet.

White said that real estate finance and securitization — areas that he referred to, alternatively, but not necessarily inconsistently, as “discrete areas of the firm” and “a large part of the practice” — grew “very rapidly” over the past five years, focusing principally in the area of commercial mortgage-backed securities. “Our finance department was involved in every major leveraged buyout last year,” said White, including Blackstone’s $23 billion acquisition of Equity Office Properties.

“All of those financings were done on mortgages on those properties, and those mortgages were turned into securities. Every major deal that was done in 2006 and 2007 was done off the back of mortgage-backed securities.” He added: “There was a frothiness that occurred as a result of the Blackstones and the Apollos using mortgage-backed securities to fund their buyouts. It was a lot like junk bonds becoming the instrument of choice in the late 80’s and early 90’s.”

White explained that, in 2004, there were only $98 billion worth of mortgage-backed securities issued. In 2008, he said, that number ballooned to $314 billion. “So we grew right along with client demand. And now that market has contracted severely. That $314 billion from last year will go to roughly $60 billion in 2008 — an 80% contraction.” White said he expects that market to come back, and, in anticipation, is retaining 150 real estate finance and securitization lawyers.

Law Blog - WSJ.com : Cadwalader to Cut 96 Lawyers.

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