JB: A lot of these bank loans are going to investment pools of one sort or another. So, you go to the bank to renew your commitment, and they say, "Sorry, Dan, we can't do that anymore, you're going to have to sell some of the stuff that you've got," and they've been running on leverage all of the time anyway–well, you're going to sell some of the stuff you own in order to pay them back. That's kind of what's going on right now. They are selling across the board, because if I call in your loan and you're a long-short guy, which means you have to cover your shorts and sell your longs. And most of these guys will leverage two or three or four or five–pick a number–times.

DW: But buying in his shorts is going to push prices up while selling longs pushes prices down… is that necessarily a bad thing?

JB: No, not necessarily. But there will be some long-only guys who can't keep their loans out–they're the guys who do private capital, and what they're doing is borrowing short and lending long in some fashion. You can get kind of sideways in these transactions. We have seen some minor and some major buyout deals absolutely collapse because they can't raise the money. And we're not seeing any new ones start!

DW: All right, so you take the buyout factor out of the equation, but we're still talking about an economy where people continue to need to buy computers and cars and eventually build more houses.

JB: I'm not saying it's the end of the world. It affects the marginal borrower, who I think is really not necessarily the consumer or the corporation. The last time we talked, I made a comment that I thought that some of these developing countries, their markets, looked like bubbles to us.

Hong Kong and Singapore and Malaysia, etc. are all down 15%, 16%, 17% year-to-date versus say 8% for the Dow Jones Industrials. So those markets are getting corrected, and my suspicion is part of it is because you have what is commonly called a "credit correction" on the way.

MG: The only thing I would add to that is: If the Fed is lowering rates, doesn't that solve the problem? It's not the price of credit, it's the availability of credit that's having a major impact on the markets.

JB: Dropping rates is a pretty blunt instrument. It's not like a scalpel to solve a specific problem; it just kind of pummels everything one way or the other. If you look at the shape of the yield curve, and nobody talks about this much, but the shape of it is pretty interesting. At the long end, you're over 4%, and at the short end, you're below 2%–that's a pretty good yield curve!

DW: Mark, doesn't the Fed lowering rates help the banks, because it gives them the opportunity to borrow lower and loan high? This might be a good way to help repair some of that balance-sheet problem, no?