How close are we to real credit problems? Well, that's a tough call. But breakingviews.com offers a scenario, not for a meltdown exactly, but for a lot of pain. Basically, it starts with people no longer buying debt, which rocks the secondary market, which forces some hedge funds to mark down portfolios, which spooks pensions, who demand their money back. Few CLOs and CDOs make it to market. This could happen, but let's hope it doesn't happen willy-nilly in accelerated fashion. What we need is an orderly wind down. Hopefully, that will happen. But you never know. There's a lot of teeth gnashing at hedge funds. No one would be surprised if more are forced by massive redemptions related to subprime loans into drastic action.

For more:
- here's the article
- here's a New York Post article on prime brokers reducing their lending