Less Lending, Higher Interest Rates, Or Both!

I'm surprised to see a line like this in the National Journal (for my money, the best weekly publication in the world):

"Wall Street investors and the major banks that finance deals have been the primary victims so far, but below them, smaller banks will inevitably be forced to sharply curtail their lending, raise interest rates, or both." (emphasis added)

I'm going to go out on a limb and say that both will happen if one happens. The demand curve in the loanable funds market still slopes down, no?