All these distortions induced lending standards to fall: they led to a flood of cheap mortgage loans to subprime borrowers and they promoted the distribution of the associated risks throughout the whole financial system. And due to a lack of transparency along the securitisation chain, no one really knew on whose balance sheets the risks eventually ended up.
Then, in 2007, housing prices in the US started to falter and US subprime borrowers started to default on their loans. 2.2  Banks get into trouble  Once that happened, a crucial asset in financial markets just vanished: trust. Or to use the Latin word: credit.