The lack of trust meant that financial institutions were only willing to lend to one another for increasingly shorter periods, ultimately only overnight. A financial markets version of the bank run portrayed in It’s a Wonderful Life took place. In the UK, in the case of Northern Rock, a traditional bank run occurred as depositors became concerned about the safety of their savings.
They no longer trusted the institution because they were uncertain about its ability to fund itself, given its reliance on mortgage-backed securities for funding – a market that was no longer functioning at all because of a lack of trust in the value of these securities. This breakdown in trust led to a breakdown in intermediation.