Although, monetary conditions had begun to tighten, the sub-prime mortgage crisis caused liquidity squeeze that resulted in loss of confidence and panic among investors and lenders  2  BIS Review 33/2008  (and now central banks) as they could not offload the complex risky assets and structured financial products.
Since banks turned to rescue and bought off chunks of these papers, with low mark-to market valuations these resulted in losses to a number of financial institutions and write offs required capital injections. This fortunately was possible given the growth in sovereign funds which are waiting for acquisition and other deals.