The direct and indirect contagion risks are high. The dangers thus arise in the tail and apply to the entire financial market when normally safe, short-term lending contracts dramatically in the face of sudden and significant uncertainty about asset values and the condition of counterparties.
A macroprudential regulatory  23  In 2006, just before the onset of the stresses that eventually led to the financial crisis, the largest U.S. financial firms relied on short-term wholesale funding for about half their total funding needs, and deposits for just over one-third.