And so, there were rising expectations of losses for holders of securities backed by these mortgages. But because of the complexity and opacity of some of these securities, it was extremely difficult for investors to determine, with confidence, both the creditworthiness of the assets backing a particular security and the market value of the security itself.
In these circumstances, uncertainty led to contagion and dislocations in money markets more generally, even those markets that have nothing to do with U.S. subprime mortgages. Market liquidity, which was recently thought to be too abundant, became scarce. Some investors found that the assets that they assumed were liquid were, in fact, frozen. Even the market for overnight loans was affected.