The turmoil in financial markets surfaced as "liquidity constraints" when conduits and aggregators of securitized products and financial institutions faced difficulties in raising funds. Losses incurred by financial institutions eventually expanded due to declines in the prices of various securitized products, and this in turn led to a tightening of credit standards.
As a result, there was downward pressure on economic activity, impairing financial institutions' assets. As was the case in Japan after the bursting of the bubble, financial conditions in the United States deteriorated with market participants' pessimism rising and falling in a repetitive pattern. Needless to say, the situation deteriorated sharply since the bankruptcy filing of Lehman Brothers in mid-September.