12 But the importance of considering intermediation channels in the aggregate, as opposed to taking them into account for some firms at some times, has remained difficult to quantify. 13 Moreover, that work has tended to concentrate on the intersection between intermediaries and nonfinancial borrowers. A characteristic of the recent crisis, however, was the critical role of interactions within the financial sector.
Although rising defaults on subprime mortgages caused the initial turbulence in financial markets, roadblocks to the flow of credit within the financial sector from heightened uncertainty, increases in the asymmetry of information, and questions about the alignment of incentives helped turn a conventional credit event into a full-blown crisis.