At the same time, however, banks became extremely reluctant to borrow from the Federal Reserve for fear that their borrowing would become known and thus cast doubt on their financial condition. Importantly, the crisis also involved major disruptions of important funding markets for other institutions.
Commercial paper markets no longer channeled funds to lenders or to nonfinancial businesses, investment banks encountered difficulties borrowing even on a short-term and secured basis as lenders began to have doubts about some of the underlying collateral, banks overseas could not rely on the foreign currency swap market to fund their dollar assets beyond the very shortest terms, investors pulled out from money market mutual funds, and most securitization markets shut down.