Banks under stress, like Washington Mutual and Wachovia, need to set aside more capital against potential losses. So they have to sell assets, which drives asset prices even lower, which requires more capital. And round and round we go.
Great Depression 2.0: Tracing the Meltdown
The housing bubble burst. Wall Street collapsed. Now the aftershocks are radiating throughout Main Street. TIME explores how this initially insular financial crisis went national.
The Deleveraging Death Spiral