Financial Faith Is Crisis' Top Casualty
One year in, credit crunch has upset all expectations about modern markets
By Jason Farago,  Newser Staff
Posted Aug 4, 2008 2:35 PM CDT
Ben Bernanke, chairman of the Federal Reserve, and Jean-Claude Trichet, head of the European Central Bank. Despite their efforts, the credit crunch endures after a year of gyrations.   (AP Photo/Shizuo Kambayashi)
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(Newser) – Last summer, central banks injected hundreds of billions of dollars into the financial system, desperate to restore liquidity to battered markets. But by then the credit crunch was on—and after 12 months, it shows no signs of abating. The Financial Times looks at how risky US mortgages set off the worst economic crisis in 70 years.

"There was this huge trust in the intellectual capital of Wall Street," one CEO said. But complex securities invented in recent years were far riskier than ratings agencies suggested. Investors thought risk was spread widely enough that markets would avoid a Japan-style meltdown. Instead, a chain reaction has led to massive writedowns, nationalized banks, and dried-up markets, from which it may take years to recover.