Chain of action: impact of credit crunch

--For months, Fed officials believed the financial market's problems were generally limited to borrowers of subprime mortgages -- those issued to more-risky homebuyers and firms -- and investors who held those mortgages. But the credit crunch has spread as hedge funds, banks and others from around the world reported unexpected exposure to defaulting subprime loans. The breadth, suddenness and opacity of this exposure have rattled investors and triggered a broadbased reluctance to lend to any but the most creditworthy borrower. --That skittishness spread first to the market for loans to heavily indebted companies, such as those undergoing a leveraged buyout. Next it hit "jumbo" size mortgage borrowers, and then some issuers of asset-backed commercial paper -- short-term corporate IOUs backed by other assets such as subprime mortgages, which are often sold to money-market funds.