The tapping of the credit lines were happening at precisely the moment that the risk constraints were binding harder for the banking sector. Tighter value at risk constraints translated to higher shadow value of capital and hence to the desired contraction of balance sheets. Contracting balance sheets of hedge funds and other holders of ABCPs led to a fall in the demand for the liabilities issued by SIVs and conduits. In late July and early August, SIVs and conduits began to experience diffi culties in rolling over their short term liabilities. Furthermore, as credit lines got tapped, the balance sheet.
