It reduces spending and purse strings get tightened. When the mortgage doesn't get paid, the mortgage backed security isn't getting its repayments. The retirees living off the dividends from the REIT don't get paid. Then the retiree spends less in the economy, which would've paid the restaurant worker's wages.

When the chain breaks, the whole system is impacted. Think of it as a graph. When payments aren't flowing from one node to the next due to crisis, the solution is to have the government ensure those payments be made via taking on debt in bad times (and less borrowing in good times).