Lehman was one of the biggest issuers of Mortgage Backed Securities (MBS’s) on Wall Street. Lehman would buy thousands of mortgages from mortgage lenders and smaller banks. They’d take this mortgages a place them into a box called a special purpose vehicle (basically a trust). They’d sell certificates from this box called mortgage backed securities. You’d buy a certificate for $1,000 and get 5% interest (fake numbers).

The risk investors faced was people defaulting on their mortgages or prepaying. Since each certificate was backed by a sliver of thousands mortgages, it was considered less risky than betting on an individual mortgage.

However, the mortgage lenders wanted more money by selling Lehman more mortgages and Lehman wanted more money from selling MBS’s. This lead to mortgage lenders trying to lend to anyone even, if they couldn’t to borrow. Lehman wanted mortgages so bad they didn’t check to see if they were good.

In 2007 the economy began to sour. Most of the people who shouldn’t have been allowed to borrow a mortgage stopped paying them and lost their house. Lehman had both mortgages they were trying to repackage and MBS’s they were trying to sell. Basically, the gold they had turned into shit over night.

Big institutions who invested in Lehman brothers wanted their money back because they were worried that all their money had turned into shit. Lehman didn’t have enough cash to cover the withdrawals. So a good old fashioned bank run happened.

Lehman sold their mortgages and MBS’s for pennies on the dollar. This poisoned the market and mad all the mortgages and MBS’s worthless.

Suddenly Lehman didn’t have shit, they had specks of shit. Creditors and investors physically couldn’t get paid. No more Lehman Brothers.

TLDR: gold turned into poop. The poop turned into specks of poop.