It seems part of it is an accounting issue and Credit Default Swaps (CDS) which are "insurance" against a loan going bad. I'm going to take a stab at this, correct me if there's a mistake.

CAST:
ACME, a company with cash to loan.
DEBTOR, a company which borrows from ACME.
INSURE, an insurance company which sells CDSs to guarantee loans such as ACME to DEBTOR.
LENDOR, a company which loans to companies like ACME using ACME's accounts receivable as collateral.

ACME loans DEBTOR $1,000,000.

ACME also purchases a Credit Default Swap (CDS) in the amount of $1,000,000 from INSURE for, say, $20,000 per year for 2 years. That Credit Default Swap is a derivative.

ACME now carries on its books most of that loan as an asset. After all, if DEBTOR defaults INSURE will cover the loss. Since that loan is now an asset, to be used, -

ACME borrows $900,000 from LENDER using the insured DEBTOR loan as security.

Here comes the problem. DEBTOR defaults. Can't pay ACME. That money disappears. Except it's been insured, covered, guaranteed.

However, due to market conditions, INSURE doesn't have the money to cover the bet it took. NOW ACME has $1,000,000 on its books as an insured asset which has disappeared.

And ACME has borrowed against it's insured DEBTOR loan.

AS DEBTOR loan disappears, LENDOR's loan to ACME is no longer secured. LENDOR demands repayment from ACME. Which doesn't have the money and can't get it, because a major asset has disappeared leaving ACME with a dismal balance sheet.

Etc.