I am not in finance. This is a second-hand explanation. Tablespoon of salt and all that. These sorts securities were structured in such a way that some peopl

I am not in finance. This is a second-hand explanation. Tablespoon of salt and all that. These sorts securities were structured in such a way that some people get a lower ROI, but better risk profile. The way that works is that whoever accepts the lowest rate of return gets their portion first. When the money runs out, the assets that would have the highest rate of return miss out entirely. There are two major ways that a loan can change: default (where the debtor simply does not pay; this typically leads to foreclosure and the bank often takes a loss) and renegotiation (where the debtor negotiates a reduction in how much the debtor will eventually need to pay on the theory that the lower amount will make default less likely). Both of these reduce the amount of money coming in (and, indeed, the amount that is ever going to come in). What happened is that the amount of money coming in (and expected to come in) dropped to the point where, after paying every asset promising a lower rate than Toxie, there was no money left to pay Toxie. As there is no means by which this situation can change, Toxie no longer has value.