Still not sure what caused all the trouble in the banking world?
Toxic assets were a major contributor to the financial crisis. When they cratered, everything froze up.
What exactly is a toxic mortgage asset? They're complicated, but the folks at Planet Money do a good job of explaining things. They even bought a toxic asset and looked under the hood to see how it works.
Alas, Planet Money's toxic asset is now worthless. However, the experiment helped people understand how mortgage funding works and why banks are in trouble. If you didn't follow the life of Toxie (Planet Money's pet toxic asset), you can get a quick overview here and read or listen to more stories explaining how Toxie worked. Things get a little goofy at the end, but this was a big deal.
Further reading: