At $600 billion the collapse still ranks as the largest bankruptcy filing in US history.  Lehman was heavily invested in the subprime mortgage market.  At the time they had about $22 billion in assets which it leveraged into $680 billion in real estate investments.  When the value of homes declined in 2007, it triggered a call on Lever which was unable to cover the loans.  The US government stepped in but they were unable to come to terms on an agreement and so Lehman want bankrupt.  The stock market immediately shed nearly 5% of its value and a recession followed.