Bile secreted from gallbladder & Pancreatic juice from pancreas are dumped into the duodenum (beginning of the small intestines which is connected straight from the stomach). Bile then binds to the fat along the small intestines. Bile then re-absorbed back to the liver together with its fat @ the terminal ileum. 

In Crohn's Disease in which the terminal ileum is inflamed, the bile together with its fat is not re-absorbed back into the liver. This causes excess fat in the stool. Excess bile stimulates excess electrolyte & water secretion into the colon lumen. This "increases motility, shortening the colonic transit time, and so producing diarrhoea with other gastrointestinal symptoms such as bloating, urgency and faecal incontinence. There have been several recent advances in the understanding of this condition of bile acid diarrhoea, which has also been called bile salt or bile acid malabsorption (BAM)1" 

Similarly, in surgical resection of the terminal ileum, the bile acids are not re-absorbed back into the liver. This makes bile stimulates excess electrolyte & water secretion in the big intestines. 

Therefore, bile acid sequestrants work to make these biles insoluble and osmotically inactive. Thereby, the bile acids cannot stimulate the secretion of excess electrolyte & water secretion into the colon lumen. Thus, this decreases the diarrhea caused by fat malabsorption. 

(In hypercholesterol, bile acid resins work to make these biles insoluble & osmotically inactive. Thereby, bile acid resins cannot be re-absorbed back to the liver. The liver sensing a decrease in bile has to make more biles. Biles are made from cholesterol. Because the liver keeps making biles from cholesterol, this medication use theoretically work to lower cholesterol. But as we know, hypercholesteremia is more than just high cholesterol, -statins work best. Bile acids rarely used for hyper cholesterol but more for diarrhea caused by excess fecal bile acids.)

~Wonder Me!