Romana's take on the global economy sucking

(I have never taken economics. I have struggled to get this far. If I got anything wrong, please tell me, so that I can either correct this post, or delete it before I die of shame)

So, the economy sucks, huh? As far as I can tell, this a result of those wheeler dealers on wall street, and two, large, U.S. government backed corporations by the names of Freddie Mac and Fannie Mae. Both overseen by Congress, Fannie Mae underwrote mortgages on "affordable homes". This was intended to make home loans more accessible for lower-income Americans. Freddie Mac then sold them on to the private sector, as assets. Fannie and Freddie guaranteed most of the mortgages in the U.S.A, and had combined assets of almost $5 trillion. The government backing meant that they were able to take on massive larger amounts of debt than other companies, and in return for this, they were supposed to finance more affordable mortgages.

Around 1999, Fannie Mae started underwriting bad loans - to people without high enough incomes, or without the sufficient capital to normally get a loan. These bad loans were on sold to private companies, who assumed that, as Fannie and Freddie were government affiliated, their debt securities were back by the U.S. treasury. Instead, brokers were just making massive proftis by onselling these loans.The onselling of these loans created massive profits for brokers and the like. Private companies began compiling massive numbers of these loans (assuming that they came with little risk) and putting them in a huge pile, if you like, and just sat there, waitng, as themortgage checks came rolling in each month. As the housing bubble started to collapse, and properties lost their value, mortgage owners began defaulting on their payments. Private Companies, who had taken on massive amounts of debt, began to fail. The U.S. Government decided to bail Fannie and Freddie(and Bear Sterans, and A.I.G.) out, in an attempt to stop the economy fully melting. the companies that didn't get bailed out, who now had massive amounts of debt on their hands, began to fail.

So what? I don't work for one of those failing companies, like the Lehman brothers. heck, I don't even live in the same country. The failing of these corporations is causing a rippling effect. Financial firms are going to be less quick to lend money, and growth of economies everwhere will slow down. Jan Hatzius of Goldman Sachs, predicts that the U.S. economy's G.D.P. will be down 2% in '08 and '09. Consumers, unable to access credit, and fearful of the loomng crisis, are stopping their spending. Retailers and manufacturers are starting to fail - the Big # of car manufacturing, Ford, General Motors, and Chrysler recently flew from Detroit to Washington to beg for a government handout. Jobs will be lost. More mortgage payments will fail to be payed. And people bought these mortgages all over the world - Hungary, Singapore, Brazil. In New Zealand, we're mostly going to be okay, because our banks aren't investment ones, who bought these mortgages - our debt isn't likely to be called in. But the Global economy will slow, and things like exporting, and tourism, some of our biggest earners, will slow. People will lose their jobs, even here, and nobody seems to have come up with the silver bullet that will fix, or at least slow, the meltdown.

(I was going to put a bit of opinion here, but I can't be bothered. Form your own opininon, and tell me in the commets. Am off to study now. Man, this was an ace way to procrastinate.)