The economic mess as told by Dick and Jane

Many ask what is really going on with the stock market, banks failing, and big corporations and mutual funds losing billions of dollars. Here is a simple explanation in terms that we can all relate to:
Let's say you buy a house for $100,000 and get the largest loan that you can find for that pruchase, say a $95,000 loan. You make your payments on time, but you learn that real estate values had gone down since you bought your home and now your property is only valued at $75,000. The bank writes you a letter and says they want you to reduce the blalnce on your loan from about $92,000 to $71,250.......RIGHT NOW. most of us would not be able to do that, and would be declared in default and be forced into bankruptcy, or make some other emergencty plan. This is basically what has happened to the investment banks, mutual funds, and other companies investing in mortgage backed securities. Becasue variable rates on many mortgages increased, values went down, and the economy began to slow, a higher percentage of mortgages went into foreclosure. Still well over 90% of theses mortgages are performing, yet the holders of the securities are being forced to write down the value of the securities, by large amounts. The accountants, using the mark to market rules make the banks or holders of the securities take the loss now, thus causing the problems.