03/28/2008 02:45 am ET | Updated May 25, 2011

Mortgage Crisis Drags Down Entire Economy

The mortgage meltdown is taking a rising toll on the broader economy, increasing pressure on the Federal Reserve to slash interest rates for a third time next month in hopes of averting a recession.

Homeowners will see their property values sink by $1.2 trillion next year, and 524,000 fewer jobs will be created -- both a result of the trouble caused by loan defaults and rising foreclosures, according to a report released this week for the U.S. Conference of Mayors.

The fallout is weakening consumer spending, and auto sales next year will be their worst since 1998, according to the study by research firm Global Insight.

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