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9:00 AM EST, Monday, September 8, 2008: Today's BIG news is that the Federal Government has taken over Fannie and Freddie. It's the biggest bailout ever. At this stage we have no idea if this is a good thing or a bad thing long-term.

A "good thing" is that it stabilizes housing markets and adds confidence to our ailing financial markets.

A "bad thing" is that it does nothing for housing or for confidence, but ends up hurting the value of the U.S. dollar.

Our government has figured $100 billion of cash to each one -- a total of $200 billion. But taking them over has effectively doubled the U.S.'s debt to slightly over $10 trillion.

The U.S. government is presently running a huge deficit. It's spending far more than it "earns" (i.e. receives in taxes). To keep spending, it borrows money from everyone, but especially from foreign governments like China and Japan. Adding Fannie and Freddie debt means adding more obligations. Fannie and Freddie's present and future mortgages will pay off some of their debt -- but not all. We have no idea how much. Fannie and Freddie management lied about the strength of their balance sheets. They were much much worse. And with housing in free fall, no one (including Paulson, Bernanke, and Buffett) has any idea what Fannie and Freddie mortgages might be worth. Homeowners continue to default on their mortgages.

I watched Paulson on CNBC this morning. He did this bailout because he had to, not because it was a good investment for the federal government, or for you and I, taxpayer. He talked about "Fragility in our capital markets" and "grave concern that these two companies are too big." Buffett on CNBC by phone this morning also said this had to be done. He was cautious about what it all means.

As I've written before, this financial crisis (i.e. the one we're in) is different to any other. All others going back to the Great Depression (but excluding that one) required a single large check, some reorganization and little time. Things starting improving from the moment the check was written.

This one is different. The checks have been written and written and things continue to worsen. The ailments spread. It started out as sub-prime problems. Now we look like we'll lose at least one of our big three auto makers.

There are only two mantras:

1. When in doubt, stay out.

2. Cash remains king, though today the stockmarkets look like they're ready to celebrate big-time. It won't last. Good time to get out if you're still holding equities.

Want to be really depressed about the Fannie-Freddie bailout? A fellow called Martin D. Weiss has written a long piece called Why The Fannie-Freddie Bailout Will Fail. It's worth reading.

More good tennis to watch. The rain postponed the men's final. It's on tonight.