Billionaire investor Bill Ackman unveiled a plan on Tuesday he says would help the Trump administration meet its goals for Fannie Mae and Freddie Mac, the two giant mortgage companies still under government control since the 2008 financial crisis.
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored enterprises that sit at the heart of the U.S. housing-finance system.
Rather than making home loans directly to borrowers, they buy mortgages from banks and lenders, bundle them into securities and guarantee those securities for investors. This process provides lenders with steady cash to make new loans, keeping mortgage credit flowing and rates relatively stable nationwide.
THE TOP 3 REASONS HOUSING HAS BECOME SO UNAFFORDABLE IN THE US MARKET
The duo now back or own roughly half of all U.S. residential mortgages, representing about $12 trillion in outstanding debt.
Ackman’s hedge fund, Pershing Square Capital Management, is the largest common shareholder in Fannie Mae and Freddie Mac, holding more than 210 million shares combined.
During a presentation on X, Ackman proposed the following three-step plan:
1. Acknowledge that the bailout has been repaid
Fannie and Freddie have sent hundreds of billions of dollars in profits to the U.S. Treasury, far more than the amount they received during the 2008 rescue.
Ackman said the Treasury and the Federal Housing Finance Agency (FHFA) should formally recognize that the companies have repaid their debt to taxpayers.
TRUMP’S 50-YEAR MORTGAGE MAY BURDEN AMERICANS WITH MORE DEBT, EXPERTS SAY
2. Make taxpayers official owners
As part of the bailout, the government received warrants, or the right to buy up to 79.9% of each company’s stock for a nominal price.
Exercising those rights would make taxpayers the official majority owners of both firms.
3. Return the companies to the stock market
Fannie and Freddie were removed from the New York Stock Exchange after they were placed under federal conservatorship during the 2008 financial crisis.
Ackman argued that they now meet the requirements to be relisted, which would allow investors to trade their shares again.
The Pershing Capital chief said that all of these steps can be taken immediately by Treasury and the FHFA. He also says this solution would result in taxpayers owning a 79.9% stake in Fannie Mae and Freddie Mac, which would result in a value of more than $300 billion.
Ackman’s announcement comes as the Trump administration explores new ways to make housing more affordable, including a proposed 50-year mortgage, even as critics warn such measures could saddle borrowers with more long-term debt.
Whether either effort gains traction could determine how the next phase of U.S. housing policy balances affordability, risk and taxpayer exposure.
Read the full article here
