Billionaire investor and Pershing Square Holdings founder Bill Ackman recently made waves on X (formerly Twitter) by doubling down on his bullish forecast for Fannie Mae Over-the-counter: FNMA And Freddie Mac OTC: FMCC. Ackman, whose investing acumen has earned him comparisons to Warren Buffett and the nickname “Baby Buffett,” believes these government-sponsored enterprises (GSEs) are approaching a pivotal moment that could deliver massive returns for investors.
Ackman’s renewed enthusiasm stems from his confidence in the policies of a potential second Trump administration, which he claims could create a regulatory environment conducive to ending the long-term conservatorship enjoyed by these companies. With a triple-digit rise expected, Ackman’s thesis has generated interest but also highlighted the significant risks involved.
History of the province
In 2008, in the midst of the global financial crisis, the US Treasury placed Fannie Mae and Freddie Mac under conservatorship due to their exposure to subprime mortgages. This intervention provided a $187 billion lifeline, but it came with strict conditions: private companies were required to pass all profits to the Treasury under the “net sweep agreement.” Over time, they returned nearly $300 billion, exceeding the initial bailout.
Fannie Mae and Freddie Mac play critical roles in the U.S. housing market. They buy mortgages from lenders and package them into securities sold to investors. Fannie focuses on large banks, while Freddie works with smaller institutions. Despite their financial recovery, they remain under government control. The Treasury Department holds collateral equal to 80% of its common stock and preferred stock valued at $193 billion.
Momentum towards independence
Freddie Mac today
As of 03:59 PM ET
- 52 week range
- $0.77
▼
$5.09
Under the first Trump administration, important steps were taken toward reforming small government institutions. Treasury Secretary Steven Mnuchin ended the net sweep agreement, allowing entities to retain profits and rebuild capital buffers. The Federal Housing Finance Agency (FHFA) also introduced new capital requirements, paving the way for a potential exit from conservatorship.
Ackman believes that a second Trump administration will pick up where these reforms left off. It is estimated that a successful exit could generate $300 billion in additional profits for the government while removing $8 trillion in liabilities from its balance sheet. Furthermore, Ackman predicts that GSE corporate IPOs in late 2026 could price shares at around $31, with valuations reaching $34 per share by 2028. This represents a potential gain of 679% for Fannie Mae and 705% for Freddie Mac. From Monday’s close.
The case for and against GSEs
Ackman’s optimism is based on several assumptions. First, the Treasury is expected to restrict ex-dividends towards preferred stock, easing the path to privatization. Second, the FHA is expected to set capital requirements at 2.5%, which is claimed to be achievable given the strength of SMEs’ earnings and ability to accumulate capital quickly.
Fannie Mae today
As of 03:59 PM ET
- 52 week range
- $0.93
▼
$5.25
- Price target
- $3.00
However, the Congressional Budget Office (CBO) has previously suggested that higher capital thresholds and political resistance could complicate the process. In addition, Ackman admits that raising the necessary $30 billion through a stock issue would dilute existing shareholders, which could lead to lower returns.
Although Ackman’s predictions are convincing, they are by no means guaranteed. The future of these companies depends on many factors, including regulatory decisions, political dynamics, and market conditions. Higher capital requirements or failure to dissolve Treasury preferred stock could derail efforts to exit conservatorship.
Moreover, the timing of the reforms is uncertain, and any delay could undermine the investment thesis. For these reasons, Ackman cautions investors to only risk what they can afford to lose, as he stated in his post X.
Bottom line
Ackman’s recent campaigning for Fannie Mae and Freddie Mac highlights his belief in their long-term potential, especially under a pro-deregulation administration. With the potential for high returns exceeding 10%, global stock pools offer an exciting opportunity, or “asymmetric,” as Ackman puts it, but only for those prepared to navigate significant uncertainty.
For investors willing to take risks, these stocks represent a high-risk bet on regulatory reform, political will, and the resilience of the US housing market. As the debate over their future unfolds, the coming years could represent a turning point for these companies and their shareholders.
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