Bill Ackman’s Bold Case for Fannie Mae and Freddie Mac
Billionaire investor and Pershing Square Holdings founder Bill Ackman recently made waves on X (formerly Twitter) by doubling down on his bullish outlook for Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC). Ackman, whose investing acumen earned him comparisons to Warren Buffett and the “Baby Buffett” nickname, believes these government-sponsored enterprises (GSEs) are nearing 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 argues could create a regulatory environment favorable to ending the GSEs’ long-running conservatorship. With predictions of triple-digit upside, Ackman’s thesis has sparked interest but also underscores the substantial risks involved.
History of Conservatorship
In 2008, amid the global financial crisis, the U.S. Treasury placed Fannie Mae and Freddie Mac under conservatorship due to their exposure to risky subprime mortgages. This intervention provided a $187 billion lifeline but came with stringent conditions: the GSEs were required to pass all profits to the Treasury under a "net sweep agreement." Over time, they have returned nearly $300 billion, surpassing the initial bailout.
Fannie Mae and Freddie Mac play critical roles in the U.S. housing market. They purchase mortgages from lenders and package them into securities sold to investors. Fannie focuses on larger banks, while Freddie works with smaller institutions. Despite their financial recovery, both remain under government control. The Treasury holds warrants equivalent to 80% of their common stock and senior preferred shares valued at $193 billion.
Momentum Toward Independence
Under the first Trump administration, significant steps were taken toward reforming the GSEs. Treasury Secretary Steven Mnuchin ended the net sweep agreement, allowing the entities to retain earnings and rebuild capital reserves. The Federal Housing Finance Agency (FHFA) also introduced new capital requirements, setting the stage for a potential exit from conservatorship.
Ackman believes a second Trump administration would pick up where these reforms left off. He estimates that a successful exit could yield an additional $300 billion in profits for the government while removing $8 trillion in liabilities from its balance sheet. Furthermore, Ackman projects that the GSEs’ initial public offerings (IPOs) in late 2026 could price shares at around $31, with valuations reaching $34 per share by 2028. This represents potential gains of 679% for Fannie Mae and 705% for Freddie Mac as of Monday’s close.
The Case for and Against the GSEs
Ackman’s optimism hinges on several assumptions. First, he anticipates that the Treasury will credit past profit distributions toward senior preferred stock, easing the path to privatization. Second, he expects the FHFA to set the capital requirement at 2.5%, which he argues is achievable given the GSEs’ earnings power and ability to accumulate capital quickly.
However, the Congressional Budget Office (CBO) previously suggested higher capital thresholds and political resistance could complicate the process. Additionally, Ackman acknowledges that raising the necessary $30 billion through equity issuance would dilute existing shareholders, potentially tempering returns.
While Ackman’s projections are compelling, they are far from guaranteed. The GSEs’ future depends on numerous factors, including regulatory decisions, political dynamics, and market conditions. A higher capital requirement or failure to resolve the Treasury’s senior preferred shares could derail efforts to exit conservatorship.
Moreover, the timing of reforms is uncertain, and any delays could undermine the investment thesis. For these reasons, Ackman warns investors to risk only what they can afford to lose, as he mentioned in his X post.
The Bottom Line
Ackman’s latest push for Fannie Mae and Freddie Mac highlights his belief in their long-term potential, especially under a pro-deregulation administration. With the possibility of high triple-digit returns, the GSEs offer an exciting or “asymmetric” opportunity, as Ackman put it, but only for those prepared to navigate the significant uncertainties.
For investors willing to take on the risk, these stocks represent a high-stakes bet on regulatory reform, political will, and the resilience of the U.S. housing market. As the debate over their future unfolds, the coming years could mark a turning point for these GSEs and their shareholders.
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