Pershing Square Joins Fannie, Freddie Bandwagon

Nov 18 2013 | 1:49pm ET

Pershing Square Capital Management's latest activist target is a big one. Indeed, the very biggest: the U.S. government.

The hedge fund, led by William Ackman, said Friday it had bought nearly 10% stakes in both Fannie Mae and Freddie Mac, the government-controlled mortgage insurance giants that both President Barack Obama and Congressional Republicans favor dismantling, following their massive bailouts by the government during the financial crisis. But now Pershing Square has joined forces with hedge fund Fairholme Capital Management, which last week said he and other investors were interested in buying a recapitalizing Fannie and Freddie.

Pershing Square, which said that the mortgage giants were "undervalued," paid about $500 million for its stakes.

This is the second time Pershing Square has pushed for a restructuring of the two companies; in 2008, Ackman proposed major changes that would have wiped out common shareholders and given him a windfall on his short bets against the companies.

The government, however, seems as uninterested this time as it was last time: A Treasury official said in a Friday statement that the Obama administration "remains committed" to "responsibly winding down" the two companies. Any other outcome would require Congressional approval, and it does not appear to be forthcoming, either.


In Depth

The Benefits Of Private Debt Investing

May 7 2015 | 10:43am ET

Jeffrey Haas is chief operating officer of Old Hill Partners Inc., an SEC-registered...

Lifestyle

Yale Receives $150 Million Gift from Blackstone’s Schwarzman

May 12 2015 | 12:10am ET

Yale University announced it has received a $150 million gift from Blackstone Group...

Guest Contributor

How To Generate 6% Yield In A Volatile World

May 22 2015 | 6:41am ET

Private credit comes in many different flavors, all with the common themes of over...

 

Editor's Note