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.

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Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…