Thursday, 23 February 2017
Last updated 12 min ago
Feb 24 2014 | 11:43am ET
Fannie Mae and Freddie Mac aren't going anywhere, according to Pershing Square Capital Management's William Ackman.
The hedge fund manager discussed his $400 million bet on the two government-backed mortgage giants at fund of hedge fund EnTrust Capital's annual meeting. He predicted that the hedge funds and others suing the U.S. government over its bailout of the two companies would succeed—and that a legal victory would see Fannie and Freddie shares soar, by as much as 10 or 15 times their current price.
Ackman also said he expected the government to back off on plans to liquidate Fannie and Freddie, The Wall Street Journal reports. He said Pershing Square's roughly 10% stake in the companies' common shares will be richly rewarded when Fannie and Freddie are privately-owned again, and are an even better bet than the preferred shares owned by Fairholme Capital Management and Perry Capital, both of which are suing the government.
Shutting Fannie and Freddie has support on both sides of the aisle, and is backed both by President Barack Obama and Congressional Republicans. The White House in November rejected Fairholme's proposal that hedge funds recapitalize the companies, which accepted $187.5 billion in federal bailout funds.
Fairholme made its proposal after the U.S. Treasury Department changed the terms of that bailout to seize all of Fannie and Freddie's profits.