Bill Ackman Sees Privatisation

Bill Ackman sees privatisation on the horizon for two of the largest US government-owned mortgage lenders, Fannie Mae and Freddie Mac.

The two major mortgage lenders were involved in several scandals spanning almost two decades, entailing misleading statements, improper accounting and subprime loans.

The Securities and Exchange Commission (SEC) charged six former executives in 2011 with securities fraud. Executives were accused of approving and knowingly providing misleading statements claiming the companies had minimal higher-risk mortgage loans.

Moreover, Freddie Mac was accused of improper accounting practices, including trades that misled investors by pampering the profitability to justify higher executive bonuses.

Perhaps the most famous scandal was in 2006 and 2007 when Fannie and Freddie invested in subprime securities, which credit agencies incorrectly considered low-risk. 

Then, there was a Fannie Mae and Freddie Mac Shareholders lawsuit against the federal government alleging that they created an environment which made it impossible for the companies to meet their financial obligations.

“As we look toward 2025, one investment in our portfolio stands out for large asymmetric upside versus downside, so I thought I would share it. We have owned Fannie Mae and Freddie Mac common stock for over a decade. Today, they trade at or around our average cost. 

As such, they have not been great investments to date. 

What makes them particularly interesting today versus any other time in history is that there is a credible path for their removal from conservatorship in the relatively short term, that is, in the next two years,” he wrote.

Bill Ackman sees privatizing Fannie Mae and Freddie Mac as a boon for shareholders and a windfall for the treasury

The move would effectively make the largest mortgage lenders private entities, again benefiting shareholders and the treasury, according to Bill Ackman. 

“A successful emergence of Fannie and Freddie from conservatorship should generate more than $300 billion of additional profits to the Federal government (this is on top of the $301 billion of cash distributions already paid to the Treasury) while removing ~$8 trillion of liabilities from our government balance sheet,” he wrote.  

Bill Ackman, a major shareholder of Fannie Mae, said there is a credible path to remove the companies from conservatorship in the next two years with Trump at the helm.

During Trump’s first term in office, Secretary Mnuchin took steps toward this outcome, but he ran out of time,” Ackman said.

“I expect that in the second @realDonaldTrump administration, Trump and his team will get the job done. Trump likes big deals, and this would be the biggest deal in history,” Ackman added.

“I am confident he will get it done,” he said. 

He conceded that there remains a high degree of uncertainty about the ultimate outcome in a warning to his followers.

Bill Ackman describes himself as a contrarian activist investor. 

But he also has his fair share of controversy. 

In 2015, he was investigated by the FBI for his alleged stock manipulation in Herbalife, a nutritional supplement company.

Ackman and his firm, Pershing Square Capital Management, wreaked havoc on the nutritional supplement company back in December 2012, betting a massive $1 billion against Herbalife based on his peddled belief that it was an illegal pyramid scheme that preyed on low-income people and minority groups.  

HLF stock price initially plummeted, leaving the firm and its Chief Executive Officer, Michael Johnson, in disarray. 

The former Chairman of The Securities and Exchange Commission also jarred Bill Ackman over his practices.

Bill Ackman sees the privatisation of major mortgage lenders, posted on X, causing both stocks to already jump

Shares of both companies enjoyed a boost, with Fannie Mae rising 18.4 percent and Freddie Mac also up 18 per cent.  

As noted above, the companies are two of the biggest backers of mortgages in the US. Following the housing market collapse in the 2008 crash, Fannie and Freddie suffered huge losses and were placed in conservatorship under the Federal Housing Finance Agency.

Bill Ackman is known to be a Trump ally, an advocate of protectionist trade policies previously celebrating the incoming president’s proposals, to impose trade tariffs on products from Mexico and Canada by 25 per cent.

Bill Ackman also blamed US Treasury Secretary Janet Yellen for the 2023 bank runs, where three known regional banks went bankrupt that year. 

“Increasing the limit for deposits insured by the FDIC above $250,000 “is not something we have looked at,” Yellen said.

“A temporary systemwide deposit guarantee is needed to stop the bleeding,” said Bill Ackmanduring the 2023 bank crisis.

With a Trump administration in 2025, Bill Ackman sees privatisation on the horizon along with tariffs being weaponized. 

“To be clear, according to Trump, the 25% tariffs will not be implemented, or if implemented will be removed, once Mexico and Canada stop the flow of illegal immigrants and fentanyl into the U.S.,” wrote Bill Ackman on X after the announcement.

“In other words, @realDonaldTrump is going to use tariffs as a weapon to achieve economic and political outcomes, which are in America’s best interests, fulfilling his  America First policy,” he added. 

Bill Ackman Sees Privatisation as also a likely feature of the new administration.