Pershing Square Capital’s William Ackman is spearheading a push to keep some segments of Fannie Mae and Freddie Mac’s business a private, for profit enterprise in a risky, counter-intuitive move. The move also pits Ackman against the Obama administration, which has moved to “wind down” the government sponsored enterprises’ business.
Pershing, Ackman’s $12 billion hedge fund, acquired a 9.98 percent stake in the common shares of Fannie Mae and a 9.77 percent stake in those of Freddie Mac last week. Now, Ackman hopes to begin talks with the government and shareholders to privatize the two GSEs, which began making a profit in 2012, despite needing a taxpayer bailout just two years earlier. When the feds took over Fannie Mae and Freddie Mac, many thought the securities they held were of little value, but hedge funds and private equity firms have recently begun turning profits on the once-toxic assets, Bloomberg News reported.
The U.S. Treasury Department last week said it wanted to wind down Fannie and Freddie.
Experts told Bloomberg News that Ackman’s proposal was unconventional, but might pay off.
“It’s risky as the odds are stacked against these investors in the short-term,” Nela Richardson, senior economist with Bloomberg Government, told Bloomberg News. “This is the biggest hot-button issue after Obamacare and there’s little chance of reform now. However it may pay off in the long term for the investors.”
An investor group led by Ackman purchased the so-called Winter Garden penthouse condominium at One57 for over $90 million in May, as previously reported. [Bloomberg News] — Mark Maurer