Fannie Mae And Freddie Mac: The Bill Ackman Perspective And Huge Return Potential
Seeking Alpha - September 7, 2014 - September 7, 2014
Seeking Alpha, By Jason Orestes
Pershing Square’s Bill Ackman is quite the bull on Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). In part due to fundamentals — which are rather robust as the two businesses have been reporting record profits as of late — and that he finds a more regulated Fannie and Freddie to be the most viable approach for the American housing market.
Fannie and Freddie have been under conservatorship since their September 2008 bailout, with the Government somewhat arbitrarily redefining terms of the loan in 2012 when they unexpectedly returned to profitability. The Government altered the way dividends were paid and profits allocated, sweeping all of them to the Treasury and leaving preferred shareholders with nothing in the process: this is the crux of the hedge fund barrage of lawsuits levied at the Government as of late. Funds such as Richard Perry’s Perry Capital and Bruce Berkowitz’s Fairholme Funds have large stakes in Fannie and Freddie preferred shares and lead the charge with lawsuits that work in relative concert and lobby for the return of dividends. Ackman too has filed suit against the Government, though his case is for shareholder rights and the explicitly stated disregard of any fiduciary duty directors have expressed they have towards shareholders.