Fannie Mae and Freddie Mac shares rose today on Bill Ackman's renewed push to end their government conservatorship. The Pershing Square CEO, whose firm holds significant stakes in both companies' common and preferred stock, is engaging Trump administration officials to accelerate a conservatorship exit.
The government placed Fannie Mae and Freddie Mac into conservatorship during the 2008 financial crisis, injecting billions in taxpayer funds. The Federal Housing Finance Agency has overseen operations since, while the Treasury Department sweeps nearly all profits to taxpayers. This arrangement has prevented common and preferred shareholders from realizing value, despite the companies returning to profitability years ago.
The Trump administration controls any policy change. The Treasury Department, under presidential direction, could alter the profit sweep terms or direct the FHFA to develop an exit plan. Ackman's current engagement focuses on accelerating this process.
For equity holders, a conservatorship exit is a direct catalyst for significant upside. Common shareholders would regain control and access future earnings. Preferred shareholders could see their claims fully recognized and receive dividend payments. The market is underpricing the probability of an accelerated exit.
The next concrete step involves formal proposals from the Treasury or FHFA on capital requirements or an exit timeline. Additionally, legal challenges to the profit sweep continue through the courts, with the Supreme Court having previously addressed aspects of the case. Watch Treasury and FHFA statements for any policy shifts.
