This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Ackman Unveils Fannie and Freddie Strategy

NEW YORK ( TheStreet) -- Fannie Mac  (FNMA) and Freddie Mac  (FMCC) shares rallied late Monday after hedge fund investor Bill Ackman detailed his thinking in owning common shares of the mortgage giant at the Ira Sohn Conference and in an interview with CNBC.

President Obama last year stated his desire to wind down Fannie and Freddie in an effort to reduce the government's role in the mortgage market. Currently more than about 90% of new mortgages rely on government backing.

However, the legislation favored by the President to reduce the government's footprint appears to be going nowhere, and Ackman told CNBC Monday private market solutions to housing are "not feasible." He argues the government sponsored entities, which ran into trouble during the crisis and were placed under government conservatorship in 2008, are low risk as long as they stay away from subprime mortgages and stay out of what he called the "fixed income arbitrage business." Ackman was presumably referring to the GSEs' use of derivatives to bet on the direction of interest rates, which in the decade preceding the 2008 crisis became a risky side business to their main function of guaranteeing mortgages and issuing mortgage backed securities.

"I am prepared to sit down and make a deal with the government regarding Fannie and Freddie," Ackman said at the conference, according to The Wall Street Journal's Marketwatch.

While the U.S. Treasury currently receives all the profits from Fannie and Freddie, Ackman reasons the government won't want to continue to be responsible for the GSEs because it would eventually require taking their $5 trillion in liabililties onto the government's balance sheet, thus increasing the national debt by that amount.

Shares of Fannie and Freddie, which were in negative territory most of the day, rose in the final hour of trading after Ackman made his comments. Fannie shares ended the day up 3.02% at $4.10, while Freddie shares were up 6.28% to $4.23.

Follow @dan_freed

 

 

 

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,265.99 +109.14 0.64%
S&P 500 2,011.36 +9.79 0.49%
NASDAQ 4,593.4250 +31.2360 0.68%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs