Bill Ackman still adding to Federal Home Loan Mortgage Corp (FMCC), Federal National Mortgage Assctn Fnni Me (FNMA)

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Fannie Mae

In an interview with Bloomberg Market Makers, Bill Ackman of Perishing Square Capital discussed Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA).

Is there money still to be made after most recent Court Decision?

Ackman was asked whether there was money to be made in Fannie & Freddie after the most recent court decision and he responded yes, and that they have added meaningfully in the last week or two to their positions.

Ackman reiterated that he does not think the court decision addressed the substance of the most important argument that the government took private property and that the government stepped in and took 100% of the profits of Fannie & Freddie unilaterally. He compared it to the government walking in to Apple and taking 100% of the profits. The host quickly stopped him mentioning that the GSEs are in a conservatorship and Ackman responded that it does not mean they can steal.

Conservatorship does not mean you can steal

He reiterated that a government cannot act outside of the law and that the bailout was negotiated with the board and that in the next 18 months they will have fully paid back the government. He believes that the decision will not be allowed to stay.

Fannie and Freddie Larger Part of the Mortgage Market Today

He also reminded us that Fannie and Freddie are even more essential now than they were 5 years ago and that Fannie and Freddie consist of a larger part of the mortgage market then before the crisis.

Fannie and Freddie the only bailed out company without capital

Of all the companies in the financial crisis, Fannie and Freddie are the only ones that currently pose a risk because the government has not allowed them to recapitalize. If the government does not allow them to recapitalize they will continue to pose a risk to the tax payer.

 

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