Fannie Mae (FNMA, Financial) and Freddie Mac (FMCC, Financial) have already proven themselves essential to the U.S. housing fi nance system, which is a critically important bulwark for the U.S. economy. The current disarray in the non-agency residential and rental housing mortgage market, which has recently occurred as a result of the crisis, will remind the Congress and the American people of the critically important function that Fannie and Freddie perform during periods of economic stress. The crisis has also made manifestly clear the need to recapitalize Fannie and Freddie so that the private sector becomes the fi rst loss capital in the housing fi nance system, which should provide even greater urgency for a recapitalization and privatization of the two companies. While we wait for the necessary steps for this to occur, both companies are quickly rebuilding needed capital through retained earnings. For these reasons, we believe that Fannie and Freddie will emerge as even stronger and more essential enterprises after the crisis.
From Bill Ackman (Trades, Portfolio)'s Pershing Square 2019 annual letter to shareholders.
