There are no material third quarter updates for Fannie (FNMA, Financial) and Freddie (FMCC, Financial) regarding housing finance reform or the underlying businesses, which continue to perform well. We believe that last week’s U.S. midterm elections, which resulted in Democrats gaining control of one branch of Congress, make it incrementally more likely that the Trump administration will take the lead on housing finance reform.
Treasury Secretary Steven Mnuchin has repeatedly cited housing finance reform as a priority for 2019. The first step in these efforts is likely the appointment of a new director of the FHFA, Fannie and Freddie’s primary regulator, when the current director’s term ends in January. We will be submitting a public comment letter on FHFA’s draft capital rules for Fannie and Freddie later this week. On the legal front, we and other plaintiffs have filed papers opposing the government’s motion to dismiss 12 cases asserting an unconstitutional taking and related claims and, given delays in the briefing schedule, expect a decision on the motion in late 2019 or early 2020.
From Bill Ackman (Trades, Portfolio)'s third-quarter 2018 Pershing Square shareholder letter.
