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Holly LaFon
Holly LaFon
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Bill Ackman Comments on Fannie Mae

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May 20, 2019 | About:

On March 27th, President Trump issued a memorandum to the Secretary of the Treasury and the Secretary of Housing and Urban Development directing them to craft housing finance reform plans. The directive to Treasury listed “ending the conservatorships of the GSEs” as its first goal and instructed Treasury to specify for each reform included in the plan “whether the proposed reform is a ‘legislative’ reform that would require congressional action or an ‘administrative’ reform that could be implemented without congressional action. For each ‘administrative’ reform, the Treasury Housing Reform Plan shall include a timeline for implementation.” A response from Treasury is expected in the next two to three months. We believe the memorandum is notable as it: (1) is by far the most explicit directive on housing finance reform from President Trump to date, (2) pushes for a prompt resolution, and (3) is consistent with the housing finance goals that Treasury Secretary Mnuchin has repeatedly articulated since the 2016 election.

On April 4th, Mark Calabria was confirmed by the Senate as the new Director of the FHFA, Fannie and Freddie’s primary regulator. Dr. Calabria has since given a series of recent interviews in which he has shared his views on the potential reform path for Fannie and Freddie. Dr. Calabria has stated that he expects that “sometime in the fall, Treasury and I will hopefully come to an agreement. That will allow us, later in the year, to suspend the net worth sweep and start to build capital” and that an IPO could happen “perhaps [in the] first half of next year.”

FNMA (FNMA) and FMCC common shares have increased 143% and 135% respectively, year-to-date. FNMA and FMCC preferred shares have both increased 66% year-to-date.

From Bill Ackman (Trades, Portfolio)'s first-quarter 2019 Pershing Square shareholder letter.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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