Billionaire investor and Pershing Square Holdings founder Bill Ackman recently made waves on X (formerly Twitter) by doubling down on his bullish outlook on Fannie Mae. OTC market: FNMA and Freddie Mac OTC: FMCC. Ackman, whose investment acumen has earned comparisons to Warren Buffett and the nickname “Baby Buffett,” believes these government-sponsored enterprises (GSEs) are approaching a turning point that could bring huge returns to investors.
Ackman’s renewed enthusiasm stems from his confidence in the policies of a potential second Trump administration, which he argues could create a regulatory environment conducive to ending the GSE’s longtime conservative activities. With forecasts for triple-digit growth potential, Ackman’s thesis has generated interest, but also highlights the significant risks involved.
History of the Conservatory
In 2008, at the height of the global financial crisis, the U.S. Treasury placed Fannie Mae and Freddie Mac into conservatorship due to their exposure to subprime mortgages. The intervention provided a $187 billion lifeline, but came with strict strings attached: the GSEs were required to turn over all profits to the Treasury under a “clean-up agreement.” Over time, they have returned nearly $300 billion, exceeding the original bailout.
Fannie Mae and Freddie Mac play a critical role in the US housing market. They buy mortgages from lenders and package them into securities that they sell to investors. Fannie focuses on larger banks, while Freddie works with smaller institutions. Despite the financial recovery, both remain under government control. Treasury holds warrants equivalent to 80% of their common stock and senior preferred stock, valued at $193 billion.
Impulse towards independence
Freddie Mac today
As of 3:59 pm ET
- 52 week range
- US$0.77
▼
$5.09
During the first Trump administration, significant steps were taken to reform the GSEs. Treasury Secretary Steven Mnuchin terminated the asset cleanup agreement, allowing companies to maintain profits and rebuild capital reserves. The Federal Housing Finance Agency (FHFA) also introduced new capital requirements, setting the stage for a potential exit from conservatorship.
Ackman believes a second Trump administration will pick up where they left off with these reforms. He estimates that a successful exit could generate an additional $300 billion in profits for the government while removing $8 trillion in liabilities from its balance sheet. In addition, Ackman predicts that the GSE’s initial public offering (IPO) at the end of 2026 could result in a stock price of approximately $31, with the stock reaching $34 per share by 2028. That represents a potential gain of 679% for Fannie Mae and 705% for Freddie Mac as of Monday’s close.
Arguments for and against GSEs
Ackman’s optimism is based on several assumptions. First, he expects the Treasury to offset past profit distributions toward senior preferred shares, easing the path to privatization. Second, he expects the FHFA to set the capital requirement at 2.5%, which he believes is achievable given the GSEs’ profitability and ability to rapidly accumulate capital.
Fanny Mae today
As of 3:59 pm ET
- 52 week range
- $0.93
▼
US$5.25
- Target price
- $3.00
However, the Congressional Budget Office (CBO) has previously suggested that higher capital thresholds and political resistance could complicate the process. In addition, Ackman acknowledges that raising the required $30 billion by issuing shares would dilute existing shareholders, potentially reducing profits.
While Ackman’s predictions are compelling, they are far from guaranteed. The future of the GSEs depends on many factors, including regulatory decisions, political dynamics and market conditions. Higher capital requirements or the Treasury’s failure to resolve the senior preferred stock issue could derail conservatorship exit efforts.
Moreover, the timing of reforms is unclear, and any delays could undermine the investment thesis. For these reasons, Ackman cautions investors to only risk what they can afford to lose, as he mentioned in his X post.
Bottom line
Ackman’s latest support for Fannie Mae and Freddie Mac underscores his belief in their long-term potential, especially under a pro-deregulation administration. Given the potential for high triple-digit returns, the GSEs offer an exciting or “asymmetrical” opportunity, as Ackman puts it, but only for those willing to handle significant uncertainty.
For investors willing to take on risk, these stocks represent a high bet on regulatory reform, political will and the resilience of the U.S. housing market. As the debate about their future unfolds, the coming years could be a turning point for these GSEs and their shareholders.
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