Hedge fund billionaire certain of near-term GSE exit

Hedge fund billionaire Bill Ackman feels confident that Fannie Mae and Freddie Mac will be released from conservatorship within the next two years.

In a post on X, Ackman, owner of Pershing Square Capital Management and investor in the government-sponsored enterprises' stock, said the prospect of the two housing agencies going public is more realistic than ever. 

"Secretary [Steven] Mnuchin took steps for this outcome, but he ran out of time," wrote Ackman. "I expect that in the second Trump administration, Trump and his team will get the job done."  

Specifically, the CEO of Pershing Square Capital pointed to Mnuchin ending net worth sweeps in 2019, which helped the GSEs build up $168 billion of capital.

If the "job is done," the government could see a bountiful return on its investment, the entrepreneur said.

A successful exit of Fannie and Freddie from conservatorship should generate over $300 billion of profit to the federal government, Ackman predicts, while also removing $8 trillion of liabilities from the government's balance sheet.

Ackman posits if the government agrees to retire its senior preferred stock and the capital ratio of the enterprises is reduced to 2.5%, the housing entities would need about $30 billion in combined capital to stage an initial public offering in 2026.

"We estimate the value of each company at the time of their IPOs in 2026 at [about] $34 per share," he added. "We calculate the profit to the government of [about] $300 billion assuming full exercise of its warrants and a sell down of common stock in both companies over the five years following the IPOs."

"Trump likes big deals and this would be the biggest deal in history," Ackman added. "I am confident he will get it done." Ackman, who a recently Motley Fool report identified as an investor in 10% of Fannie and Freddie's over-the-counter shares, has been a Trump ally.

The billionaire's predictions are in line with previous commentary from Mark Calabria, former head of the Federal Housing Finance Agency, who thinks the event will materialize, but not right away.

"An exit from conservatorship is not a 2025 event. It's more '27/'26," Calabria, said in a prior interview.

Calabria has acknowledged that a lot of issues would have to be addressed to make a release from conservatorship possible, including asset-liability imbalances the GSEs have and the Treasury's senior preferred shares, but he added that there are mechanisms for handling them.