Freddie Deal: ‘Now That You Have Time, Mr. President, Let’s Stop the Steal!'

Core Argument - Shareholders are not seeking a "gift" from the government but are asking for the enforcement of the original senior preferred stock agreement and proper accounting of payments made [1] Government Support and Terms - Treasury's support for Fannie Mae and Freddie Mac totaled $193 billion in senior preferred stock, with a 10% coupon and warrants for 79.9% of each company [3] - In contrast to the 2008 bank rescues, which had more favorable terms, the mortgage firms faced harsher conditions [2] Payments and Accounting Issues - The companies have paid Treasury $301 billion, which includes a blended interest rate of 11.6% and a full return of the $193 billion principal, plus an additional $25 billion [3][4] - Despite these payments, the senior preferred stock remains unchanged due to the Net Worth Sweep, which treated payments as dividends rather than principal repayments [4][10] Historical Context - The deal was altered on August 12, 2012, when Treasury changed the terms to claim all profits each quarter instead of a fixed dividend [5] - This change occurred after the companies returned to profitability and was not a negotiated resolution [5] Investment Strategy and Future Outlook - Ackman advocates for a "walk before you run" approach to end the conservatorship, suggesting relisting the companies first and then addressing capital rules and leadership structure [6] - A clean exit could yield significant returns for the government if the companies trade like conventional financial firms again, with projected upside of 300% to 400% for shares upon reprivatization [9] Concerns About Future Capital - If conservatorship can reorder claims easily, private investors may be hesitant to provide rescue capital to troubled institutions, as seen in post-crisis bank failures [8] - Ackman argues that a smaller government stake in trustworthy companies could be more valuable to taxpayers than a larger stake through heavy dilution [11]