What the Big Guys on Wall Street Are Buying

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Nov. 15 (Bloomberg) -- Former Fannie Mae Director Tim Rood and Bloomberg's Nela Richardson and Julie Hyman discuss Bill Ackman's Fannie Mae and Freddie Mac bet with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Great to have all of you here.

Give us perspective on what is going on.

Let's laid out.

Ackerman taking the stakes of nearly 10%. nine point seven percent in the case of freddy.

He is saying now he will eat discussions with the government and management and other entities to explore what should be next for these two companies.

He said this was in light of the proposed transaction.

Something fair home capital proposed on wednesday.

He is the largest holder of preferred stock in these two companies.

He proposed basically he takeover, that the two companies spin off a couple of their subunits, there mortgage insurance units, and that his preferred stock equity at these two companies.

Analysts say, this is not likely to happen, but obviously it sparked something in his mind that there are possibilities for these two companies.

The caveat in all of this is that the white house said it wants to wind down fannie mae and freddie mac.

Can they actually do it?

Bill ackerman is making the bet that that cannot happen.

Perhaps policy wise, at the end of the day, the government will make the decision that fannie and freddie are too important to the overall housing market.

I know you have a lot of thoughts of the -- on this and you're not a big fan of fannie and freddie.

I want to go over to nila, is this what might be behind us trade, aid that the government will not be able to wind these guys down?

Any investments in fannie and freddie is a political bet on the future of the companies.

When bill ackerman makes an investment, he is not just trying to make a ticket on the train.

He is trying to drive the whole train.

He is trying to steer in the direction that will lead to the eventual privatization of fannie and freddie.

Tim, i know you have talked about unwinding these two.

How do you in -- view the investment right now?

It is opportunistic.

He is following up on the proposal.

Makes a lot of sense for a lot of good reasons but does not just make sense for these two.

It makes a lot of sense for the federal government.

Fannie and freddie are misunderstood organizations right now.

They are in an oddball state for sure.

They are playing a role as a utility for the federal government.

There are a lot of things about both of the deals that make a lot of sense for the government.

There is a huge windfall opportunity for both fair home and pershing square.


Very much so.

Even senator bob corker, who is very much against fannie freddie, would like the housing sector to be free.

He said you cannot do it and you have to have something.

Can you try to look into the future and try to help the viewers understand what some clots i government-backed future fannie freddie that is a little more independent might actually look like?

I am hoping for sure we get away from banzai.

I think that is what got us into this, a dual mandate of these organization.

This is what we're looking for.

If you look at the preamble to any policy of proposal being made, they all say the same thing.

This is on -- and unsustainable market.

We need to get private capital action.

It is not that, kid.

I think the terms that have been put forward the loose and to be defined, are reasonable.

To not worry about it.

If you change your mind later, we will reconsider and pay you fairly.

Right now, they are looking at capitalizing investments.

There is a great upside for them.

The two fundamental roles you need for the housing market to be filled are the issuance function, and the insurance function.

I have 4000 pages of new regulations that will give you great certainty it will be done pretty easily.

You have political uncertainty here because yes, there is the talk about winding down these two, but there is also a legacy of the backstop that has existed so yes, on a tactical basis, it is -- there is a psychological let's see.

-- legacy.

There is also the issue of these two john and other investors profiting.

Potentially enormously.

How does that look in washington?

I interviewed at the annual conference and we talked about this very issue.

He would not come out and say exactly what side he was on but he did make the point you as a country need to make the decision, do we want to support housing or not and is this a policy we think is good for our nation?

With that in mind, he said, if we make the decision we want to help housing, we have got to keep fannie and freddie in the game.

Privatizing them may not be an option.

I wonder if that is the bet he is making.

He could also make that known as getting anything done in washington right now.

That is an easy bet to make.

In washington, as you work capitol hill and talk to lawmakers, what is your sense for a likely or possible compromise as the government tries to figure out how to pull itself out of fannie and freddie?

Nothing with fannie and freddie is easy and simple yet -- simple.

It is the case there is a lot of daylight between the two plans and the leading plan in the senate and house and that there would be a lot of visceral between the two parties in trying to get something done at this time.

I do not think gse reform is in any way likely.

Whatever is going on in the hedge fund's minds, it would be a long-term bet, a long-term speculative bet on the future of fannie and freddie.

Nothing will be done in the short term with this particular congress.

I think you are probably

This text has been automatically generated. It may not be 100% accurate.


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