Why Bill Ackman Is Bullish on Fannie and Freddie

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May 5 (Bloomberg) -- Bill Ackman, who runs the $15 billion Pershing Square Capital Management LP, explains why he is bullish on Fannie Mae and Freddie Mac and comments on Valeant's offer for Allergan and his views on activist investing. He speaks with Stephanie Ruhle on Bloomberg Television's "Street Smart." (Source: Bloomberg)

We believe this is the pre-cable mortgage.

It is critical.

We think the only way to do it is by preserving fannie mae and freddie mac.

Our basic are they were really great institutions that took very low risk.

We think the right answer with fannie and freddie is in some sense we should wind down the old fannie and freddie and rebirth of them as new fannie and freddie.

They go back to the old business.

It is just being a guarantor of mortgages, winding down the business of fixed income arbitrage focusing on guaranteeing middle-class or worse.

Interesting enough, the taxpayer makes about $400 billion.

The taxpayer owned 79.9%. that is what i don't get.

They have a massive amount.

That is right.

Assuming they are worth 40 bucks, that is $320 billion of taxpayer money.

If they went away, it would be wiped out.

Why don't more people care about that?

I do not think people have done the math or even focused on it.

All we have heard from washington is that we're are going to wind down fannie and freddie.

They were pretty abusive in the way they walked the halls of congress and through their weight around as lobbyists years ago.

That leaves a lot of people with that taste in their mouth.

The 12,000 people who did not cause the problem have real jobs.

The government looked at the companies, took stakes in them when things are bad and when they turned around and things improved, the government then sold into the public market and made a ton of money.

Why have they not done that here?

The same playbook at aig.

The same playbook at citigroup should play here.

Maybe it is undercapitalized.

Maybe they cut into businesses they should not have gotten into.

You think of the volcker rule.

They should not have been in the business of a lot of proprietary trading.

Basel or he is going to hold more capital.

They are being overseen much work carefully.

We being the same thing applies here.

The government is the largest show holder of these companies.

It to get them out of the high risk businesses.

Over time, they should sell this into the markets.

The taxpayer makes hundreds of millions of dollars.

We preserve the housing market for people.

We preserve the original shareholders.

Hold on.

Is the holdup than that it just seems like the base of rich hedge fund guys versus the government.

If richard perry wins and it is deemed illegal, what is going to happen to all that money?

Are they going to come back and give it back?

They have another 35% out of 20%. 80% of fannie and freddie are owned by the taxpayer.

The notion that the taxpayer should throughout the 87% does not make a lot of sense.

I do not think it is that.

Fannie and freddie have one of the most democratize the shareholder bases in the world.

I get calls from a woman who retired in florida.

You don't take my call.

You take her calls?

These are people we are working on behalf of.

That grassroot support is very helpful.

Litigation is to take place this fall.

Do you think the government will wait long and let a judge decide here?

Will they settle before?

I don't answer that question.

We are not lobbying at all.

What are you doing?

You are just sitting here watching this play out?

Our view is there no or no viable alternatives.

We are publishing would hundred 10 slides that lays out the actual cost for the facts are ended there is a viable alternative.

The bills would have been proposed are very vague.

When you do the math, you realize it is not a viable alternative.

This is a natural oligarch.

This is how they can guarantee closed mortgages.

You cannot guarantee a mortgage for 60 aces points when you're taking the risk of default if you run a tiny enterprise.

The cost is way more.

The other point we make is you could have a private sector alternative, barely.

The cost of mortgages would go up by 250 basis points, three and 50 basis points.

On double the cost of your mortgage payment if the proposed solution gets there.

They have never commented publicly.

Why question repair the regulators.

-- why?

They're the regulators.

A lot came from the fact that originally the government rejected capital and they will never get paid back.

It is one of the great investment by all time.

The government puts a 185 billion.

But by selling the stock and the ongoing 15 billion of taxes they will take out every year when caesar recapitalized.

Valleyiant, the only people who are calling this legal from running are the ones undermine them to do it themselves.

Where do you stand on this?

Give us enough it.

-- an update.

If i were on the board of a company that received a proposal like this one, the first i would do is study the proposal, make sure i understand it, and see what other alternatives exist in the market.

The only thing out again is doing that we would not is that we would've made it -- we would immediately engage with valeant.

He did not say no.

He so we are prepared to sit down immediately and negotiate a deal.

He would pay more?

It is a very attractive transaction.

It benefits both parties.

My sense is there's more in his pocket.

His incentive for making a better deal gradually goes away when no viable alternative emerges.

The likelihood of a large farm accompany staying in and saying what is likely a dumb price is remote.

What i would do is i would engage with valeant right away.

The best thing they do is find some better alternatives.

You do not want to talk to all the other players and then find out they are not going to bid and then come back to v valeant and they are in a parking position.

I think they should sit down with valeant and neatly.

We are you with eric kravitz right now?

We cannot comment right there except to say we agree that it has been a very long time since the search for a ceo has started.

We do believe there is at least one very talented candidate who can take the job.

Our hope is that the company fires the candidate as soon as possible.

Over the weekend, i'm having the screen byis cu kumbayah.

The different approaches to a strategy.

There are a lot of opportunities to create values in corporate america.

There is a lot of insufficiency in the way it is delegated here it is some directors are not paying as much attention as they should.

Carl and i have different approaches to strategies.

There is a lot of confusion in the market.

What they talked about is how short a resume -- about how shorter activism is bad.

We believe there is some very construction or -- very constructive long-term shareholder action.

We think it is very healthy for the markets.

A great reason example, they could do nothing about it.

We recruited the best of all time.

The pension plan was underfunded.

It now has a $600 million surplus.

Eric deals with all of the unions.

Employers are buying homes.

That activity is healthy for the market.

Are you working on anything together?

I think i would.

Tonight the news, we are looking at sothebuyy's. fighting back and forth, litigation.

Now dan and harry wilson are going to get here.

I did not get here.

They are saying now we are working together.

When an activist was so aggressively coming after a company joins the board, do you believe they start to work together and have a common goal?

Do you think you cannot put the pieces back together?

Likes it depends on the circumstance.

There was some noise in the market.

He is a major art collector.

He knows a little bit about the business.

When everyone sits down, they realize the shareholders are voted this is what they want.

Everyone works together.

This is not the greatest meaning of all times.

That board works they -- that board works today extremely effectively.

Today we hear the target ceo stepping down.

Is that a chance for them to put out there?

I think he has done a very good job at target.

Our big issue was target is the one of them to exit.

I like camilla.

-- i like him a lot.

You do not like herbalife.

What do you recommend?

The story has been a wall street story.

What we have done is we have produced a documentary where we interviewed 16 former herbalife distributorship they could talk about the experience.

You can watch it in an hour and a half interview on her website.

Anchor tuple to watch it.

Encourage regulators and government officials.

Thank you.

-- i encourage people to watch it.

Encourage regulators and

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


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