In a detailed proposal released Friday, Pershing Square CEO Bill Ackman outlined a structured path for reforming mortgage giant Fannie Mae. As the company’s largest common shareholder, Ackman cautioned against a rushed exit from its government conservatorship, instead advocating for a deliberate three-stage process. The plan aims to facilitate a swift return to the New York Stock Exchange while safeguarding the stability of the U.S. housing market.
A Cautious Approach Gains Political Traction
The political landscape appears increasingly supportive of reform. U.S. Treasury Secretary Scott Bessent recently reiterated the administration’s objective to realize the value of the government’s stake. Administrative steps are already being taken, such as the Federal Housing Finance Agency’s (FHFA) decision to raise loan limits for 2026. Ackman’s framework now provides a concrete foundation for policymakers to debate how to implement these goals.
He warns that significant risks accompany any premature move. An initial public offering (IPO) launched without a sufficient capital cushion could fail and expose underlying structural weaknesses. Furthermore, there is a danger that guarantee fees might need to be increased to achieve necessary returns, a move that would pressure mortgage rates for consumers.
The Three-Phase Restructuring Model
Ackman contends that an immediate privatization is unrealistic given an estimated capital shortfall of approximately $150 billion. His model prioritizes an orderly transition:
Should investors sell immediately? Or is it worth buying Fannie Mae?
- Phases 1 & 2: The U.S. Treasury would exercise its warrants for a 79.9% stake. According to Ackman, this action would secure assets worth over $300 billion for taxpayers and clarify the ownership structure.
- Phase 3: A prompt relisting on the NYSE. Following consultation with the exchange, Ackman believes this step could be executed within weeks, pending approval from the regulator FHFA.
This scenario does not initially envision dividend payments to shareholders. Distributions would only commence once the institutions are fully recapitalized. This timeline affords the Trump administration a window of roughly three years to carefully manage the exit from government control.
Market Volatility Reflects Investor Uncertainty
Fannie Mae’s shares experienced a slight decline on Friday, closing at $11.22, yet the equity remains a standout performer. Since the start of the year, the stock has surged more than 242%, fueled by persistent speculation about an end to the conservatorship that began in 2008. Recent trading has been highly volatile, with prices swinging between $10.58 and $11.56 last week alone, mirroring market participant anxiety.
Fundamental data underscores the necessity for a robust capital foundation. Although Fannie Mae reported a 16% increase in net income for the third quarter of 2025, reaching $3.9 billion, its regulatory capital deficit persists at $25.4 billion.
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