Nov. 15 - Shares of Fannie Mae and Freddie Mac jump on news that Bill Ackman's hedge fund has taken a big stake joining Bruce Berkowitz's Fairholme Capital in betting on the mortgage finance companies. Jeanne Yurman reports.
Fannie Mae and Freddie Mac. Two names that once were synonymous with failure and debt are suddenly the belles of the ball. In 2008, just as the the financial crisis was erupting, Uncle Sam took over the mortgage giants at nearly $188 billion through a taxpayer paid bailout. Now major investors like Bill Ackman of Pershing Management and Bruce Berkowitz of Fairholme Capital are carving out increasingly bigger stakes. According to a regulatory filing Friday, Ackman now has a nearly 10 percent stake in both Fannie and Freddie's common stock. And this week Fairholme offered to buy parts of the firms from the federal government and infuse them with fresh capital in a deal worth $52 billion. Fairholme has said it's looking to help with the housing sector's restructuring. Global X Funds CEO Bruno del Alma says investors' aims are definitely rooted in a financial interest. SOUNDBITE: BRUNO DEL AMA, CEO GLOBAL X FUNDS (ENGLISH) SAYING: "It's almost like an activist move. They're trying to get a big position, get certain control with regards to the board decisions, get somebody on the board and really try to do a takeover and potentially make these companies private which would be you know a massive move." The government wants to wind down Fannie and Freddie and restructure the nation's housing-finance market. The question is what form that will take. The lenders have become recently profitable. Last week announcing they'd return $39 billion to the Treasury. With this investors are hopeful that Instead of liquidating the two, the Treasury and lawmakers, who now steer the companies' futures, will rewrite laws that might extend Fannie's and Freddie's lives and pay off with a rising stock. And shares have spurred that hope picking up sharply this year. It's a tricky pursuit, however, says Professor Todd Henderson of Chicago University. SOUNDBITE: TODD HENDERSON, PROFESSOR OF LAW, UNIVERSITY OF CHICAGO (ENGLISH) SAYING: "The investors, however, are in a bit of a pickle because if it seems like there's good money to be made they will chase in and follow the other funds in there. At the end of the day they may be victimizing themselves." All the increased attention may actually push lawmakers to move in an opposite direction to avoid the wrath of the public that Wall Street is reaping gains in a bailout situation once again.