FANNIE’S FOLLIES
Dead or alive? Billion$ riding on Bam decision
Fannie Mae and Freddie Mac shareholders are pumped over a controversial recent report that claims the Obama administration has flipflopped and is now working to revive the beleaguered mortgage giants rather than kill them off.
Such a move would be a boon to Fannie and Freddie investors, who have bid up the shares of the mortgage giants 9.9 percent and 11.5 percent, respectively, this week in the wake of the report.
On the other hand, investors stand to lose all of their investments in the companies should the pair be wound down — the path that, until now, has been publicly endorsed by the White House.
Bigmoney investors — including Bruce Berkowitz’s Fairholme Funds, Richard Perry’s Perry Capital, and Bill Ackman’s Pershing Square — have billions of dollars on the line and are suing the Treasury over its 2012 decision to take all Fannie and Freddie’s profits stretching indefinitely in to the future.
The report, by Political Alpha, a 10yearold belowtheradar Washington political risk intelligence firm, citing sources, describes a “major shift of thinking” at the White House.
Fearing a Republican ad ministration might kill the mortgage giants’ affordable housing mandate, the White House is considering ending the sweep of all their profits to Treasury, “allowing Fannie and Freddie to begin to retain capital” and end the conservatorship, the report claims.
The twopage report, which got little ink when released, was mentioned on Tuesday by Ackman.
The next day, Sen. Bob Corker (RTenn.), who is the main congressional proponent of killing Fannie and Freddie, appeared on CNBC to debunk the report, calling it “major B.S.”
In an unorthodox move by a lawmaker, Corker also called on investors to short the stock. The senator has crafted several bills to shut down Fannie and Freddie, but so far they have gone nowhere.
Political Alpha — formed by former research analysts for political risk guru and ex-George Soros partner Richard Medley — declined to comment beyond its report.
Shares of both Fannie and Freddie have gained about 18 percent this year. The two companies, which have long benefited from the implicit backing of the government, became official wards of the state in 2008, when Treasury forced a drastic writedown of their assets, necessitating a $187 billion taxpayer bailout.
In 2012, just as they returned to profitability and the writedowns disappeared, the government decided to “sweep” all their earnings to the Treasury.
More than $230 billion in profits to date have been swept into Treasury.
The sweep sparked a legal battle, which presents a potential hurdle heading into an election year. The White House wants to “front run” the litigation to “better control the outcome,” according to the report.
As The Post previously reported, shareholders suing the government over the Treasury’s profit sweep have suggested in largely redacted court papers that a Federal Housing Finance Agency official misled the court when he said he did not know it was likely that Fannie and Freddie would return to profitability.
The White House did not return a request for comment.