Matt Frankel

These are pretty big profitable stocks.

At one point, Warren Buffett owned Freddie Mac, I believe.

He issued a memo in 2019 to develop a housing reform plan that included an end to the conservatorship.

And the Treasury then started allowing the two to start retaining significant profits.

I want to say it was about a $20 billion profit cap, above and beyond what was really needed to maintain enough capital to run.

In 2021, under President Biden, the profit sweep was ended altogether so they could really start accumulating money.

But both still remain under government conservatorship.

The biggest arguments in favor of keeping it there is that removing that could potentially destabilize the mortgage market at a time when interest rates are already high.

They've been accumulating capital, but the U.S.

mortgage market is huge.

They need a big capital buffer, and there's an argument that they don't have the ideal capital levels yet.

But as recently as last summer, the President met with bank CEOs to discuss an IPO of the two, which would raise up to $30 billion.

Not quite an Elon Musk IPO, but a pretty big one.

So, Ackman started accumulating shares relatively early in the conservatorship period, around 2012, which is actually when I started writing about Fannie and Freddie for The Motley Fool.

He's already sitting on some pretty decent gains, maybe not for a 13-year investment.

His cost basis was about $229 a share for Fannie, for example.

It currently trades for about $6 a share.

But he's estimated before that it could be worth at least $34 or potentially much more if the conservatorship ended.

It's a long-term bet that this would eventually happen.

That's where he's talking about Fannie and Freddie.