Hedge fund manager and Federal National Mortgage Assctn Fnni Me FNMA 14% shareholder Whitney Tilson believes that both Fannie Mae and Federal Home Loan Mortgage Corp FMC 0.96% will be multi-baggers once the courts overturn the government’s “net worth sweeps” of the two companies.
Under the current setup, the two GSE’s now forfeit 100 percent of their earnings to the U.S. government, but Tilson argues that these terms were never part of the original government bailout agreement.
“Fannie Mae (in which I have a ~3% position) was up 34% yesterday and is up another 12% today because, at long last, the truth is coming out: the government seized all future profits of the GSEs (via the 2012 ‘net worth sweep’; note that this was not the original bailout, which nobody is challenging) not because they feared ongoing losses, but precisely the opposite: because they realized Fannie and Freddie were about to become massively profitable,” Tilson explained in a new email.
He points to testimony by former Fannie Mae CFO Susan McFarland as particularly damning for the government’s case.
“Mark my words: this is the turning point,” Tilson concludes. “Now that the lie has been exposed, the courts will overturn…
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