Big Short investor’s bullish turn revive questions over GSE reform and market risk
Investor Michael Burry’s pivot from “Frauddie Mac” critic to outspoken Fannie Mae and Freddie Mac bull placed the government‑sponsored enterprises back at the center of the housing‑finance debate, as Washington weighs how and whether to bring the pair out of conservatorship.
In a 6,000‑word Substack essay, the investor made famous by The Big Short set out why he personally holds “good size” positions in both companies’ common stock and argued that a relisting on a major exchange appeared “nearly upon us.”
He framed the trades as a bet that long‑delayed capital markets reforms would finally materialize under the Trump administration.
“I personally own both Fannie Mae and Freddie Mac common stock in good size,” Burry wrote, adding that the eventual offering price would be “a key determinant of the intrinsic value of these companies.”
He said he expected IPO pricing between “1 and 1.25 times book value, with the shares potentially trading at 1.5 to 2 times book value within one to two years after listing.”
Regulators, he argued, would need to ease capital requirements, convert preferred stock, and reduce the Treasury’s claim on future earnings, warning that without such steps the common stock could be “worthless” even after an offering.
“There remains a final steep, windy and rocky climb to IPO for both,” he said.
Competing visions for life after conservatorship
Burry’s call came as other high‑profile investors floated their own road maps. Bill Ackman of Pershing Square recently promoted a three‑step plan that would see the government exercise its warrants for nearly 80% of the common stock and push for a rapid New York Stock Exchange relisting, rather than a traditional equity sale.
Analysts have questioned whether Treasury would accept large write‑downs of its senior preferred stake – a key uncertainty Burry also highlighted.
Stakes for lenders and borrowers
Burry pointed out that Fannie and Freddie own or guarantee roughly 62% of US mortgages and support about 70% of conforming bank loans.
For originators and aggregators, the eventual structure of any relisting – from capital rules to the size of the government’s continuing backstop – would shape pricing, credit availability, and the depth of the secondary market.
Ending conservatorship has been a long‑standing Trump‑era goal, with industry voices arguing that “getting some certainty around the fate of Fannie and Freddie” could ultimately stabilize rates.
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