Raleigh, N.C.-based investment firm Edge One Capital revealed it has built a “significant” position in both Fannie Mae and Freddie Mac, and is calling for an immediate end to their 17-year federal conservatorship — which it labels “the largest shareholder rights violation in U.S. history.”
Fannie Mae and Freddie Mac were placed under government conservatorship on Sept. 7, 2008, during the height of the financial crisis.
In a statement issued August 14, the Raleigh, N.C.-based investment firm did not put a figure on its total stake in the two government-sponsored enterprises (GSEs) but said it began acquiring shares in December 2023 at $0.75 for Fannie Mae and $0.67 for Freddie Mac. Managing partner Varun Gupta noted the firm’s thesis is built on “the value to all stakeholders” and the potential for “significant shareholder returns” once the GSEs are returned to private ownership.
“Conservatorship was a temporary emergency measure. Seventeen years later, it has become an indefensible exception,” Edge One stated. “We have the policy tools, capital framework, and market conditions to return Fannie Mae and Freddie Mac to private ownership while protecting taxpayers and preserving affordability.”
Constitutional And Governance Concerns
Edge One argues that the extended control amounts to a Fifth Amendment violation — “a prolonged taking of private property without just compensation” — as shareholders have been denied the use and value of their investments while the government has taken more than $300 billion in dividends on $187 billion in crisis-era support.
The firm also says governance is “fundamentally compromised” under the Federal Housing Finance Agency (FHFA), which serves as both regulator and conservator. That dual role, it contends, blurs accountability and leaves the companies exposed to political interference.
Why Now?
The GSEs back more than $7 trillion in U.S. mortgages, more than half the market, making them critical to housing liquidity and affordability. Edge One maintains that robust but balanced capital requirements — around a 2.5% leverage baseline with buffers — plus tools like credit risk transfer (CRT) could protect taxpayers without pushing up mortgage costs.
The firm also disputes claims that privatization would inevitably raise rates, saying operational efficiencies, capital calibration, and potential government backstop arrangements could preserve or improve affordability.
Stakeholder Benefits Cited
Edge One outlines the following expected gains from privatization:
- Homeowners: Greater innovation, stable credit access, and competitive pricing.
- Taxpayers: Reduced contingent liabilities as private capital absorbs first losses.
- Shareholders: Restoration of property rights and transparent capital allocation.
- Employees: Ability to attract top talent and align incentives without political constraints.
Proposal To Combine The GSEs
The firm also floats merging Fannie Mae and Freddie Mac into a single, better-capitalized entity to cut redundancy, unify technology and risk management, and potentially lower funding costs.
Such a structure, Edge One argues, could improve oversight, strengthen the housing finance system, and even fit into a proposed U.S. Sovereign National Fund.
It's not the first suggestion over the past week to potentially merge the GSEs. President Trump on Saturday, August 9 posted on Truth Social an image that appears to confirm reports he is targeting an initial public offering of Fannie Mae and Freddie Mac stock later this year, possibly in November, and hinted at an entity combining the two companies called "The Great American Mortgage Corporation."
Following up on that potential suggestion, billionaire hedge fund manager and investor Bill Ackman in a post on X called a Fannie-Freddie merger "a really good idea."
"One way to reduce mortgage rates would be to merge Fannie and Freddie," Ackman wrote. "A merger would enable them to achieve huge synergies both in their operations and in the trading price and spreads of their MBS, savings which could be passed along to consumers in the form of reduced mortgage rates."
Further, Ackman contended that a merger of the GSEs "would also reduce the cost and risks of government oversight as there would be only one institution that would require FHFA oversight."
