Bill Ackman Is In Love With Fannie Mae And Freddie Mac

Pershing Square Capital Management's founder and CEO, Bill Ackman, was speaking at CNBC's 2015 Delivering Alpha conference on Wednesday, where he discussed his latest stock picks- Federal National Mortgage Assctn Fnni Me FNMA and Federal Home Loan Mortgage Corp FMCC. Here is what he said.

Least Amount Of Downside

"I think, the most important investment we own today is probably Fannie Mae and Freddie Mac," Ackman said.

On whether he believes that Fannie Mae and Freddie Mac are worth more than what they are current trading at, Ackman said, "For sure, I think, it offers the most upside; Well probably [has less] than most downside of anything we own. The downside outcome is very unlikely."

Terms Were Harsh

Ackman was asked if this investment will turn out to be similar as his investment in American International Group Inc AIG where he had to fight a court battle. He replied, "I think, what's interesting about the AIG situation is we are not fighting the original deal with the government, alright? Hank, I give him enormous credit, he fought the government bailout. But the government was only money in town, terms were harsh."

Encourage People To Read Amici Briefs

He continued, "The terms were harsh for Fannie and Freddie, but 4 years after the crisis the terms were changed again. The negotiation between the treasury and another agency of the [U.S. government]. So, I just think that it [doesn't] get resolved [at a] legal outcome possibly. I really encourage people to read the amici briefs including one by a former FDIC chairman about the impact on the banking system if the so called Fannie Mae 3rd amendments are [allowed to stand]."

Government Can't Have It All

"So, I just think that you can't create, this cannot become a precedent where the U.S. government can step in and unilaterally take a 100 percent of the profits of a U.S. corporation forever. And so, I think, that's going to work out well. But, I think, ultimately what would drive this is not ligation, but the conclusion that Fannie and Freddie are really the only way to have a housing finance system in the U.S. with low cost mortgages for middle class borrowers," Ackman concluded.