It's Miller Time: Fannie and Freddie After the Midterms

If you're new here: I'm Glen Bradford. I own Fannie Mae and Freddie Mac junior preferred stock, across 22 series, and have for over a decade. It is most of my net worth. I don't own the common. Nothing here is investment advice. I write about what I own, and I've been wrong about timing before.

It's Miller time. That's how one headline put it, and it's the right frame. The midterms are over, Democrats won both chambers, and on Friday Trump handed the White House to the man who spent the last seven months building a list of things the President can do without Congress. That's the story of this post, and I think it's the most important personnel move for Fannie and Freddie since Pulte took FHFA. After that comes the catch-up I owe you: the October 16 en banc denial, Bessent, Ackman, a four-part series from Rule of Law Guy, Q3 earnings, and the government's brief in Angel.

It's Miller time: the White House has a list

On Friday, Trump named Stephen Miller White House chief of staff, replacing Susie Wiles. Miller starts Monday. Here's the subheadline Fox ran on it: "Incoming chief of staff helped lead months-long effort to identify executive actions Trump could pursue without congressional approval." (Fox News)

That effort was reported by Reuters on November 1, two days before the election (via GV Wire). Since April, Miller and OMB Director Russell Vought have worked with the White House Counsel's Office to identify executive actions on immigration, tariffs, housing costs, and federal spending. Agencies submitted proposals and legal reviews of what the administration could do on its own. Asked how comfortable Trump would be governing through executive authority with a Democratic Congress, one person familiar with the planning said "very comfortable." Trump's own version: "I guess I'll become Mr. Veto."

So the sequence is this. The White House spent seven months building a list of things the President can do without Congress. Congress flipped on November 3. Three days later, the man who built the list got the keys.

The man. I don't know where Miller stands on Fannie and Freddie, and I won't pretend to. But I know what he's like. FRONTLINE's profile of him opens with the running joke from his college paper: "Stephen Miller is sustained by the tears of his enemies." A fellow columnist told them, "Pushing back on Stephen is never a successful exercise." (PBS FRONTLINE) In 2017 he went on Face the Nation and said the President's powers to protect the country "are very substantial and will not be questioned." (Democracy Now) This is a guy who keeps score, and what he counts is wins.

The Ackman channel. On October 20, Bill Ackman sat for a long interview with Katie Miller, Stephen Miller's wife, on her podcast (The Katie Miller Podcast, Ep. 59). He called it "a deeply personal interview" (X). Most of the coverage was about what he said about Democrats: "I think the Democratic Party is in the worst place it's ever been, in the 250-year history of the country." He called Pritzker and Newsom "disasters" (Finwire). Asked to choose between Buffett's investing instincts and Trump's ability to command a room, he picked Trump (Benzinga). That is about as aligned with this White House as a hedge fund manager gets, and he said it two weeks before the election, on the new chief of staff's family show. To be clear about what it is: a social tie, not a policy one. I found no public record of Ackman and Miller working the Fannie and Freddie file together, and nothing says the companies came up on the show. Ackman's documented White House pitch went to Hassett, deputy chief of staff James Blair, Pulte, and McKernan (Barron's). But the loudest outside voice on Fannie and Freddie is on good terms with the Miller household. The channel is warm.

Now look at the timing. Ackman had been pitching release for two years and had hinted at the politics before. But the loud, repeated "midterms" case came after this. The episode aired October 20. On October 21 he replied "True" to the Democratic "war chest" post. On October 22 he went on CNBC and called release "absolutely politically critical." His November 2 letter said release is one of the few things the President "can still achieve after the midterms." On November 3 he said it outright: "you know, midterms." Every one of those came in the two weeks after he sat down with the incoming chief of staff's wife. I'm not claiming cause and effect. The en banc denial (October 16) and Bessent's interview (also October 20) landed the same week, and I don't know when the episode was recorded. But the sequence is the sequence: first the sit-down, then the flurry.

Why Fannie and Freddie fits the list better than anything on it. To be precise: the reporting says "housing costs." It doesn't name Fannie, Freddie, or FHFA. But look at what the list is for. It's for wins that don't need Congress, and this is the biggest one on the board.

• It's 100% administrative. A letter agreement between FHFA and Treasury. Collins already settled that the President controls FHFA, and Trump told CBS the Slaughter decision gives the President "tremendous powers that it never had before."
• It's built. Pulte, February 2026: "We are ready to go when and if the president decides he wants to do that." (WRE News) In the same breath he said the IPO itself is optional ("we don't have to do that"). The readiness isn't. Since then the paper hasn't changed, except that the companies are bigger, the court case is over, and the election is behind them.
• It's a White House decision. Lutnick said in December that this had become "a full administration discussing it and working it through." Once it's a White House call, the White House sets the pace, and through November 3 the White House's job was the midterms. That job is over, and the new chief of staff is the person whose job is executive wins.
• It can be a housing-costs story. Pair the release with an explicit Treasury backstop on the MBS, the thing Bessent's spread test needs anyway, and you can sell it as lowering mortgage costs instead of a gift to hedge funds.

Enforce the law as written. I've always thought the law should be fully enforced, and if we have problems with it, we should fix the law. That's Miller's whole brand on immigration, and it applies here too. HERA doesn't describe conservatorship as a permanent home. It gives the conservator power to take the actions "necessary to put the regulated entity in a sound and solvent condition" and to "preserve and conserve the assets and property" of the companies (12 U.S.C. § 4617(b)(2)(D)). Eighteen years in, with more than $200 billion of capital, that job is done. Mark Calabria, Trump's first-term FHFA director, has made the same point on X: releasing them isn't a radical reform, it's following existing law. If Congress doesn't like how the companies run once they're out, Congress can change the law. A Democratic Congress is welcome to try.

What would make me wrong. Miller's portfolio is immigration, and his bandwidth goes there first. Bessent's spread test is still the real gate, and no chief of staff can wave it away. And Trump has signaled more Cabinet changes are coming. If Bessent, Lutnick, or Pulte moves, that matters more than who runs the West Wing.

That's what Miller time means for this trade. If you asked me to design a White House that announces Fannie and Freddie whenever it decides to, it would look a lot like this one: a lame-duck President who can't pass a bill, a list of executive wins already lawyered, a chief of staff who built the list, and a deal that's been ready to go since February.

October 16: two orders, one page each

Here are both, straight off the docket in No. 25-5113 (consolidated with 25-5121, 25-5154, and 25-5155):

• Order denying panel rehearing, Doc. #2198524 (PDF). Before Walker and Childs, Circuit Judges, and Ginsburg, Senior Circuit Judge. "Upon consideration of appellants' petition for panel rehearing, it is ORDERED that the petition be denied."
• Order denying rehearing en banc, Doc. #2198526 (PDF). Before the full court: Srinivasan, Chief Judge; Henderson, Millett, Pillard, Katsas, Rao, Walker, Childs, Pan; and Ginsburg, Senior Circuit Judge. Judges Wilkins and Garcia did not participate. "Upon consideration of appellants' petition for rehearing en banc, the response thereto, and the absence of a request by any member of the court for a vote, it is ORDERED that the petition be denied."

Read the en banc one twice. On September 16 the court ordered the shareholders to respond, on its own motion, and I wrote at the time that it meant at least one judge wanted to hear from shareholders. The shareholders filed on October 1. Fifteen days later, with the petition and the response both in front of them, nine active judges declined to even request a vote. Whoever wanted the response read it and let it go. There's no dissent from denial and no separate statement, so FHFA gets no roadmap to the Supreme Court from inside this circuit.

Hamish Hume, who tried the case for the class, told National Mortgage News: "We think that was the appropriate and the right outcome." He put the payout "near $1 billion" with interest, and said shareholders could be paid in about a year if FHFA does not go to the Supreme Court. He also said FHFA would likely need the Solicitor General to approve and file any petition, "the typical procedure." (National Mortgage News, Oct. 16)

The calendar now

| Event | Date | |---|---| | Panel + en banc rehearing denied | October 16, 2026 | | New Congress sworn in | January 3, 2027 | | Cert petition due (S. Ct. R. 13.3, 90 days from denial) | January 14, 2027 | | With a Rule 13.5 extension (up to 60 days) | March 15, 2027 |

Rule of Law Guy wrote that FHFA has 90 days "after entry of judgment." For a case where rehearing was sought, Rule 13.3 runs the 90 days from the denial of rehearing. That's October 16, so the date is January 14.

Scoring my own calls

• Odds of an en banc grant: I said "under one in five," twice. That held. I'll take it, but I don't get much credit for calling the base rate.
• The morning of October 16, on Seeking Alpha, I wrote: "I doubt en banc takes this." The denial came down that afternoon. I'll note I added that "I've been wrong on a historical basis most of the time with respect to my Fannie and Freddie legal predictions."
• Timing: I said a ruling in November or December. It came October 16, earlier than I expected, so cert is due in January, not February or March. That's better for us.
• Cert after denial: I said "more likely than not" that FHFA petitions or asks for a 13.5 extension. I'm keeping that. The extension is cheap, the SG ordinarily asks for one when deciding, and the September petition told you FHFA cares about the principle more than the $812 million. What changed is the signal value. Zero judges asking for a vote is a hard record to sell the SG on. If the SG lets January 14 pass with no extension request, the judgment is final, and that is a much bigger tell about the administration's posture than any podcast.

October 20: Bessent puts a range on it

Four days after the denial, on Mark Halperin's 2WAY morning show, a caller asked Bessent about the GSEs. The quotes that matter:

• "I would imagine that the next year, the year after, we will be tackling the ownership structure." (Semafor, American Banker)
• It's "unclear why homeowners or mortgage holders would benefit" from a change in the shareholder structure, and "whatever we do is going to be guided by making sure that the spread on mortgages, on agency mortgages over the Treasury does not increase." He called that the "North Star." (The MortgagePoint)

Both stocks rallied that day. The headlines said "punts." I read it as the first time a Treasury Secretary has put the ownership structure on a stated calendar, with a stated test. "Next year, the year after" is 2027 and 2028. That is inside this administration. And the test isn't "will homeowners benefit." It's "don't widen the spread." That is a test you can pass. In my September post I called them spread tools. Bessent just told you the release has to be one too.

Where this hits my September call. I wrote then that the paper (a PSPA amendment, the senior preferred, the capital rule) historically gets signed at holidays and transitions, and that the window from Thanksgiving to early spring was where four clocks converged. Bessent's stated focus is later than that. I'm not going to quietly move the date, and I'm not going to keep sliding it either. Every reason to wait is softer than the reasons not to. The holiday window is still open, and this year it's the cheapest one they'll get, for reasons I lay out below. If it doesn't get used, the paper lands in the first half of 2027, which is what Bessent said. The direction is the same, and Bessent confirmed it. What I can't tell you is whether they move this winter or next spring. They don't have to rush. But the cheapest window they'll get is the one they're in right now.

Ackman: "you know, midterms"

Bill Ackman spent the back half of October making one argument, loudly. It started the day after his Katie Miller interview aired.

• October 22, CNBC. It is "absolutely politically critical for Fannie and Freddie to be released from conservatorship before the end of the Trump Administration." He said he's very bullish. (National Mortgage News, Bloomberg) The day before, per Benzinga, he'd replied "True" to a post arguing that leaving the companies in conservatorship hands Democrats a "war chest." (Benzinga)

• November 2, Pershing Square's quarterly letter. (PDF, pages 9–10.) This is the cleanest statement of his case, so here it is in his words:

  • "We strongly believe that President Trump, his administration, and the Republicans in Congress do not want to risk handing control of Fannie and Freddie in conservatorship to a new administration in 2029."
  • "As one member of President Trump's administration succinctly stated, 'We can't take the risk of the Communists taking control of Fannie and Freddie.'"
  • "In our view, the President's remaining term is more than sufficient to facilitate a relisting of F2 and their orderly exit from conservatorship."
  • "Importantly, a relisting and release from conservatorship can be accomplished by the President using his executive authority without any involvement of Congress. If the polls and betting markets are correct and control of the House and/or Senate goes to the Democratic Party, the relisting and release of F2 will be one of the few major pieces of economic policy the President can still achieve after the midterms."
  • He also writes that the companies have "more than $200 billion of shareholder equity" between them, that he expects combined capital to top "$375 billion over the next five years," and that they trade at "about 1.5 times earnings." His upside case is "more than 10-fold from current share prices." And: "our 13-year holding period has been a long time to wait."

• November 3, Election Day, Squawk Box. "The reason why it's not being touched right now is, you know, midterms." Whichever party controls the companies, "if they're still in conservatorship, can influence the outcome of elections." And: "We set the rules. In conservatorship, the president can do anything." (CNBC)

• November 3, Pershing's Q3 call (secondhand). Per reports of the call, he said the administration avoided the topic before the midterms because even discussing it could push mortgage rates up. He reportedly called release "a political imperative" and "an opportunity for the president to ring the bell at the New York Stock Exchange." He also said he "wouldn't mind it going to the Supreme Court." I've only seen an automated transcript and press accounts, so treat these as reported. (Motley Fool, 24/7 Wall St.)

• November 4, the day after the election, on X. Two one-word replies, both "Correct." The first was to a post arguing that the selloff "might ACCELERATE release," because "Release does NOT need Congress to start." It said the FHFA Director and Treasury can sign it, and that with a Democratic Congress, release "becomes one of the FEW big moves Trump can still make ALONE." The second was to a post saying "Trump Taking quick action on the GSEs more urgent now."

So that's the post-election Ackman: release doesn't need Congress, and it's more urgent now, not less.

Here's how I read it. Ackman wasn't hedging. He was saying, about as plainly as a guy in his position can, that the reason nothing happened this year was the midterms. That obstacle is gone now. And he isn't guessing from the outside. He has been working this with the administration for two years and pitching the President in public: in December 2025, and in March ("Now that you have the time, Mr. President, let's Stop the Steal!" per Benzinga). And his own letter quotes an unnamed administration official: "We can't take the risk of the Communists taking control of Fannie and Freddie." I don't know who said it or what else was said in those rooms, and I won't pretend to. But a guy doesn't put that sentence in a shareholder letter unless he walked out convinced they aren't leaving this one undone. That matches what I see from the outside: a President who keeps reposting Fannie Mae ads, a Treasury Secretary who just put it on a two-year agenda, and a court case that's finished except for the SG.

None of this is new, by the way. I laid out the record in a Seeking Alpha piece the morning of October 16 ("Fannie Mae Preferreds For Post-Midterm IPO Announcement"), a few hours before the denial came down. For a year the people who would actually do this talked about it like a foregone conclusion:

• Lutnick, September 11, 2025 (CNBC): "I think a deal is going to be struck. I think we're going to take the company public."
• Bessent, September 24, 2025: "When we bring them public... everything will be in place for their success."
• Lutnick, December 3, 2025 (CNBC): "It is a sooner rather than later story... I would like to see that, but you know this is a full administration discussing it and working it through, but we are well down the road on getting a deal done with Fannie and Freddie... Donald Trump is on it, we're going to focus on that kind of opportunity together with the agencies going public. I think we're going to do some amazing things next year... I'll leave that to the announcement later on." Next year was 2026. Note the "full administration" part: by December this was no longer just Treasury, FHFA and Commerce working it.
• Bessent, December 16, 2025 (Fox Business): "It's not off the table. We're working on it very deliberately." Asked if it would be done next year: "Sometime."
• Pulte, February 2026 (Fox Business): an IPO this year is "more likely than not. This is up to the President."
• Trump, June 2026: "We're thinking about an IPO for that. It's not a rush."

Then the deal talk stopped, and the stock went down 60%. Ackman's letter says the President and his team "have remained silent and have taken no public steps." On the deal, that's fair: no announcement, no banks, no terms. On the companies, they never went quiet. Trump kept bringing up Fannie, Freddie, and Bill Pulte on the campaign trail, at least half a dozen times by my count. He talked about Pulte "creating wealth, probably worth over $1T," and about Fannie and Freddie helping homebuyers in Montana get to the American Dream. In September he reposted the Fannie Mae and Freddie Mac ads from his own accounts. A President who wants to leave something alone doesn't campaign on it.

What went quiet was the mechanics, and we've seen that movie before. Mark Calabria, Trump's first-term FHFA director, later wrote about 2020: "I believe both the Treasury and the White House wanted to push the issue until after the election. Since any change had the potential to create short-run volatility in the mortgage market, I believe the administration did not want to run that risk." Ackman said the same thing about 2026 on his call. Talking up the companies while keeping the deal terms off the table until after the election isn't abandoning the plan. It's how this administration handles anything that touches mortgage rates in an election year. Ackman's "Communists" line and Bessent's "next year, the year after" both say the plan survived.

The tape before the election was telling. FNMA closed at $3.15 on October 14. Then came the denial on the 16th, Bessent on the 20th, and Ackman on the 22nd. By the November 3 close it was $5.56, up 76%, and FMCC was $5.00. (24/7 Wall St.)

November 3: the gate opened onto a different room

Democrats won the Senate and the House. (Spectrum/AP, PBS, CNN) The new majorities take over January 3. FNMA closed at $4.80 on November 4 and FMCC at $4.36, down about 14% and 13% from Election Day. (24/7 Wall St.)

In September I wrote that the political gate "closes on election night regardless of where oil is," and that if the House flipped, "the hearings come anyway, so the marginal political cost of acting drops further, not less." The election is over, and "midterms" is no longer a reason. The market sold the news anyway.

I don't read anything into that. The common went from $3.15 to $5.56 to $4.80 in three weeks, and nothing about the companies changed in between. The price volatility means nothing. It's people trading headlines in a stock whose real value depends on a restructuring nobody has written yet. That's also why I don't recommend the common. Whatever the deal is, Treasury's warrants for 79.9% and whatever becomes of the senior preferred both land on the common first, and the dilution math swings wildly depending on terms nobody has seen. The junior preferred is a different bet. It's a play to par on restructuring. Its job is to sit in the capital structure of companies that are out of conservatorship, so that a future administration can't rewrite the U.S. housing market by letter or take money out of it again.

So the question isn't what Wednesday's tape said. It's what a Democratic Congress can actually do.

What a Democratic Congress can't do. It can't stop a PSPA amendment. Treasury and FHFA sign those by letter. It can't stop a capital rule. FHFA writes that. It can't un-deny the en banc petition. Ackman is right that the conservatorship is an executive instrument. Nothing about release requires a vote, and Tim Scott's March line, "it's nearly impossible for us to get there," was always about Congress, not Treasury.

What it can do. Subpoenas, hearings, letters, and a two-year attack ad. "Gift to hedge funds" is now a message from a majority with gavels, not a minority with press releases. NPR wrote the first draft in February. A House committee writes the second draft in January. That raises the cost of any step that looks like a giveaway: forgiving the senior preferred, a cheap warrant exercise, a sale priced at a discount. They can also try to pass something that blocks administrative action, some kind of jumpstart-style bill that says FHFA and Treasury can't move without Congress. That bill needs a signature, and the man who would have to sign it is the one who wants this done. Vetoes get overridden with two-thirds of both chambers, and this was a wave, not a supermajority. I don't think they can stop it.

And the argument that gets stronger. Ackman's piggybank point is about 2029, and on Tuesday 2029 got more likely. "The next year, the year after" runs into a hard wall on January 20, 2029, and the people holding the gavels in between would love to inherit a conservatorship. Here's the twist I keep coming back to. If they can't stop it, the smart Democratic move may be to try to take credit for it, by pairing release with an explicit-guarantee bill or an affordability rider and calling it their reform. I don't know if that happens. But it's a lot more likely than a Democratic Congress successfully blocking a letter agreement.

So the update is this. This is 100% administrative action. Democrats can't stop it, and I don't think they can even slow it down materially. Trump, Bessent, Pulte, and Lutnick understand the constraints they're working under better than I do. They don't have to rush. They can pick this up whenever they want, and that's really what "next year, the year after" means. But if they want to monetize it and decide where the proceeds go (taxpayers, the deficit, Trump Accounts, whatever it is), they do have to start while there's enough runway left to finish.

So when does it start, and what's still in the way?

This is the question everybody's actually asking, so let me take Ackman's frame seriously and work it through.

His frame is simple. The one thing this administration can't afford is to hand a conservatorship to the next one. Everything else is sequencing. So start from the deadline and work backward.

The real window is shorter than "the rest of the term." January 20, 2029 is the hard wall. But there's a softer one in front of it. The same logic that froze this before the midterms (even talking about it might move mortgage rates in an election year) applies again before November 2028. Ackman said on the call that the administration stayed away from the topic this year for exactly that reason. If you believe him, the usable window opened on November 4 and runs to roughly the summer of 2028, between two elections. That's about 20 months.

Bessent's "the next year, the year after" (Ackman's letter repeats it: the administration "will focus on F2 and their future ownership in 2027 and 2028") is when Treasury says it will focus on this. It isn't when they're allowed to act. Nothing stops them from acting now. And the next eight weeks may be the best part of the whole window:

• Republicans still hold the gavels until January 3. After that, every step gets a Democratic hearing and a subpoena. Before it, nobody with a gavel is asking.
• This is the season the paper gets signed. The letter agreements on these companies were signed December 24, 2009, December 21, 2017, and January 14, 2021, all in lame-duck or holiday windows.
• The court case can be part of the deal, not a reason to wait. The SG has until January 14 to decide on cert. Not filing is a decision too, and it fits neatly beside a letter agreement.

So the honest version is that the window is open now. The question is whether they use it now or let "next year" become their start date.

Then count what has to happen inside it.

| Step | Who signs | How long it takes | |---|---|---| | Decide on the senior preferred (convert, cancel, or something else) | Treasury + FHFA, by letter | Days, once decided | | Fix the capital rule | FHFA rulemaking | Months: a proposal, comment period, final rule | | End the consent orders and the conservatorship | FHFA Director | Short once capital is set | | Relist on the NYSE | The companies, the exchange | Weeks to months | | Sell down Treasury's stake, if they want to monetize it | Treasury, underwriters | Years, in pieces |

The paper is quick. The rulemaking isn't. And if the goal includes monetizing the stake and steering where the money goes, the sell-down is a multi-year process that has to start inside the window. Otherwise the next administration finishes it and picks where the proceeds go. That's the clearest case for "sooner rather than later." Start in the lame duck and you can finish the capital rule and the relisting in 2027. Wait until late 2027 and you're doing both in an election year.

Constraint by constraint, now that the midterms are behind us:

1. Midterms. Gone. That was the one Ackman said mattered.
2. Congress. Noise, not a veto. Democrats take the gavels January 3. They can hold hearings and pass a blocking bill. The bill needs Trump's signature. They can't stop this or even slow it much. They may try to take credit for it.
3. The court case. One date. January 14, 2027 is the cert deadline. If the SG lets it pass, the Sweep is a final judgment against the government. If the SG files or extends, the case stays alive as leverage while the deal gets built. Either way it resolves on a known date, and Ackman says he wouldn't mind Supreme Court attention. The last letter agreement on these companies under Trump was signed January 14, 2021, so the coincidence is worth noting.
4. Bessent's spread test. The real gate. Release can't widen agency mortgage spreads over Treasuries. That's a design problem, not a calendar problem. It's solved with capital, an explicit Treasury backstop on the MBS, and a credible plan, and the companies are adding about $30 billion of capital a year while they wait. Ackman's letter makes the same point: more than $200 billion of equity now, $375 billion in five years.
5. Iran. Still going, but it gates less than you'd think. The working assumption all year, mine included, was Iran first, then F2. The war isn't over. U.S. strikes on Qeshm Island came days before the vote, and talks run through Qatar. But oil fell hard after the election as the administration, with Vance publicly blaming the war for the rout, leaned toward a deal. Brent was back near $93–95 by November 5, below $100 for the first time since early October. (OilPrice, Gulf News) The 30-year mortgage was 7.18% on November 5, down from 7.40% in mid-October but still a full point above a year ago. (Freddie Mac PMMS) Here's what matters. Iran sets the level of rates. That gates the sale, because nobody markets an IPO into 7% mortgages. It doesn't gate the paper, and Bessent's test is about the spread, not the level. Ackman's route is a relisting, not a big IPO, and a relisting doesn't need a single new share sold. So Iran decides when the sell-down can start. It doesn't decide when the restructuring can start.
6. Bandwidth. Real, and underrated. One drag is gone: Pulte has been back at FHFA full time since early August, when Jay Clayton was confirmed as DNI (CNBC). But Treasury's Domestic Finance desk turned over in July, and the White House is changing chiefs of staff (see above). A war takes the oxygen out of every room. This is the constraint I'd watch, because it's the one that turns "next year" into "the year after," and the year after is an election year.

My read on the start date. We're in the middle of a pretty good window right now, and the cheapest stretch of it runs to January 3. But they don't have to rush it. Nothing legal or political forces their hand before 2028. When it starts depends mostly on bandwidth and on when they decide to pick it up. The paper comes first, then the capital proposal right behind it. If they use the lame-duck window, the first visible step is a letter agreement or capital proposal between now and mid-January. If they don't, it's the first half of 2027, which is what Bessent said. Either way it's a letter agreement or a capital proposal, not an IPO. The relisting comes once the spread test is passable. The sell-down comes when oil lets it. I think Ackman is right that they're not leaving it undone. Whether they've started building it is something we'll know by spring, because by then it has to be visible.

Rule of Law Guy: cancel, don't convert

Rule of Law Guy published six posts in three weeks. I recommend reading them in order.

The GSE "Fix Is In" Scorecard (Oct. 19) is his read on the denial, and it carries the argument the rest of the series hangs on. The senior preferred exists only because of the Net Worth Sweep. A unanimous panel just affirmed a jury verdict that the Sweep breached the implied covenant. So, he argues, converting Treasury's senior preferred into common, and taking value out of the Sweep a second time at the common holders' expense, would be a fresh breach, not a cleanup. In his words, "Trump 47 would be foolish to structure a GSE recap/release that converts Treasury's GSE Senior Preferred Stock (SPS) into GSE common stock."

Bessent Speaks on the GSEs (Oct. 20) reads the North Star the way I do. Bessent wants capital to keep growing before he acts. His line is that the stress-test results show "the GSEs have a perception problem, not a financial problem."

The four-part series (I, II, III, IV) is a full proposal:

1. Treasury declares the senior preferred repaid and cancels it.
2. Treasury exercises its warrants for 79.9% of the common.
3. Treasury sells that common, for the warrant price plus a binding donation commitment, to a 501(c)(3). The charity donates it ratably to the roughly 70 million Trump Accounts. That's his "as much as $400 billion," or "over $5,700" per child, as a maximum case.
4. An irrevocable voting proxy keeps the stake out of political hands.
5. The legal theory: HERA lets the Secretary sell "upon terms and conditions and at prices determined by the Secretary." Congress wrote explicit sale limits into the RTC and TARP and left them out of HERA. And Collins read HERA's grants permissively enough to uphold the Sweep, so the same reading should cover Treasury's sale authority.

Part IV makes the political case after the midterms. It turns "billionaire giveaway" into "$5,000 for every kid," and a block held for years in kids' accounts can't be raided in 2029.

What I think of it.

The politics are the best I've seen on this, and they got better on Tuesday. The single strongest weapon a Democratic House has against release is the hedge-fund framing. A plan where most of the government's upside lands in children's accounts takes that weapon away. If anyone in the building is looking for a way to do this in 2027 that survives a hearing, it looks something like this.

On the senior preferred, I'm keeping my base case, which is conversion at face value. That's what CBO scored, and it doesn't need a Treasury Secretary to say "repaid." But his breach argument is the strongest case against conversion I've read, and it's stronger after October 16 than it was before. The Sweep isn't an allegation anymore. It's a final judgment, unless the SG says otherwise by January 14. Pricing a conversion against a court-confirmed breach is a litigation risk Treasury would have to own. I'd put it this way: the verdict didn't change what I expect Treasury to do, but it raised what it costs Treasury to do it.

Two cautions. His HERA reading is a theory, and a good one, but no court has blessed a Treasury sale of GSE common to a charity, and the 79.9% exercise and the proxy structure would both get litigated. And for junior preferred holders, cancel versus convert is mostly a common-stock fight. We sit above the common either way. What we need is the capital table fixed and the conservatorship ended, and every one of these plans needs both.

Q3: the capital keeps building

Neither company's Q3 earnings release says anything new about the conservatorship. I haven't diffed the full 10-Qs yet. The numbers (Fannie, Freddie):

| | Fannie Mae | Freddie Mac | |---|---|---| | Q3 net income | $4.2B | $3.2B | | Net worth, Sept. 30 | $119.6B | $81.0B | | Senior preferred liquidation preference | $238.0B | $150.4B (rises to $153.6B on Dec. 31) | | Other | CET1 deficit of $30B | $140.2B remaining Treasury commitment |

That's $7.4 billion of retained earnings in a quarter, about $30 billion a year at this run rate. If Bessent's test is "let the capital grow, don't widen the spread," every quarter like this moves the companies toward passing it. It also adds dollar for dollar to the liquidation preference, which is the number any 2027 deal has to resolve one way or another. Rule of Law Guy's fight and mine is over how.

The October 22 housing executive order didn't touch any of this. It ordered a pilot to proactively cancel borrowers' mortgage insurance premiums, made FHFA's title-insurance waiver pilot permanent, and set up a manufactured-housing task force. There was nothing on conservatorship, capital, or LLPAs. (White House fact sheet) More spread tools.

Angel v. United States: the government's brief

The other email I didn't get to. On October 30 the government filed its brief in Joshua Angel's Federal Circuit appeal: Defendant-Appellee's Brief, No. 2026-1953, Doc. 9 (PDF). It argues two things. First, the Court of Federal Claims was right to dismiss for lack of jurisdiction because every claim "arise[s] from the Third Amendment's net worth sweep effective on August 17, 2012," and is therefore untimely. Second, and alternatively, the claims are barred by issue and claim preclusion, since they "had previously been dismissed on at least two occasions." Angel's side of it is in my August post on his opening brief. I'd put this one well behind Fairholme in importance. It's on the board for completeness.

The bear case, stated fairly

Bessent said 2027 or 2028, and those were his words, not mine. That is two more years of a liquidation preference compounding by the quarter. A hostile House with subpoenas can make any giveaway-shaped deal politically radioactive even if it can't stop it legally. The SG can still file by January 14 or extend to March 15, and an administration that wants leverage over the companies may want the case alive. Ackman has been saying "soon" since 2025. Pershing's own letter claims 10x, and the stock is down more than half this year. A Treasury Secretary whose test is "prove it won't widen the spread" has given himself a reason to wait forever if he wants one.

All true. The court case is over except for the SG's decision. The companies are making about $30 billion a year. The Treasury Secretary has put the ownership structure on a two-year agenda, inside a term that ends January 20, 2029, against a Congress that would like nothing more than to inherit the conservatorship. And the largest outside holder is telling you the President can do it alone. That is not a thesis breaking. It's a thesis with a deadline, and the people who own the deadline know it.

What I'm watching

1. January 14, 2027. Cert petition, 13.5 extension, or nothing. Nothing is the biggest tell on the board.
2. January 3, 2027. The first letter from a Democratic committee chair to FHFA or Treasury about the GSEs.
3. Pulte. He hasn't said a word about release since October 1 that I can find. The first post-election statement from FHFA sets the tone.
4. Brent and the Qatar talks. An Iran deal is what opens the sale gate. It doesn't hold up the paper.
5. Rule of Law Guy's compiled version. He's said it's coming. If it gets traction at Treasury, you'll hear it in Bessent's language first.
6. Q4 results in February. One more quarter of capital toward Bessent's test.
7. Personnel. Susie Wiles is out as White House chief of staff, and Stephen Miller starts November 9 (NPR, CBS). CBS ties the change to the midterm losses, and Trump has signaled more Cabinet changes could follow. If Bessent, Lutnick, or Pulte moves, that matters more than anything else on this list.

Common, as of the November 4 close: FNMA $4.80, FMCC $4.36.

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Disclosure: I am long Fannie Mae and Freddie Mac junior preferred stock across 22 series, listed on /positions. I am not long the common. Nothing here is investment advice. I hold what I write about, and I have been wrong about timing before, including the holiday window in September's post. More at /fanniegate.