Bill Ackman Said He Is Short Fannie and Freddie, Introduces Plan to Reorganize The GSEs (FNM, FRE)

On CNBC this morning, hedge fund manager William Ackman said he was short the common stock of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Ackman also laid out a plan to reorganize the GSEs.

Ackman said Fannie and Freddie should have "fortress" balance sheets. Under his plan, Fannie can raise about $86 billion in capital by giving investors in $750 billion of senior unsecured notes 90 cents on the dollar in debt of a new company, with the balance in equity. Subordinate debt holders would get warrants. Under Ackman's plan, current equity holders would be wiped out.

Ackman proved his acumen as a short seller in 2007/2008 as short positions he held in MBIA (NYSE: MBI) and Ambac (NYSE: ABI) proved to be big winners due to the credit crunch.

Shares of Fannie Mae is down 17% and Freddie Mac is down 19% this AM.

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