Investors in Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC) are no doubt familiar with the lineup of big money investors who have brought their cash to play in backing their positions in the GSEs. Now, Carl Icahn has joined the group with important implications for Fannie and Freddie investors.

Activist shareholders
The big money investors behind Fannie and Freddie are not known for staying quiet on their opinions or waiting for the market to move a stock. Two earlier Fannie and Freddie investors Bruce Berkowitz, manager of Fairholme Funds, and Richard Perry, manager of Perry Capital, have filed lawsuits against the government to end the net worth sweep of the GSEs.

Late last year, Bill Ackman, manager of Pershing Square,  joined those investing in Fannie and Freddie although he's leaving it to the well paid legal teams from Fairholme and Perry Capital to fight the net worth sweep. But in a very Ackman-like style, he's still making his position heard releasing a 110 page slideshow covering everything from the GSEs' backgrounds to their value as investments.

The recent purchase of Fannie and Freddie common shares from Fairholme Funds by Carl Icahn brings another powerful activist shareholder to the table. Known for launching buyouts and management shakeups, Icahn even has the weight to pressure giant companies like Apple where he has accumulated a significant stake. With the high level financial and political situation present at Fannie Mae and Freddie Mac, it would very much unlike Icahn to stand by and let things work themselves out.

A new alliance
The issues surrounding Fannie Mae and Freddie Mac have already brought generally opposed groups under the same tent. Now fighting for the GSEs are both big money funds and consumer activist Ralph Nader. Although Nader does own some Fannie and Freddie shares, his desire to see the GSEs survive is backed by their alignment with other causes he is fighting for. While fund managers see Fannie and Freddie as massive profit generators, Nader also sees them as beneficial to making housing affordable. Additionally, Nader has fought for the ability for shareholders to be heard in major corporations, something pretty clearly lacking at Fannie and Freddie.

The latest purchase by Icahn also brings together two investors who have had a long running disagreement. Ackman and Icahn are now well known for their dispute over the value of Herbalife with Icahn seeing it as an undervalued stock with growth potential while Ackman sees a giant pyramid scheme that will eventually come crashing down.

The two investors have thrown barbs at one another over the Herbalife issue but more recently have agreed to disagree going as far to say as they would be willing to work together on other investments.

What can we expect?
If past records are any indicator, Icahn is not going to stay quiet on the issue of Fannie and Freddie. He will probably mention them during investor conferences or appearances on financial networks. What is not known at this point is whether Icahn will take a larger role through aggressive lobbying or joining the club of those suing the government over the net worth sweep.

Icahn's investment provides another layer of protection for Fannie and Freddie common shareholders in the event of a settlement or privately run recapitalization plan. Although Ackman would also fight hard to stop his investment in the common shares from being wiped out, having Icahn on your side as well is rarely a bad thing. With the participation of both Ackman and Icahn, a resolution of the Fannie and Freddie issue is less likely to benefit just the preferred shareholders while leaving out the common shareholders.

The move by Icahn adds another major investor to Fannie and Freddie and could create some momentum for other fund managers to buy shares as well. While many institutions have internal rules not allowing the purchase of stocks not traded on a major exchange, some may make exceptions to these rules in light of the other investors purchasing the shares.

Another big investor
Much of the rise in the share prices of Fannie Mae and Freddie Mac can be attributed to the efforts of large investors. With some filing lawsuits to end the net worth sweep and other showing their support and making their case at investor conferences, the big money is doing its part to seek value for Fannie and Freddie shareholders.

Fannie Mae and Freddie Mac do remain risky investments due to the necessity to end the net worth sweep, probably via the courts, for preferred or common shareholders to see any of the GSEs' profits. But getting investors like Icahn on board is still a plus as it brings more money, more lawyers, and makes the investment case more acceptable for other fund managers.