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Bruce Berkowitz, a prominent mutual-fund investor, sent letters to the boards of Fannie Mae and Freddie Mac late Friday scolding directors for not protecting the rights of shareholders, upping the ante in his bid to let investors share in the spoils of the newly profitable mortgage-finance giants.
In an interview Sunday, Mr. Berkowitz said he hopes to “wake up the boards” so they realize “that they have a fiduciary responsibility” to shareholders such as his Fairholme Funds Inc., which last month disclosed that its position in the companies had grown to a combined amount of nearly $1.3 billion….
Mr. Berkowitz in his letters encouraged Fannie and Freddie’s boards to assert their independence from the federal government, including relisting the companies’ shares on the New York Stock Exchange, and called on the firms to establish special committees to enter negotiations with the government about restructuring themselves as private companies. The letters also said the firms should consider ceasing the payment of dividends owed to the government in cash, instead making payments-in-kind that would boost the government’s stake, using an alternative provided to the companies in their original 2008 bailout agreements.
Mr. Berkowitz also called for the companies to resume annual shareholders’ meetings, which ended after the 2008 bailout. “Frankly, it has been a while,” he wrote in the letter, which was also sent to the companies’ regulator, the Federal Housing Finance Agency….
Mr. Berkowitz said last week’s letters followed a series of unsuccessful attempts to meet with the chief executives of both companies. “It’s easy to see we’re not welcome,” he said, adding he was still waiting for a response. “If the directors have a pulse and five dollars in a bank account, I think they should be concerned because not responding to me would be bordering on gross negligence,” he said.