Investor Fires Salvo Against Fannie, Freddie

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. Fairholme and other shareholders are suing the U.S. government to challenge changes that the Treasury Department made to the 2008 bailout of Fannie and Freddie. The changes, effective last year, required the companies to send all profits to the government, replacing an earlier 10% dividend payment and preventing the firms from retaining any earnings.

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