Bruce Berkowitz’s Fairholme Fund (MUTF:FAIRX) is out with Q2 letter to shareholders. As reported earlier, Bruce Berkowitz has purchased a massive stake in Fannie Mae and Freddie Mac prefs. In the letter to shareholders Berkowitz explains why he sued the Government over their plans for the GSEs, and why he thinks that the companies will reward investors handsomely. Below is a brief excerpt from Bruce Berkowitz on Fannie, Freddie, AIG, Bank of America, followed by the full letter in scribd.

Bruce berkowitz

Eighty-five percent of net assets are invested in American International Group Inc (NYSE:AIG), Bank of America Corp (NYSE:BAC), and others damaged by our country’s residential real estate bubble. we bought when most thought them dead. clearly, they were not and we helped prove the point. our initial investments reaffirmed a deeply held – and historically profitable – belief that it doesn’t pay to bet against America.

Also see Waterstone: Freddie Mac, Fannie Mae Common Shares ‘Worth Zero

The Fund’s latest investments in the recovery of homeownership are in the preferred stocks of Fannie Mae and Freddie Mac. Your current mortgage may be backed by Federal National Mortgage Association (OTCBB:FNMA) / Fannie Mae or Federal Home Loan Mortgage Corp (OTCBB:FMCC) / Freddie Mac – about 60% of new mortgages are. Millions of families depend on them to lower the costs and increase the availability of homeownership. In times of stress, Fannie and Freddie stand to ensure the continued functioning of our housing market. Their twelve thousand employees do yeoman’s work helping to preserve a cornerstone of the American dream.

Also see Fannie Mae, Freddie Mac Shareholders Bitter over ‘Double Standard’
The Fund was able to purchase the preferred stocks of   Federal National Mortgage Association (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC) near one-fifth of liquidation values – a significant bargain thanks to market predictions of U.S. Government agencies expropriating their assets. we see them differently. Fannie and Freddie are successful, publicly traded, shareholder-owned companies just like AIG and Bank of America. Shifting political winds can change their futures, but not alter their pasts.

Also see Fairholme Fund Sues For Fannie Mae, Freddie Mac Investor Rights

The Fund has filed complaints in the court of Federal claims and the U.S. District court in washington. In our suits, we seek nothing more than the enforcement of existing contractual rights, which require the payment of dividends to Fannie and Freddie preferred shareholders. our arguments are based on fundamental principles. In America, property ownership is a sacrosanct freedom, guaranteed by our Constitution. In America, we follow the rule of law, not the rule of the crowd. In America, profitable companies honor contracts.

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