Berkowitz Seeks to Acquire Insurers From Fannie, Freddie

Fairholme Capital Management LLC, the mutual-fund firm run by Bruce Berkowitz, proposed buying two businesses that insure mortgage-backed securities from Fannie Mae and Freddie Mac to salvage a bet on the two government-backed companies.

The businesses would be acquired in exchange for about $34.6 billion in Fannie Mae and Freddie Mac preferred stock that Fairholme and investors including Paulson & Co. and Perry Capital LLC bought in a wager that the U.S. government would keep the mortgage companies alive. Fairholme’s proposal would raise at least $17.3 billion in additional funds from preferred holders and through a rights offering, Fairholme said yesterday in a statement.