Bruce Berkowitz, the money manager battling the U.S. government over the future of Fannie Mae and Freddie Mac, is calling on the boards of the mortgage-finance giants to build capital instead of turning over their profits to the Treasury now that they've returned to profitability.

The government-sponsored enterprises, which have been under federal conservatorship since they were seized amid soaring losses in 2008 "must now retain earnings to build a fortress- like balance sheet and keep promises made to millions of homeowners and savers," Berkowitz wrote in letters to the boards of both companies dated Feb. 28.

Shareholders "own them," Berkowitz, 55, said today in a Bloomberg Television interview. "They've paid back the taxpayers and it's time to move forward. And in my recent note to the directors, I'm trying to remind them who they work for."

Berkowitz, whose Fairholme Capital Management holds large stakes in the companies, is pursuing a federal court challenge to the U.S. practice of sweeping up all of the companies' profits each quarter. Under terms of their conservatorship, the Federal Housing Finance Agency, not their boards, determines what happens to their profits.

"I am confident that the board is doing the job it has been given," Fannie Mae Chairman Philip A. Laskawy said in a statement posted on the company's website. "FHFA has retained certain authorities for its exclusive determination and control, as provided by federal statute, including all decisions relating to the declaration and payment of dividends."

By the end of March, Fannie Mae and Freddie Mac will have sent $202.9 billion to the Treasury as dividends on the $187.5 billion taxpayer bailout of the two firms. The money is counted as a return on the U.S. investment and not a repayment of the aid, leaving the companies with no avenue for rebuilding capital and exiting conservatorship.

Miami-based Fairholme, with $11 billion in assets under management, owns 17 million shares of Freddie Mac common stock and 52 million shares of the company's junior preferred stock, Berkowitz said. Fairholme also owns 20 million shares of Fannie Mae common stock and 66 million shares of the company's junior preferred stock, he said.

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