NEW YORK (

TheStreet

) -- Bruce Berkowitz's

Fairholme Capital Management

on Monday said it owns "$2.4 billion par value" in

Fannie Mae

(FNMA)

and

Freddie Mac

(FMCC)

preferred stock.

Fannie Mae's common shares were up 23% in morning trading to $2.59. Freddie Mac's common shares were up 21% to $2.46.

Fairholme said in a statement that it was "ready to help with a restructuring that accelerates the return of meaningful investment to the secondary mortgage market."

Also see: Fannie and Freddie Vultures Need a Facelift >>

Fannie and Freddie were taken under government conservatorship in September 2008. The U.S. Treasury holds $117.1 billion in Fannie Mae senior preferred shares and $72.3 billion in Freddie Mac senior preferred shares.

Fannie Mae announced on May 9 that it would pay the Treasury a second-quarter dividend of $59.5 billion, after determining it could recapture most of its valuation allowance for deferred tax assets at the end of the first quarter. Freddie Mac announced on May 8 that it would pay a dividend of $7 billion to the Treasury in June.

Following the June dividend payments from Fannie and Freddie, the government will have received dividends totaling $131.6 billion on its combined GSE preferred investment of $189.4 billion.

At this stage, there is no mechanism in place for Fannie or Freddie to repurchase any of the senior preferred shares held by the government. Meanwhile, dividend payments on junior preferred shares -- including those held by Fairholme -- remain suspended.

Returning Fannie and Freddie to their private-forms is "critical to our nation's economic security" as it lowered the cost and increased the availability of homeownership, the firm said.

"There are no substitutes," for the GSEs, which currently purchase or insure 6 out of every 10 home mortgages in America, Fairholme said.

With the agencies now profitable enough to repay the government, it is time for the GSEs common shareholders and junior preferred shareholders to have seats at the table, according to Fairholme. "Repaying taxpayer investments, restructuring government guarantees, and restoring shareholder property are not mutually exclusive. This is the American way," the statement said.

Berkowitz is not the only one lobbying for re-privatization of the housing giants. Other

giant hedge funds

have also made a play for the preferreds, with ex-government official

Jim Millstein

and former Presidential candidate and consumer advocate

Ralph Nader

also pushing for a recapitalization of the agencies.

Fannie's preferred Series S shares (FNMAS), with a face value of $25, were down 1% a to $6.05 on Monday morning. Fannie's preferred Series E shares (FNMFM), with a face value of $50, were up 19.5% to $15.00.

Freddie Mac's preferred Series Z shares (FMCKJ), with a face value of $25, were up 1% to $6.22.

Also see: Fannie Freddie Seesaw Ride Far From Over>>

-- Written by Shanthi Bharatwaj New York.

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