Look who’s defending Goldman Sachs and Bank of America

Bruce Berkowitz came to the defense of Bank of America Corp. and The Goldman Sachs Group Inc. today, stating they are still good investments despite the recent wave of negative headlines.

Goldman Sachs, in particular, has gotten hammered over the past few weeks after a Senate Permanent Subcommitee on Investigations report accused the firm of misleading investors in mortgage-linked investments. The report was referred to the Justice Department and the Securities and Exchange Commission, and could result in a criminal indictment of the firm.

But Mr. Berkowitz still believes in Goldman, which is a top holding in his Fairholme Fund Ticker:(FAIRX) and his newer, Fairholme Allocation Fund Ticker:(FAAFX). “They are smart guys,” Mr. Berkowitz told attendees at Morningstar’s annual investment conference in Chicago. “I personally think they are ethical good guys,” he said.

As for Bank of America, Mr. Berkowitz said that a lot of the bad press was much ado about nothing. “People are wildly pessimistic about Bank of America,” he said. “People hate them. They say, ‘I lost my job because of you,’ or ‘I lost my house because of you.’”

But Bank of America was one of the first firms to waive late charges, as well as one of the first financial services institutions to push for reform of the banking sector, Mr. Berkowitz said.

To understand Bank of America, investors have to understand Merrill Lynch & Co Inc., MBIA Inc., NationsBank and all the other entities that make up what is now BofA, Mr. Berkowitz said.

During a Q&A with Morningstar Inc.’s director of research, Don Phillips, Mr. Berkowitz also defended his fight over St. Joe Co., of which the Fairholme Fund owns 30%.

Mr. Berkowitz made headlines last year when he bought more of the Florida real estate development company after David Einhorne, another well-known investor, announced he was shorting shares.

Although St. Joe accounts for only 3% of the Fairholme Fund, the firm has spent a lot of time on the position. Mr. Berkowitz joined the company’s board late last year, only to resign six weeks later, citing differences with management.

Then in February, he was successful in removing St. Joe’s chief executive, Britt Greene, and three other board members. On March 4, Mr. Berkowitz was named chairman.

“We have stopped the bleeding,” Mr. Berkowitz said of St. Joe. The company now has 100 employees and no pension liabilities. “We still need to do more to gain an understanding of what [St. Joe owns] under the ground and above the ground.”

Related Topics: Bank Of America Corp., Goldman Sachs