Fannie, Freddie Feel the Heat

Mortgage finance giants Freddie Mac (FRE Quote) and Fannie Mae (FNM Quote) keep throwing out red meat for their critics to devour like a pack of ravenous lions.

An accounting scandal has been swirling around Fannie's top brass following the release of a report criticizing its bookkeeping. But not to be left out, Freddie on Friday reminded investors that it has an accounting mess of its own to sort out yet.

Freddie, the nation's No. 2 mortgage buyer, on Friday slashed reported 2003 net income by $75 million in order to establish a legal reserve for litigation arising from last year's massive restatement. The reserve will likely cover the cost of settling a pending Securities and Exchange Commission investigation and numerous class actions that were filed in the wake of the accounting scandal at Freddie. Freddie's latest restatement reduces 2003 net income to $4.82 billion. ...