NEW YORK (TheStreet) -- Whatever you think about Fannie Mae (FNMA) and Freddie Mac (FMCC), there can be little honest disagreement that the government-run mortgage giants are serial accounting offenders.
I reported last week on the latest evidence of Fannie's inability or unwillingness to file accurate financial statements.
While the problems date back roughly two years, they hadn't been reported on previously because Fannie buried them in obscure filings, arguing they weren't material to investors.
But a pair of accountants I spoke with don't agree, nor does the accounting website Going Concern, which in citing my story helpfully included links to past issues at Fannie dating from 1998-2004.
"How much more do you need to know that Fannie and Freddie let problems fester?" says Francine McKenna, one of the accountants I interviewed last week. "And who ends up holding the bag? The taxpayer. These two organizations need to be put to sleep. Whatever your opinion is from a policy perspective, they can't get it under control from an accounting perspective."
If these accounting issues were honest mistakes, the lesson appears to be that Fannie and Freddie are too big to manage. If they were the result of deliberate malfeasance, a different lesson may be drawn--perhaps that they are too big to regulate.
My sense is that both are true--not just of Fannie and Freddie, but of the big banks as well. We don't even need to look back as far as the subprime housing crisis to find similar issues at Bank of America (BAC) or JPMorgan Chase (JPM).
But it is clear that the best chance of winding down Fannie and Freddie, a Senate bill known as Johnson Crapo, is going nowhere. That may be just as well. The bill was plagued with problems, not least of which was that it wound down Fannie and Freddie only to hand much of their business off to the giant banks.
But those who are celebrating Fannie and Freddie's survival should not celebrate too loudly or too long. The next accounting errors are likely just around the corner, and like mushrooms, they will only grow larger while they remain in the dark.