Giant mortgage funding company Freddie Mac (NYSE:FRE) -- or as some are starting to call it, "Fraudie Mac" -- announced yesterday that its restatement of three years' worth of financial numbers would be delayed by up to two months. Further, the company warned that its previously announced maximum amount for restatement, $4.5 billion, might not be high enough. Freddie Mac also said that it was extending its summer tour, and that rumors about Stevie Nicks and Lindsey Buckingham getting back together again are unfounded.

Oh, wait, that's Fleetwood Mac. Ahem.

The timing of this announcement is not fortuitous. Sen. Jon Corzine (D-N.J.) introduced a bill yesterday that would shift regulation of Freddie and Fannie Mae (NYSE:FNM) to a new agency within the Treasury Department. Some are calling for the two to face substantial capital constraints and additional risk management. In this environment, all yesterday's announcement might cause for Freddie is a little piling on.

Earlier in the summer, Freddie Mac gave a more ominous meaning to its long-held nickname, "Steady Freddie," when the company announced a rash of executive firings after years of earnings smoothing techniques were uncovered. Freddie Mac responded by forcing its then-CEO Leland Brendsel into retirement and promoted Greg Parseghian into the top chair.

For whatever reason, Freddie's board failed to consider that this might not be the most prudent move to avoid further controversy -- as Parseghian's previous role as chief investment officer for the company meant that he was smack in the middle of the conspiracy to veil true performance from Freddie's investors. Previously snoozing regulators demanded in August that Parseghian be shown the door as well. Further, the feds insisted that Brendsel's status be changed from "retired" to "fired," depriving him of more than $20 million. Now, Freddie and Fannie face the likelihood of substantially stronger regulation, brought on in no small part by Freddie's recent foibles.

What Freddie managed to do was to put what has been a pretty sweet deal at risk. Freddie and Fannie, as federally chartered institutions, have the implied faith and credit of the U.S. Treasury behind their debts. They are also publicly held, and as we saw with the NYSE last week, when the interests of the shareholders (and executives) clash with regulatory prudence, the latter will eventually suffer. In the case of Fannie and Freddie, there is no cap on their sizes.

This was more than fine when the companies had easy founts of growth in the form of taking market share at the highest credit levels, but once they saturated this market, the two were left with a choice -- take on more aggressive types of debt or grow slower. Since they had the backing of the federal government, and the interests of shareholders in mind, you can guess which way they went.

No one thinks that either Freddie or Fannie are in danger of collapsing, but the problems at Freddie, caused by virtue of its being a public company, have members of Congress focusing long and hard at the $1.5 trillion in liabilities it would assume should the unthinkable occur.

Since the Pandora's box has been opened, it is on this conflict that Congress really ought to concentrate. The duality of Fannie and Freddie as publicly traded ventures and government-backed entities is the real conflict, not whether or not executives at Freddie had a cookie jar for accounting. Focusing on the regulations overseeing them is like fixing a bridge with structural defects by giving it a new coat of paint.