Fannie Mae (NYSE:FNM) has been brutalized this week, and for good reason. An incisive article in Fortune explains the suspicious nature of a recent accounting change at the government-sponsored mortgage-trader.

In short, it looks like Fannie has sweetened its estimates of bad credit at precisely the time when mortgage loans across the board are actually getting worse and worse. Rotting loans are precisely the problem at many big banks, Citigroup (NYSE:C), Morgan Stanley (NYSE:MS), Merrill Lynch (NYSE:MER), Bank of America (NYSE:BAC), and others.

Fannie swears up and down that these accounting changes are fine, and were made in the interest of transparency. I don't believe it. After all, this is a company with an unparalleled history of hubris and accounting shenanigans. What do you think the odds are that it got an entire culture transfusion? And even if it did, why would you buy a company where "earnings" are just a pile of assumptions and black-box calculations? If Fannie doesn't really know what its holdings are worth, how do you know what its stock is worth?

Unfortunately, even investors smart enough to stay away from Fannie may have to suffer for its behavior, at least if there's a green light for the housing bailout plan proposed by Fed Chair Ben Bernanke. Let's hope the legislators in Congress grow some spines and take a look at this latest whoop-ti-doo. Fannie's cavalier attitude toward estimates of credit risk is a prime reason to sink the plan, which would have Fannie -- and sibling Freddie Mac (NYSE:FRE) -- buy million-dollar mortgages and stick taxpayers with the responsibility of guaranteeing them.

Fannie Mae is an Inside Value recommendation. Bank of America is an Income Investor recommendation.

At the time of publication, Seth Jayson, a top-10 CAPS player, had no positions in any company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.