Fannie Mae (NYSE:FNM) reported reduced second-quarter earnings this morning, thanks to declines in its derivatives portfolio. The quasi-governmental mortgage-financing firm earned $1.09 a diluted share, compared to $1.44 in the same quarter last year. Net income fell 25% to $1.1 billion from $1.46 billion.

Both Fannie Mae and its smaller, embattled cousin Freddie Mac (NYSE:FRE) use extensive hedging techniques to offset the interest rate risk inherent in their businesses. However, this time around Fannie's unrealized losses worked against company.

Fannie Mae's mark-to-market derivatives portfolio booked $1.88 billion in losses for the quarter. That's substantially more than the $498 million in market losses during the prior second quarter. The company's net interest income actually rose 38%, though, to $3.5 billion. Excluding the derivatives' impact, Fannie Mae earned $1.86 a share, 20% ahead of last year's Q2 results.

Fannie Mae has worked hard to distance itself from Freddie Mac's accounting concerns. CEO Franklin Raines said recently in a BusinessWeek interview, "... We spent millions of dollars on internal systems and we maintain strict control over what kind of derivatives can be used and our accounting for them. We are compulsive about managing risk."

That's far and away from Freddie Mac's admission that "lack of sufficient accounting expertise and internal control" helped create the mess it's in. Still -- and unfortunately for shareholders -- the distinction between Fannie and Freddie may not be enough to sway headline-lovin' lawmakers from tightening regulatory controls over both companies as if they were one and the same.