The Securities & Exchange Commission is finally cracking down on the behemoth government boondoggle known as Fannie Mae. (Previous Fannie coverage here and here.) From the Washington Post:

The Securities and Exchange Commission’s top accountant last night told mortgage funding giant Fannie Mae that it should correct its past accounting, a directive that could erase 38 percent of the profit the government-sponsored company has claimed since the beginning of 2001.

Fannie said last month that if it was required to make such a correction, it might have to record $9 billion of previously unreported losses.

“Fannie Mae’s accounting did not comply in material respects” with two major accounting rules, the SEC’s chief accountant, Donald T. Nicolaisen, said in a written statement. Instead of following requirements, “Fannie Mae internally developed its own unique methodology,” Nicolaisen said.

In other words: Deceived. Manipulated. Cooked the books. The SEC is telling Fannie Mae to restate its earnings and word is that 9 Fannie Mae execs may be on their way out.

Fannie Mae shares fell $1.54, or 2 percent, to $69.15 in trading midday today on the New York Stock Exchange.

Is Franklin Raines’ pork-lined tenure finally up?