In at least one instance, the regulators said, it appeared that the government-sponsored company put off some accounting for expenses to a future reporting period in order to meet earnings targets that brought bonuses for executives.

The Fannie Mae board has named a special committee of outside directors to respond to the allegations by the Office of Federal Housing Enterprise Oversight. Fannie Mae is the second-largest U.S. financial institution behind Citigroup Inc.

The developments surprised financial experts and Wall Street. A little more than a year ago, Freddie Mac - Fannie Mae's sister agency and competitor in the multi-trillion-dollar home mortgage market - disclosed that it had understated profits by some $4.5 billion for 2000-2002 in an effort to smooth earnings.

Fannie Mae's accounting then came under close government scrutiny, though its leaders insisted that it had no problems of that type.

On Monday, the regulators at OFHEO submitted a report to its board that found earnings manipulation, lax internal controls and a corporate culture "that emphasized stable earnings at the expense of accurate financial disclosures," according to a letter from OFHEO to directors made public Wednesday.

EO's report said its findings "are serious and raise doubts concerning the validity of previously reported financial results, the adequacy of regulatory capital, the quality of management supervision, and the overall safety and soundness" of Fannie Mae, according to a statement Wednesday by Ann McLaughlin Korologos, presiding director of the Fannie Mae board.