The Bush administration and a key House lawmaker on Tuesday cited a recently released investigation finding a breakdown in financial controls at Fannie Mae to bolster their push for tighter controls of the mortgage giant, media reports said.

The probe by a team led by former Sen. Warren Rudman, R-N.H., detailed major accounting deficiencies and an arrogant corporate culture at Fannie Mae.

Rudman’s report said Fannie Mae’s former chief financial officer and controller shared primary responsibility for the accounting failures at the company. Fannie Mae is now reworking its books.

Both Fannie Mae and its fellow government-sponsored enterprise, Freddie Mac, have been rocked by accounting scandals. In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae’s chief financial officer, Timothy Howard, resigned Dec. 21.

In early February of this year, the Bush administration said Congress should create a new regulator for Fannie Mae and Freddie Mac and direct it to cut the approximately $1.4 trillion investment portfolios held by the government-sponsored enterprises.

Federal regulators, “Congress and the American people were misled by the former leadership” of Fannie Mae and Freddie Mac, Rep. Michael Oxley, R.-Ohio, chairman of the House Financial Services Committee, said at a hearing at his panel, according to Business Week.

Oxley said the report underscored the need for a tough new regulator of Fannie Mae and Freddie Mac, according to accounts.

Fannie Mae disclosed Monday that it had found more errors in its accounting review.

The House in October passed legislation written by Oxley that would bring stricter federal oversight of the two government-sponsored companies, reports said. But the White House opposes that bill because it would not force the two mortgage giants to reduce their mortgage investment holdings, reports said.

“We are focused on doing what is right for the taxpayer,” Emil Henry, assistant Treasury secretary for financial institutions, told Business Week Tuesday. “While many of the issues in the report are in the process of repair, I think it’s clear that the elephant in the corner, the legacy of that era, is the extensive retained portfolio which… in our judgment is something that presents systemic risks.”

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Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

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