"This just smacks too much of the accounting games the company was playing a couple years ago," said Armando Falcon, who headed the Office of Federal Housing Enterprise Oversight, the federal agency regulating government-sponsored Fannie Mae, at the time its accounting crisis erupted. "They have very little room to play with here when it comes to trust and credibility," Falcon said in a telephone interview, adding that "it doesn't bode well for the new management." The latest accounting uproar comes as Fannie pressures the government to raise the mandated cap on its mortgage investment holdings, now set at $735 billion, as a way to help calm jittery credit markets. "With this news, there is absolutely no justification" for Fannie being allowed to assume additional debt, said Rep. Richard Baker, R-La., a member of the House Financial Services Committee who is a longtime critic of the company. "We don't know the embedded risk yet." The reaction on Wall Street was only slightly more forgiving.