Fannie and Freddie are pseudo-government agencies. The pseudo part is because they are backed by government funds, they have a government housing mission, and they are supposedly heavily regulated. The problem with having a mission to make more money for shareholders and a mission to provide affordable housing as a government directive is that you can easily get the two confused. If you have a never ending supply of money, you can take what you need when you need it so that the accounting looks good at the end of each year. This is where the regulation is needed to make sure that doesn't happen.
200 regulators, assigned exclusively to these two companies, could not keep Freddie and Fannie from screwing with their financial statements. Warren Buffet got out of Fannie and Freddie in 2000 and 2001 because he (his company) suspected some accounting problems. If a single person (granted, a very smart and motivated person) can evaluate these two companies accurately, why can't 200 people keep track of them? This just goes to show that more regulation is not always the right answer, especially if current regulation is not working.