Fannie Mae, one of Washington's largest and most influential companies, is facing a serious crisis. Federal regulators have accused the mortgage-finance giant of cooking its books, in part to make room for huge bonuses for its top executives.

When confronted with emergencies in the past -- legislative efforts to tax the company or to end federal ties that give it a competitive advantage -- Fannie Mae has used a brass-knuckles approach. Its political machine, comprised of hired lobbyists, executives and directors of both political parties and grassroots groups nurtured by donations from its foundation, has long been able to run over its adversaries.

But this time, Fannie Mae is acting differently. While whispering to Wall Street that all the fuss is nothing more than a difference over accounting interpretations, the company's board has commissioned an independent probe led by former Sen. Warren Rudman (R-N.H.), making it clear that the directors want to put the matter behind the firm even if it means throwing some top executives overboard.

"I don't think they have ever faced a crisis like this. Political muscle is not going to fix this problem," said Washington attorney Bill Lightfoot, who tangled with Fannie Mae over tax issues while a member of the D.C. Council.

Fannie's chief executive Franklin D. Raines, chief operating officer Daniel H. Mudd and chief financial officer J. Timothy Howard have the most at risk, with regulators from the Office of Federal Housing Enterprise Oversight telling the board they are not sure they have confidence in current management's ability to make the broad changes needed to fix the accounting problems. The agency also prompted the company to change the employment contracts of those top three executives, to make it easier to fire them.

There are signs the gilt-edged resumes, and political futures, of three former Fannie executives have already been tarnished, because of findings they profited from manipulation of financial results in 1998. Former Fannie Mae chief James A. Johnson, who holds a top post in the Democratic presidential campaign and headed the Kennedy Center and the Brookings Institution; Smithsonian Institution Secretary Lawrence M. Small, who was Fannie Mae's chief operating officer; and Washington lawyer Jamie Gorelick, a former Fannie vice chairman, who has served as deputy attorney general, the Pentagon's top lawyer and a member of the 9-11 commission, joined Raines and Howard in receiving sizable bonuses that year. Regulators allege they were paid after the company improperly deferred other expenses.

Johnson, who headed the vice presidential selection process for Sen. John F. Kerry (D-Mass.), could be the first to feel the fallout. Democratic Party insiders say that Johnson is no longer considered the leading candidate for treasury secretary in a potential Kerry administration. His role as leader of Kerry's transition planning for the White House might also be in jeopardy unless the regulators' allegations are convincingly disputed, they add. "It strikes me those are the most likely outcomes for Johnson," said a senior economic adviser to Kerry, who sought to remain anonymous for fear of reprisals within the campaign.

Johnson declined to respond to requests for a comment.

Small's mention in the OFHEO report is another in a series of personal missteps that have come to light recently. Earlier this year a federal judge sentenced him to two years' probation and 100 hours of community service for the purchase and possession of 206 art objects made with the feathers of protected species. As the director of the nation's largest complex of museums, Small was also ordered to write a public letter of apology and explanation for his actions.

Small, who was Fannie's chief operating officer for eight years, declined to comment on the regulators' report.

Gorelick has told friends that she would seriously consider an offer some day to serve as defense secretary, an aspiration that could be harder to achieve if OFHEO's allegations pan out. In an interview, she said, "I have no desire to go back into government in the near term." She added that she had "knocked herself out" on the 9/11 commission and for the time being is "very happy" working as a D.C.-based partner of the law firm Wilmer, Cutler, Pickering, Hale and Dorr.

At the same time, Gorelick might be spared because, unlike many of the other former or current officers, her responsibilities at Fannie did not specifically include financial matters.

Raines is in the most difficult predicament. In the wake of the regulators' study, Fannie's stock fell 13.4 percent in three days More than any other time in its 36-year history, the District-based company with 4,100 employees in the area finds itself under the microscope.

Besides the board-ordered independent internal probe by Rudman, the Securities and Exchange Commission has begun an informal inquiry. Members of Congress have promised to look into the matter. And OFHEO has hired Stanley Sporkin, a former federal judge and senior SEC enforcement official, to help them in the continuing examination of Fannie Mae.

Raines, budget director in the Clinton White House and chair last year of the Business Roundtable's committee on good corporate governance, now finds himself being criticized by regulators for permitting a corporate culture that made the accounting problems possible.

Until last week, Raines had held his company out as the shining opposite of Freddie Mac, its smaller rival in the housing finance business. Several top officers of that Virginia-based company were ousted last year in the wake of accusations by regulators that it had smoothed earnings improperly. Now Fannie is also accused of using accounting maneuvers to do the same thing, though regulators said they could not yet estimate the magnitude or even whether the results overstated or understated Fannie's bottom line.

By the account of one well-placed Fannie insider, the company's directors were becoming restless because of the lackluster performance of the stock price even before the regulators' report. Raines also had clashed behind closed doors with part of his board over the best approach to deal with Republicans' calls for stiffer regulation. Raines favored fighting such efforts, at least on a few key points, while a number of directors said he should accede to the proposals because in the long run they would help the company's standing with the investing public and on Capitol Hill.

Although a senior company official said the Fannie board wants to deal decisively and swiftly with the allegations of accounting manipulations, two directors who spoke publicly about the probe defended current management. In a written statement, lead outside director Ann McLaughlin Korologos, one of three outside directors on the committee that hired Rudman, said, "Frank Raines is handling this situation just as you would expect a first-class CEO to do -- with honor and absolute integrity. Frank's strong leadership and his commitment to the company's mission are appreciated by every member of the board."

Director H. Patrick Swygert, president of Howard University, said his board colleagues have not taken Raines to task on either regulation policy or the company's stock price. He added: "No one should draw an implication that we are moving to a change in management."

The current crisis is already renewing calls to beef up regulation of Fannie and Freddie, which buy home mortgages from banks and other lenders and package them into securities for sale to investors. Together they help finance about half the home mortgages in the country.

Federal Reserve Chairman Alan Greenspan and Treasury Secretary John W. Snow have long campaigned to impose tougher oversight on both companies. Greenspan and Snow have warned that serious troubles at either company could threaten the nation's entire financial system. And lawmakers who were defeated this year in overhauling the regulatory system plan to try again next year.

Fannie has faced -- and beaten back -- vigorous challenges before. The reason: its lobbying is arrayed broadly and cleverly, its alliances with community-based groups are potent and secure, and its personal connections reach into the highest levels of both political parties.

Fannie's use of contract lobbyists and its campaign contributions are also extremely aggressive. Last year it retained nearly two dozen lobbying firms and laid out $8.7 million to reach almost every interested constituency in Congress.

The company has been careful to layer its corporate suite with both Republicans and Democrats. Its top lobbyist, Duane Duncan, is a former chief of staff to Rep. Richard H. Baker (R-La.), a longtime company critic who chairs the House's subcommittee overseeing Fannie and Freddie. The company's most senior communications executive, Charles V. Greener, and its executive in charge of regulatory policy, Michele Davis, are longtime Republican operatives.

The company also employs Democrats other than Raines. Thomas E. Donilon, Fannie's executive vice president, for example, served as chief of staff to the secretary of state during the Clinton administration.

Fannie's board (part of which has been appointed by the President of the United States) and its former executives represent a bipartisan Who's Who of Washington's elite. The current board includes Kenneth M. Duberstein, a lobbyist and former chief of staff to President Ronald Reagan; Frederick Malek, an investor and former aide to President Richard Nixon; and Korologos, a former secretary of labor under Reagan. A recent former board member is Stephen Friedman, who is President George W. Bush's top economic adviser. Robert Zoellick, the current U.S. trade representative, is a former general counsel of Fannie Mae.

"Once you find serious internal control weaknesses at Fannie Mae and Freddie Mac, if that is established, then there is considerable political risk for members of Congress standing in the way of a reasonable regulatory package," said Thomas Stanton, author of a book on the potential risk the companies pose to American taxpayers, and a teacher at Johns Hopkins University. "I think Fannie Mae's political clout melts away in front of members' realization that they could be held accountable."

Notwithstanding its problems, Fannie has a powerful array of assets to call upon to fight restrictive legislation.

Rep. Baker said: "It is not going to be an easy thing to pass a bill to create a regulator of prominence."

Fannie Mae chief executive Franklin D. Raines appeared on Capitol Hill before the Senate Banking Committee in February.