The chief executive of mortgage finance company Fannie Mae , under fire for alleged accounting irregularities, will appear before a congressional panel next week, a company spokesman said on Wednesday.

CEO Franklin Raines' appearance will be one of the Fannie Mae management's first public chances to respond to charges from federal regulators, who last week issued a stinging report saying Fannie Mae smoothed earnings to hide volatility from quarter to quarter and in one instance apparently deferred a large expense so top executives would qualify for bonuses.

The company announced Raines would testify after the House Financial Services Committee said it would authorize its chairman to issue subpoenas to compel witnesses to come before a hearing scheduled for Oct. 6.

Despite congressional scrutiny, passage of legislation to bolster oversight of Fannie Mae and sibling mortgage finance company Freddie Mac -- which revealed its own accounting controversy in 2003 -- is highly unlikely in the dwindling days of the congressional session.

"The hearing from Baker is just the beginning," said Bill Van Arnum, an analyst at Principal Global Investors in Des Moines, Iowa. "I doubt anything will happen in terms of reform or regulations this year, but you know the debate is definitely forming."

And at the same time, House of Representatives budget writers dealt a minor setback to Fannie Mae's regulator by rebuffing requests from the White House and lawmakers of both parties to increase its funding in a stopgap "continuing resolution" measure that keeps the government running until a new fiscal year budget is approved.

"OFHEO was treated in the CR the same as all other federal agencies. As important as the work that OFHEO has, it's not more important than the work the FBI has, and Homeland Security," said Appropriations Committee spokesman John Scofield.

CFO'S TESTIMONY ALSO SOUGHT

A key lawmaker, Louisiana Republican Rep. Richard Baker, said he also wants Fannie Mae Chief Financial Officer Timothy Howard to appear at the hearing next week. Regulators have blamed Howard for failing to exercise proper supervision over accounting at Fannie Mae.

A company spokesman said it was unclear late Wednesday whether Howard had accepted an invitation to testify.

OFHEO's report detailed charges of pervasive accounting errors and weaknesses in internal controls at Fannie Mae. The investigation was launched as a precaution after the accounting scandal at Freddie Mac , which resulted in a $5 billion upward restatement of earnings, the replacement of five top managers and a $125 million civil penalty
Fannie Mae insisted throughout the unfolding of the Freddie Mac revelations that its accounting was free from any similar manipulations.

But after OFHEO's report became public, Fannie Mae's board -- led by non-management directors -- agreed to add what are likely to be billions of dollars more in capital reserves as a financial safety precaution and change accounting and staffing practices to address regulators' concerns

Managers have expressed support for board actions but have offered no rebuttal to the regulator's findings.

The Securities and Exchange Commission is conducting an informal inquiry as well. Regulators have told board members the company may have to restate past financial results.

Fannie Mae's shares fell 15 percent last week. The company's stock closed down 71 cents, or 1 percent, at $66.25 on Wednesday on the New York Stock Exchange

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