Fannie Mae (FNM) shares fell again on Friday, culminating a week-long tumble that wiped out more than $11 billion of value, as investors questioned how easily the No. 1 U.S. housing finance company can keep growing if government regulators tighten their grip.

Fannie Mae's stock, which started the week at $77.21, fell to a 12-month low of $64.80 on the New York Stock Exchange (search), where it was the most active issue. Late Friday afternoon, it was off $1.82, or 2.73 percent, at $65.33, on volume of more than 19 million shares.

The sell-off, for a widely held stock that is usually quite steady, came as Fannie Mae's chief regulator issued a stinging rebuke, questioning whether the company manipulated financial results to minimize the appearance of risk, and whether current management is competent to fix the problems.

"Regulators in Washington are headed in the direction of clipping their wings," said Hugh Johnson, chief investment officer of First Albany. "The net result, if they are successful, is that they take some of the gusto out of their growth."

Fannie Mae, a Congressionally chartered company, helps banks repackage trillions of dollars of home loans into bonds that can be sold on Wall Street. Fannie Mae sells a guarantee for each loan ensuring timely payments by borrowers.

Debt issued by the company and smaller counterpart Freddie Mac (FRE) — among the largest holders of U.S. mortgages and bonds pooling home loans — is widely held by U.S. banks and foreign central banks.

An implicit U.S. government guarantee helps them raise money cheaply, and invest that cash in higher-yielding mortgage debt.

"If the government perceives risk ... in the balance sheet of Fannie Mae, they will ask Fannie Mae to increase its capital," said Dick Bove, managing director at Punk Ziegel & Co. "If it has to increase its capital, then it won't be able to grow."

Financial markets got their first whiff of trouble at Fannie Mae this week when talk circulated on Monday that the regulator, the Office of Federal Housing Enterprise Oversight (search), questioned its accounting.

On Wednesday, Fannie Mae revealed the concerns, and said the U.S. Securities and Exchange Commission had begun an informal inquiry. Later that day, OFHEO said it found pervasive accounting problems reinforced by Fannie Mae management.

On Thursday, Standard & Poor's credit rating agency said it may downgrade some of Fannie Mae's debt, noting that the company may be riskier than once thought.

S&P said it may cut Fannie Mae's "AA-minus" subordinated debt and "risk-to-government" ratings. The latter represents Fannie Mae's credit quality exclusive of the implicit government support.

Johnson said OFHEO's concerns don't mean the government backing will be eliminated, but they might make it harder for Fannie Mae to grow. "Investors, when faced with a lower growth rate, will not pay as much" for Fannie Mae shares, he said.