Is it possible to regulate Fannie and Freddie?

We--the taxpayers--now own Fannie, Freddie, AIG, and some gazillion mortgages and more with the $700 billion bailout. Well, once we own them, somebody has to manage them on our behalf. They have to safeguard the "public interest" and also make money for us out of this mess. At least, minimize our losses. We will need technocrats--not politicians, please!--to do this.
Can it be done? I think not.
Why? Hey, I will use Warren Buffett's comments on Fannie, Freddie, and the complex investment transactions, and after reading them you tell me why we--the taxpayers--stand any chance of coming out ahead in this:

Mr. BUFFETT: Well, it's really an incredible case study in regulation because something called OFHEO was set up in 1992 by Congress, and the sole job of OFHEO was to watch over Fannie and Freddie, someone to watch over them. And they were there to evaluate the soundness and the accounting and all of that. Two companies were all they had to regulate. OFHEO has over 200 employees now. They have a budget now that's $65 million a year, and all they have to do is look at two companies. I mean, you know, I look at more than two companies.
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Mr. BUFFETT: And they sat there, made reports to the Congress, you can get them on the Internet, every year. And, in fact, they reported to Sarbanes andOxley every year. And they went--wrote 100 page reports, and they said,`We've looked at these people and their standards are fine and their directorsare fine and everything was fine.' And then all of a sudden you had two of the greatest accounting misstatements in history. You had all kinds of management malfeasance, and it all came out. And, of course, the classic thing was thatafter it all came out, OFHEO wrote a 350--340 page report examining what went wrong, and they blamed the management, they blamed the directors, they blamed the audit committee. They didn't have a word in there about themselves, and they're the ones that 200 people were going to work every day with just two companies to think about. It just shows the problems of regulation.
QUICK: That sounds like an argument against regulation, though. Is that what you're saying?
Mr. BUFFETT: It's an argument explaining--it's an argument that managing complex financial institutions where the management wants to deceive you can be very, very difficult. Or even when the management doesn't know what's going on, and--just take Bear Stearns. Bear Stearns had--I read it,anyway--750,000 derivative contracts. Now, you know, I could clone Albert Einstein, you know, and--many, many times and have him work 12-hour days forme and he would not be able to keep track of what's going on in an institutionlike that. It's--the ones that are too big to fail may be too big to manage,in some cases. And they're particularly difficult to manage if they'repromising Wall Street and their investors that they're going to do things that can't be done.
(thanks to peter gordon's blog for the link to this transcript)