Some other news we are following up this morning on the financing of the government-controlled mortgage company Freddie Mac. Its investments are under scrutiny later today at a Senate hearing.

Last week, NPR and ProPublica reported on this program that Freddie Mac made billions of dollars of investments that amounted to bets against homeowners refinancing. This week more lawmakers are pressing for answers. And we have more this morning from NPR's Chris Arnold.

CHRIS ARNOLD, BYLINE: Millions of Americans are frustrated that they can't qualify for today's record low interest rates. Freddie Mac is one of the gatekeepers there. And in recent years, Freddie has been making it harder for homeowners to refinance. At the same time, we've reported that by using complex securities, Freddie placed $5 billion worth of bets that pay off if homeowners stay stuck in higher interest rate loans.

SEN. BOB MENENDEZ: It's pretty outrageous. Freddie shouldn't be betting against homeowners to begin with.

ARNOLD: That's Senator Bob Menendez, a Democrat from New Jersey. We spoke to him yesterday. He's calling for an investigation by the Inspector General that oversees Freddie Mac's regulator, the Federal Housing Finance Agency. Menendez says he wants to know whether Freddie's investments influence decisions about who could qualify to refinance.

MENENDEZ: The concerns of losses on the portfolio side may very well have permitted the type of practices that actually hurt homeowners instead of help them. And if in fact this is all the case, then tens of thousands of homeowners could have gone into foreclosure that didn't need to. So that's a very big deal.

ARNOLD: The FHFA Inspector General's Office appears to looking into all this. A spokesperson said in a statement that the IG is conducted a, quote, "open evaluation of capital markets which encompasses this issue." For its part, Freddie Mac and its regulators say that there is a firewall separating the investment side of the company from lending policy. And they say that that policy has not been influenced by the investment portfolio. Still, members of Congress are asking more questions. Republican Senator Johnny Isaacson has said that the trades were, quote, "at best unsavory and at worst immoral." And a group of 10 Democratic senators this week cosigned a letter to Freddie's regulator. Senator Bob Casey says he wants answers about why Freddie made financial bets against homeowners.

SEN. BOB CASEY: Yes, exactly. And even if someone could prove that somehow that practice or that strategy was not inappropriate - and I don't think they can prove that - but even if you can prove that to a certainty, you still should not engage in that practice.

ARNOLD: Casey says that at the very least it just looks so bad that it shakes average Americans' confidence in the system. Clifford Rossi is a former Freddie Mac risk management executive. He's now a professor at the University of Maryland. Rossi says that these trades remind him of a previous blowup back in the 1990s. Freddie Mac then too was backed by the government - though to a lesser degree - and its portfolio traders back then decided to invest hundreds of millions of dollars in the tobacco company Philip Morris.

CLIFFORD ROSSI: Congress caught wind of that and it just was like a, you know, a fire in the movie theater in some sense, and they very quickly moved to unwind, to sell those bonds out.

ARNOLD: That's not to say that Rossi doesn't think there's a real issue here. Rossi says that Fannie Mae and Freddie Mac have giant investment portfolios and those have always created a potential conflict for Fannie and Freddie's overall mission. And he says that with the housing crash and homeowners' current trouble refinancing, that conflict is suddenly a much bigger deal.

ROSSI: I think it just amplifies - that highlights, that is - the nature of these inherent conflicts that exist at the company.

ARNOLD: Those conflicts are coming under greater scrutiny at a Senate banking committee hearing underway this morning. Chris Arnold, NPR News.

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