Page last updated at 09:41 GMT, Wednesday, 24 September 2008 10:41 UK

Key finance firms 'probed by FBI'

File image of Freddie Mac sign in front of its headquarters
The US government has stepped in to rescue some struggling institutions

The FBI has begun an investigation into four major US financial institutions caught up in the current financial crisis, US media say.

Investigators are reportedly examining possible fraud by mortgage giants Fannie Mae and Freddie Mac, the failed bank Lehman Brothers and insurer AIG.

Top managers at those firms are also being investigated, the reports say.

In the past year, as the US housing market slumped, the FBI began a broad inquiry across the financial sector.

It was prompted by concerns over the way high-risk, "sub-prime" mortgages were being sold.

The FBI has been looking at lenders who sold home loans to buyers on low or unpredictable incomes and also the investment banks that packaged these loans and sold them on.


Investigations into the four companies were at an early stage, officials told the Associated Press news agency.

ABC News, citing unidentified sources, said the probes were assessing whether company officials systematically misled investors about the financial strength of their institutions.

The slump in the US housing market has resulted in billions of dollars of losses for these banks and turmoil in world credit markets.

Last week FBI director Robert Mueller said more than 20 large financial firms were already under investigation.


Freddie Mac, Fannie Mae and AIG are all being bailed out by the US government.

And the government recently announced a $700bn bail-out plan that would enable banks to offload their bad debt.

But both Democrat and Republican politicians have voiced concerns that taxpayers could be paying a high price for the risks initially undertaken by banks.

Democrats want help for individuals who stand to lose their homes, as well as limits on pay for the bosses at the firms in question.

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