September 24, 2008

Sources: FBI investigating possible fraud by

Fannie, Freddie, Lehman, AIG

and their executives

By LARA JAKES JORDAN |Associated Press Writer

8:59 PM CDT, September 23, 2008

WASHINGTON (AP) _ The FBI is investigating four major U.S. financial institutions whose collapse
helped trigger a $700 billion bailout plan by the Bush administration,
The Associated Press has learned.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The
inquiries will focus on the financial institutions and the individuals
that ran them, the senior law enforcement official said.

The law
enforcement officials spoke on condition of anonymity because the
investigations are ongoing and are in the very early stages.
Officials said the new inquiries bring to 26 the number of corporate lenders under investigation over the past year.

Spokesmen
for AIG, Fannie Mae and Freddie Mac did not immediately return calls
for comment Tuesday evening. A Lehman spokesman did not have an
immediate comment.

Just last week, FBI Director Robert Mueller
put the number of large financial firms under investigation at 24. He
did not name any of the companies under investigation but said the FBI
also was looking at whether any of them have misrepresented their
assets.

Over the past year as the housing market cratered, the
FBI has opened a wide-ranging probe of companies across the financial
services industry, from mortgage lenders to investment banks that
bundle home loans into securities sold to investors. Mueller has
previously said the FBI's hunt for culprits in the nation's subprime
mortgage crisis focused on accounting fraud, insider trading, and
failure to disclose the value of mortgage-related securities and other
investments.

The investigations revealed Tuesday come as
lawmakers began considering whether to approve emergency legislation
that would give the government broad power to buy up devalued assets
from troubled financial firms.

The bailout proposed by the Bush
administration is aimed at helping unlock credit and stabilize badly
shaken markets in the United States and around the globe.

In the
past two weeks, the government has taken over Fannie Mae and Freddie
Mac, the country's two biggest mortgage companies, with a bailout plan
that could require the Treasury Department to put up as much as $100 billion for each of them over time if needed to keep them afloat as mortgage losses mount.

Last week, the Federal Reserve provided an emergency $85 billion loan to AIG, which teetered on the
brink of bankruptcy. Lehman Brothers was forced to file for bankruptcy
after attempts to engineer a private rescue fell apart. All the
companies were laid low from bad bets on complex mortgage-related
securities.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage
was to deal with the root cause of all the troubles, billions of
dollars of bad mortgage debt sitting on the books of major financial
companies. This debt has triggered the worst credit crisis in decades,
causing credit markets to essentially freeze up despite the fact that
the Fed joined with major central banks around the world to pump
billions of dollars of reserves into the financial system.

Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the nation's largest mortgage lender and now owned by Bank of America Corp., is also under scrutiny.