Originally Posted by timesonline.com.uk

FBI investigates Fannie Mae and Lehman Brothers
Suzy Jagger in New York

The FBI is trying to pin down whether executives at four American financial institutions, believed to have triggered the $700 billion proposed bailout of Wall Street, lied to shareholders, it emerged yesterday.

The Federal Bureau of Investigation has launched an inquiry into Fannie Mae and Freddie Mac, the mortgage companies; Lehman Brothers, the collapsed investment bank; and AIG, the nationalised insurance company.

While a spokesman for the FBI last night told The Times: "We don't name companies", it is understood that investigators are trying to ascertain whether fraud helped cause some of the troubles at the four groups. The investigation includes whether executives deliberately misled the stock market about the health of their businesses. Spokesmen for Lehman Brothers and AIG were unavailable for comment.

The investigation comes amid fury among many Americans who resent a proposal where $700 billion worth of taxpayer funds would be used to bail out Wall Street for the mistakes it made investing in risky mortgage-backed assets.

Yesterday, Henry Paulson, US Treasury Secretary, and Ben Bernanke, the chairman of America's Federal Reserve Bank, faced a grilling from lawmakers in Washington over their proposal to create a financial landfill into which troubled banks can dump their distressed assets. Mr Paulson is trying to get Congress to agree to legislation that gives the Treasury absolute control over such a $700 billion fund, which he hopes will help banks purge their balance sheets and start to lend to one another once again.

A spokesman for the US Justice Department said yesterday: "As part of our investigative responsibility, the FBI conducts corporate fraud investigations. The number of cases fluctuates over time, however we do not discuss which companies may or may not be the subject of an investigation."

However, it is now understood that the FBI is looking at 26 cases of potential corporate fraud related to the collapse of America's mortgage industry.

Robert Mueller, a FBI director, told Congress a week ago that 24 cases of potential corporate fraud were under investigation, up from 21 disclosed by the bureau in July.

In a testimony before the House of Representatives judiciary committee, the FBI promised to chase corporate executives in mortgage fraud cases.

Mr Mueller said the FBI was looking at all levels of the mortgage systems.

With respect to the corporate probes, which could result in federal charges, "the allegations would be there were mis-statements of assets," he said.