FBI launches investigation into collapsed finance giants

The FBI is investigating four major U.S. financial institutions whose collapse has forced George Bush's administration to launch a $700billion bail-out.

Federal investigators are said to be looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, investment bankers Lehman Brothers and insurers AIG.

The probe, still in its opening stages, will focus on the financial institutions and their top managers.

The FBI is trying to determine whether anyone in the collapsed firms had any responsibility for providing 'misinformation', according to law enforcement sources.

The probe is part of broad FBI inquiries across the financial sector sparked by the past year's housing slump.

In the bureau's spotlight are companies that sold mortgages directly to 'sub-prime' buyers on low or unstable incomes and - further up the food chain - the investment banks that packaged and sold those home loans on.

Officials said the new inquiries bring the number of corporate lenders under investigation during the past year to 26.

FBI chief Robert Mueller last week put the number of large financial firms under investigation at 24, saying the bureau also is looking at whether any of them have misrepresented their assets.

In testimony before the House of Representatives Judiciary Committee, Mr Mueller also vowed to pursue corporate executives if necessary in mortgage fraud cases.

The U.S. government is bailing out Freddie Mac, Fannie Mae and AIG in the wake of bankruptcy fears while Lehman Brothers has filed for bankruptcy protection.