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FBI to probe US financial crisis

Source: PTI
September 24, 2008 19:47 IST
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The Federal Bureau of Investigation is probing a possible mortgage fraud in the collapse of banking giants -- Fannie Mae, Freddie Mac, Lehman Brothers and AIG, a media report said.

FBI spokesman Special Agent Richard Kelko had no comment on that information, but said that 26 firms were currently under investigation as part of the bureau's mortgage fraud inquiry, CNN reported.

"The FBI currently has 26 pending corporate fraud investigations involving subprime lenders," Kelko told CNN.

"As we have seen, this number can fluctuate over time, however, we do not discuss which companies may or may not be the subject of an investigation," he said.

The television network quoted sources as saying the probes of Fannie, Freddie, Lehman and AIG are believed to be in the early stages. One source said the government would be "remiss" if it didn't look into what happened at these companies because of the financial problems they are involved in and the actions of individuals running them.

The United States is in the midst of a spiraling economic crisis fuelled largely by the housing market.

FBI director Robert Mueller had told the Congress that 1,400 individual real estate lenders, brokers and appraisers were now under investigation in addition to two dozen corporations.

Earlier this decade, mortgage lenders relaxed restrictions on obtaining mortgages as home prices soared about 85 per cent from 1996 through 2006 in inflation-adjusted dollars, creating a bubble. Then the bubble popped, and lenders as well as mortgagees took the hit.

As the mortgage industry began to unravel, CNN said, the FBI, with assistance from the Internal Revenue Service, launched a broad investigation into mortgage fraud.

In June, its Mortgage Fraud Task Force had arrested more than 400 mortgage brokers, lenders, appraisers and other industry insiders, who, it said, were responsible for more than $1 billion in losses.

Last month, a Mortgage Asset Research Institute study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42 percent compared with the same period in 2007, CNN said.

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