Robert Mueller, FBI Director, just last week put the number of large financial firms under investigation at 24. None of the companies under investigation were named but said the FBI also was looking at whether any of them have misrepresented their assets.
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, over the past year as the housing market cratered. 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.
Tuesday, the investigations revealed 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 Bush administration bail out proposal is aimed at helping unlock credit and stabilize badly upset markets in the United States and around the globe.
The government has taken over the country's two biggest mortgage companies, Fannie Mae and Freddie Mac, in the past two weeks, 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.
The Federal Reserve provided an emergency $85 billion loan to AIG, last week which stagger on the brink of bankruptcy. After attempts to engineer a private rescue fell apart, Lehman Brothers was forced to file for bankruptcy. 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.
Failed bank IndyMac Bancorp Inc. is also being investigated by the FBI for possible fraud and Countrywide Financial Corporation, formerly the nation's largest mortgage lender and now owned by Bank of America Corporation.
Contributed by MLR Realty
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