The FBI is investigating four Wall Street institutions at the heart of the financial crisis over their role in the sub-prime mortgage meltdown, it emerged today.
Reports said preliminary investigations into potential corporate fraud at the US mortgage finance giants Fannie Mae and Freddie Mac, the insurer American International Group and the investment bank Lehman Brothers had been opened.
They are among 26 companies being scrutinised by the FBI. Freddie Mac, Fannie Mae and AIG were bailed out by the government in the last fortnight, while Lehman Brothers filed for bankruptcy.
Senior executives at the companies are also believed to be in the FBI's sights, while the securities and exchange commission is also reportedly assessing possible civil fraud claims against the four firms.
"The FBI continues to investigate a number of companies for sub-prime lending practices, but the department brings criminal prosecutions based solely on the facts and the law," Brian Roehrkasse, a Justice Department spokesman, said.
"Where we find evidence of criminal wrongdoing, we will prosecute."
Several California institutions, including IndyMac Bank of Pasadena, which collapsed in July at a cost of $8.9bn (£4.7bn), are reported to be under investigation.
Countrywide, formerly the largest mortgage lender in the US and now owned by Bank of America, is also under scrutiny.
The investigations come as Congress considers a $700bn bailout package for the financial industry.
The Bush administration's plan would allow the Treasury to buy toxic bad debts from troubled financial institutions.
Congressmen yesterday demanded safeguards, additional details and more time to scrutinise the way in which the Treasury intends to spend the money.
In the past two weeks, the government has taken over Fannie Mae and Freddie Mac to prevent their collapse.
Last week, the Federal Reserve provided an emergency $85bn loan to AIG to save it from bankruptcy, but refused to bail out Lehman Brothers.
Eight months ago, the FBI began an investigation into the sub-prime mortgage market, in which loans were given to people who were not in a position to repay them.
This prompted the credit crunch as bad debts were bundled together with higher quality assets and sold on by banks.
The FBI is known to have demanded information from Goldman Sachs, Morgan Stanley and - prior to its collapse - Bear Stearns.
In June, two Bear Stearns executives were arrested over charges that they misled investors as the subprime market began to disintegrate.
The FBI is investigating 26 firms and 1,400 individuals involved in the US financial crisis for fraud and "sub-prime lending practices". Freddie Mac, Lehman Brothers, Fannie Mae and AIG are among the firms being scrutinized after recently receiving federal bailouts. 

Investigators, who are cooperating with the IRS, Postal Office, and other federal offices to complete their investigation, are concerned that major corporations may have also forced or bribed ratings agencies to favor them.

The probe, which is in early stages, began eight months ago when the FBI began taking a close look at the mortgage industry and widespread irresponsible loaning practices. At least one corporation has been raided, but so far no evidence of fraud has been found.

The FBI has questioned executives of each of the firms closely, and arrested two in June. An anonymous source told The Times that the firms had been ordered to "hold all papers and e-mails under lock and key" as the FBI scours the finances of each firm. 

Many of the companies and individuals being investigated are at the center of the nationwide financial crisis and controversial bailout plans, and have been widely blamed for the country's financial crisis. The investigation has come at a time when the eyes of many in the US and around the world are turned towards the financial markets, as Congress and politicians scramble to fix the crisis while the election date looms closer. 

Officials told CNN that it would be a long time before the investigations were finished, adding a warning: "Don't expect indictments tomorrow or next week or next month".