Mortgage collapse inquiry widened
Article source: Joanna Chung, New York - www.ft.com
The Federal Bureau of Investigation, which earlier this year started an investigation into the dramatic collapse of the sub-prime mortgage market, has now widened their enquiry to include the four financial institutions which are now at the heart of the widely reported financial problem; Fannie Mae, Lehman Brothers, Freddie May and AIG.
At the start of the summer this year, the Federal Bureau of Investigation, had 19 financial organisations included within the scope of their investigation, but the events of the last few weeks, with in the global financial markets, have forced them to widen their investigation to include the above mentioned organisations.
As the world wide economic situation begins to worsen, the Federal Bureau of Investigation’s agents have widened their current enquiry to include Fannie Mae, Lehman Brothers, Freddie May and the Insurer and sponsor of the Manchester United Football Club, AIG; as they are under growing pressure to find, highlight and hold those responsible companies and individuals to account. Many analysts believe we are entering the greatest world wide financial crisis since the Great Depression and consequently it is very important that we establish if this problem could have been worsened by any fraudulent and / or criminal activities by the companies or individuals from Fannie Mae, Lehman Brothers, Freddie May and AIG.
Although investigations are still at their early stages, Federal Bureau of Investigation enquiries are now focusing on whether any criminal acts or fraudulent activities at these companies have instigated their individual problems and therefore had a knock on effect on the world wide financial market.
Following the effective nationalisation of Fannie Mae, Freddie Mac and the insurer AIG, and the chapter 11 bankruptcy filing for Lehman Brothers, George Bush’s White House are now attempting to deliver a $700bn monetary rescue package for the American financial system. It is hoped that this deal which is being proposed currently will bring some much needed liquidity into the American Financial System.
At the time the Federal Bureau of Investigation had an additional 19 organisations under investigation, their Director Robert Mueller commented that the majority of the investigations involved insider trading, accounting fraud, failures to disclose the proper evaluation of securitised loans and derivatives.
He further commented that there were a total of 24 investigations looking into misstatements by financial companies during the course of the unraveling financial crisis.
During this time, regulators at both state and federal level have made public their investigations into the sub-prime mortgage market and manipulation of the financial market. Whilst the market waits for news of the proposed bail out package AIG and Freddie Mac have both stated that they have yet to be approached by the Federal Bureau of Investigation but will co-operate fully with any investigation. Fanny Mae and Lehman Brothers choose to make no comment.
Many in the City of London are now looking to the Senate to approve some sort of financial rescue package to bring some confidence and stability back into the financial system as well as some much needed liquidity in to the banking system. It is quite not certain, as yet, what the results of the Federal Bureau of Investigation’s enquiry will be; what is certain however is that investigations like this, much like the previous investigation into the Enron scandal can be very complex, lengthy and time consuming.
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