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Washington: The shadow of an FBI investigation spread across the subprime mortgage crisis on Tuesday, while the US Congress moved closer to emergency relief for millions of distressed homeowners.
With the Federal Reserve kicking off a two-day meeting where it might cut interest rates further, the stock market rebounded after whipsawing investors for days on fears that the subprime slump could lead to a recession.
But while the market's bears pulled in their claws for the time being, a new potential danger emerged for bankers and brokers involved in the housing price bubble that burst months ago, triggering the present credit crunch.
The FBI said it is investigating 14 corporations over possible accounting fraud and insider trading violations in a crackdown on subprime lending. The companies were not named.
The agency said they include developers, lenders and financiers that securitised ordinary home loans into exotic investment instruments, as well as banks that held them.
In tandem
The FBI said it is cooperating with the Securities and Exchange Commission, which has confirmed opening at least three dozen investigations related to the subprime mortgage market.
Goldman Sachs, Morgan Stanley and Bear Stearns - among Wall Street's largest banks - each said on Tuesday that government investigators are seeking information from them about their subprime activities.
Years in the making, the subprime crisis is playing a major role in shifting the US presidential campaign debate toward the economy, while Congress seeks an urgent policy response.
The House of Representatives overwhelmingly passed a $146 billion econ-omic stimulus package on Tuesday. Parts of the package would allow the Federal Housing Administration and housing finance giants Fannie Mae and Freddie Mac to help prop up the mortgage market.
These measures "will enable homeowners with larger mortgages to refinance, lower their monthly payments, and avoid foreclosure," said Rep. George Miller, a California Democrat. Senator Christopher Dodd, chairman of the Senate Banking Committee, urged the Senate to take similar action swiftly to help distressed homeowners.
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