Barclays Capital logos are seen on the former Lehman Brothers building in New York yesterday. Lehman Brothers Holdings Inc filed for Chapter 11 a week ago on Monday, and has, since then, sold its North American banking business to Barclays and its Japanese and Australian units to Nomura. - AP

CHARLOTTE, North Carolina

(AP):

American International Group (AIG) Inc may have agreed to take the United States government up on a two-year, US$85 billion loan to help stave off bankruptcy, but now the nation's largest insurer faces an FBI investigation.

Law enforcement officials said on Tuesday that the FBI was investi-gating the New York-based insurer for potential fraud, as well as mortgage finance companies, Fannie Mae and Freddie Mac, and investment bank Lehman Brothers Holdings Inc.

The four financial institutions' collapse helped trigger the govern-ment's US$700 billion bail-out plan, which continued to be discussed on Capitol Hill on Wednesday.

Focus on managers

The inquiries will focus on the financial institutions and the individuals who ran them, a senior law enforcement official said.

The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.

AIG spokesman, Joseph Norton, said on Wednesday the company did not have details on the FBI investigation, but said, "Of course, we will cooperate with the FBI."

All four companies saw their stock prices plummet this year, as they struggled to survive under the weight of mounting losses tied to bad bets on complex mortgage-related securities.

AIG shares, which lost 71 cents, or 14.2 per cent, to US$4.29 in afternoon trading Wednesday, traded as high as US$70.13 last October, at the beginning of the credit crisis.

Late Tuesday, AIG said it signed a definitive agreement with the Federal Reserve Bank of New York for the deal, which was hammered out last week. A final agreement could be filed as early as by the end of the week, Norton said.

The agreement provides a two-year, US$85 billion emergency loan at an interest rate of about 11.5 per cent to AIG, which teetered on the edge of failure because of stresses caused by the collapse of the subprime mortgage market and the credit crunch that ensued.

In return, the government will get a 79.9 per cent stake in AIG.

Some of AIG's shareholders had wanted to help the company raise enough money to avoid taking the loan and ceding a majority stake in the company. The shareholders were considering raising money, which could include bringing in other investors or selling off some of the insurer's assets. It was not immediately clear whether AIG's signing of the agreement ended any of those efforts.