The US Federal Bureau of Investigation is probing allegations of fraud by 26 Wall Street firms, including several investment giants whose collapse sent world markets into turmoil, US media say.



The FBI has set its sights on investment titan Lehman Brothers, mortgage giants Fannie Mae and Freddie Mac and insurer AIG, in a wide-reaching inquiry that comes as lawmakers rush to agree a $US700 billion ($840 billion) government bailout of the troubled US financial sector.



The FBI probe aims to determine whether company executives had any responsibility for the institutions' financial woes through "misinformation or material misinformation,'' CNN said.



FBI director Robert Mueller said last week the bureau was probing 24 financial institutions, but gave no details other than to describe them as "large corporations'' that may face allegations of misstated assets.



ABC News said the probe was "multifaceted and the net is much deeper than the major firms officials confirmed today,'' adding that the probe had expanded from 14 major firms to 26 in less than a year.



"The FBI currently has 26 pending corporate fraud investigations involving subprime lenders,'' FBI spokesman Richard Kolko told ABC.



"As we have seen, this number can fluctuate over time; however, we do not discuss which companies may or may not be the subject of an investigation.''



Lehman Brothers earlier this month became the latest victim of the US subprime mortgage crisis, which began with a wave of foreclosures by high-risk borrowers in the United States and now threatens the global financial system.



Details of the FBI investigation broke after lawmakers in Washington grappled for a second day with the hefty bailout proposal to absorb shaky mortgage-backed debt weighing on banks and other financial institutions.



The uncertainty prompted fresh turmoil on financial markets and the main global stock markets were hit hard.



Federal Reserve chairman Ben Bernanke and Treasury Secretary Henry Paulson said the rescue plan was urgently need to avert a deeper economic crisis.

AFP