The Securities and Exchange Commission's (SEC's) decision last week to formally investigate Freddie Mac capped a torrid week for the US's second largest mortgage refinancing agency, including the start of a criminal investigation in its home state of Virginia.

The SEC told Freddie Mac it had commenced a formal investigation that would allow it to issue subpoenas for witnesses and documents. The US attorney in Eastern Virginia declined to comment further. Freddie pledged full co-operation.