AIG sues Bank of America over loans
Source: Agencies |
August 9, 2011, Tuesday
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Print Edition
Print Edition
THE insurer American International Group Inc is suing Bank of America Corp to recover more than US$10 billion of losses from a "massive fraud" on mortgage debt, deepening the morass of litigation faced by the largest US bank.
AIG, still largely owned by taxpayers after US$182.3 billion of government bailouts, is the latest of a growing number of investors filing lawsuits seeking to hold banks responsible for losses on troubled mortgages that contributed to the financial crisis.
Bank of America shares were down 67 cents, or 8.2 percent, at US$7.50 in pre-market trade following the Standard & Poor's downgrade last Friday of the United States' long-term debt rating. Many other banks' shares were also lower.
The AIG complaint, being filed in the New York State Supreme Court in Manhattan, accuses Bank of America and its Countrywide and Merrill Lynch units of misrepresenting the quality of mortgages placed in securities and sold to investors.
AIG is preparing similar lawsuits against other large banks, The New York Times said, citing insiders.
Bank of America rejects the AIG allegations. "AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets," said a spokesman.
"It is the definition of an informed, seasoned investor, with losses solely attributable to its excesses and errors."
AIG, still largely owned by taxpayers after US$182.3 billion of government bailouts, is the latest of a growing number of investors filing lawsuits seeking to hold banks responsible for losses on troubled mortgages that contributed to the financial crisis.
Bank of America shares were down 67 cents, or 8.2 percent, at US$7.50 in pre-market trade following the Standard & Poor's downgrade last Friday of the United States' long-term debt rating. Many other banks' shares were also lower.
The AIG complaint, being filed in the New York State Supreme Court in Manhattan, accuses Bank of America and its Countrywide and Merrill Lynch units of misrepresenting the quality of mortgages placed in securities and sold to investors.
AIG is preparing similar lawsuits against other large banks, The New York Times said, citing insiders.
Bank of America rejects the AIG allegations. "AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets," said a spokesman.
"It is the definition of an informed, seasoned investor, with losses solely attributable to its excesses and errors."
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