August 8, 2011
AIG sues Bank of America for $10B over mortgages
August 08, 2011 1:14 PM EDT
NEW YORK (AP) — American International Group Inc. said Monday it sued Bank of America Corp. for more than $10 billion, saying the bank cheated it by selling residential mortgage-backed securities that were overvalued.
Bank of America denied the allegations, saying AIG "recklessly" chased investments with high returns, and was big and sophisticated enough to know the risks.
Banks have been hit by a series of suits over misrepresentations of mortgage-based securities.
AIG said Bank of America and two companies that were later gobbled up by the bank, Countrywide and Merrill Lynch, sold the insurance company $28 billion in securities backed by home mortgages between 2005 and 2007, at the height of the housing boom. It said it looked at more than 260,000 of the underlying mortgages, and found that the bank's "stated metrics" for 40 percent of the securities were false.
In one case, a borrower said she had been the owner of a construction business for 25 years, which would have made her 10 years old when she took ownership, AIG said.
Bank of America spokesman Lawrence Grayson said the blame lies with AIG.
"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors," Grayson said.
AIG spokesman Mark Herr shot back: "It is disappointing but unsurprising that Bank of America continues to attempt to blame others for its own misconduct. Investors, no matter how sophisticated, were entitled to rely on its numerous written representations about the securities it sold."
Bank of America shares fell $1.17, or 14 percent, to $7 in noon trading as investors reacted to the downgrade of the U.S. government's credit rating by Standard & Poor's. Earlier in the day, they hit a 2-year low of $6.83.
AIG shares fell $2.08, or 8.3 percent, to $23.02, setting a one-year low.
In June, Bank of America agreed to pay $8.5 billion to a group of investors for selling them poor-quality mortgage securities. AIG's suit is separate, but the company is raising questions about whether the settlement went far enough. On Friday, New York Attorney General Eric Schneiderman urged the judge to reject the settlement, calling it unfair.
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What does BofA expect if they already agreed to a multi-billion dollar settlement for basically the same reasons from another Investor Group? This blame-game has gone on long enough. AIG should be happy about the hundreds of billions it's received from the US Government and move on. Believe me, I actually HATE Bank of America, but these products were sold to AIG by Countrywide and Merrill Lynch? Find a better use of Your time AIG.
Posted by: Mr Credit | Aug 9, 2011 5:37:38 PM