AIG sues BofA for $10B over bad mortgages
AIG is seeking more than $10 billion in damages from Bank of America alleging the bank misrepresented the quality of mortgages it sold to investors, Reuters reported. It could be just the first of several suits the insurer, which received a $182.3 billion taxpayer bailout, files against banks that sold it soured mortgages. AIG lost $28 billion of investments with BofA and its Countrywide and Merrill Lynch units.
A BofA spokesperson denied the allegations, pointing the finger at AIG as “an informed, seasoned investor” that “recklessly chased high yields.”
AIG also plans to intervene on BofA’s $8.5 billion settlement with investors over traded securities backed by dicey home loans initiated by Countrywide. Many investors say the payout is too low, and New York Attorney General Eric Schneiderman plans on blocking the settlement. The bank’s $2.5 billion acquisition of Countrywide has proven to be disastrous, Reuters said, because of the costs incurred by the home lender’s bad loans. [Reuters]