AIG Sues Bank Of America For More Than $10B Over Mortgage Securities

[Feuer Frei!]

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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[Growler]

The blame game marches on. I guess the taxpayer-funded bailout just wasn't enough.

Pardon me. I've a fiddle to play by the light of a burning city.

[AVGWarhawk]

The blame game will continue to go on between the lenders. We can say though, with reasonable assurance, that the current economic climate was generated by poor lending habits by the banks for homes over many years. This was topped off with credit card offerings to folks that spent beyond their means and the credit card companies provided the rope so these folks could hang themselves.

[Growler]

Originally Posted by AVGWarhawk

The blame game will continue to go on between the lenders. We can say though, with reasonable assurance, that the current economic climate was generated by poor lending habits by the banks for homes over many years. This was topped off with credit card offerings to folks that spent beyond their means and the credit card companies provided the rope so these folks could hang themselves.

Unfortunately, they also hanged us with the bill.

[AVGWarhawk]

Originally Posted by Growler

Unfortunately, they also hanged us with the bill.

We were drowned in the aftermath from the bloodshed.

[Growler]

Originally Posted by AVGWarhawk

We were drowned in the aftermath from the bloodshed.

"How long can you tread water?"
~Bill Cosby