AIG sues BofA for $10bn over "massive fraud"

 
City A.M. Reporter
The insurer American International Group Inc is suing Bank of America Corp to recover more than $10bn (£6.1bn) 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 $182.3bn 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 per cent, at $7.50 in premarket trade following the Standard & Poor's downgrade on Friday of the US' long-term debt rating. Many other banks' shares were also lower.

The AIG complaint 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.

Reuters obtained a copy of the complaint.

AIG is preparing similar lawsuits against other large banks, The New York Times said, citing people with knowledge of the complaint against Bank of America.

Bank of America rejects the AIG allegations, a bank spokesman told Reuters.

"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets," said the spokesman, Lawrence Di Rita.

"It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors. We reject its assertions and allegations."