Bailed Out Insurance Giant Sues Bailed Out Bank: AIG Seek Litigation Against Bank of America
- Posted on August 9, 2011 at 6:13am by
Becket Adams
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Bank of America Corp is being sued by American International Group Inc (AIG) for more than $10 billion over an alleged “massive fraud” on mortgage debt.
In its official complaint, AIG, one of the recipients of the government’s $182 billion bailout, accused Bank of America and its counterparts Countrywide and Merrill Lynch of “misrepresenting the quality of its mortgage-backed securities, including more than $28 billion it bought, and lying to credit rating agencies about the underlying loans,” according to a Business Insurance article.
AIG claims that it investigated 262,322 mortgages that backed 349 offerings it bought between 2005 and 2007, and concluded that the quality of 40.2 percent of the mortgages was inferior to what had been represented.
“Defendants were engaged in a massive scheme to manipulate and deceive investors, like AIG, who had no alternative but to rely on the lies and omissions made,” said the complaint, filed in the New York State Supreme Court in Manhattan.
Bank of America has since rejected AIG’s allegations and is returning fire.
“AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets,” Bank of America spokesman Lawrence Di Rita said. “It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors.”
According to The New York Times, AIG is preparing similar lawsuits against other banks. Among these is Goldman Sachs Group Inc, which received $12.9 billion as one of the biggest beneficiaries of the government bailouts.
Bank of America is “one of the sicker patients in the ward,” said Jonathan Finger, a shareholder who runs Finger Interests Number One Ltd in Houston.
The apparent lack of prosecutions — the Justice Department has brought three cases against employees at large financial companies and none against executives at large banks — has left private litigants, mainly investors and consumers, standing more or less alone in trying to hold financial parties accountable.
“When federal authorities don’t fulfill their obligation to enforce the law, they essentially give an imprimatur to the financial entities to do whatever they want and disregard the law,” said Kathleen C. Engel, a professor at Suffolk University Law School in Boston in a recent New York Times article. “To the extent there are places where shareholders and borrowers can pursue claims, they are really serving the function of the government. They are our private attorneys general,” she said.
Since the recent S&P downgrading and the AIG lawsuit, shares of the largest U.S. bank fell to their lowest since March 2009, undoing one-third of the bank’s market value, more than $32 billion, over the last three trading days. In afternoon trading, Bank of America shares were down $1.60, or 19.6 percent, to $6.57, after earlier falling to $6.31.
Tony Plath, a finance professor at the University of North Carolina at Charlotte, said investors may be surmising that drastic action will be needed. “If the stock trades at $6 or $7, there’s just no way they can raise capital without just wiping out existing shareholders,” he said.
The AIG case is among a growing number of lawsuits by investors seeking compensation for losses on soured mortgages that contributed to the financial crisis.
It is not very comforting to see that, even after being handed billions and billions of taxpayer’s money, bailout recipients are resorting to suing one another to make up for financial losses.
Makes one wonder why the bailout occurred at all.
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dbarnes3169
Posted on August 11, 2011 at 10:49pmLets see…I had AIG insurance. Had an accident and got cancelled..
Had accounts at Bank of Mexico (America). Was paying high account fees and getting screwed at every opportunity.
Now, I use neither and am much happier.
Let them both crash!
Report Post »Injunator
Posted on August 11, 2011 at 8:13pm“Bail-Out” was/is a term used that off-set, the inevitable “DEPRESSION” looming over ALL now. The “Great White Way” is the Houdini of now, “now ya see it now ya don’t” . . . no one would ever think that it would have happen though . . . now we’ll know how— grandma and grandpa got through their “Depressioon” . . . ?
Report Post »Bill Rowland
Posted on August 11, 2011 at 6:38amThe Obama of the insurance industry – Blame it on someone else. I can’ accept the fact that all of those Harvard MBAs, accountants and lawyers weren’t smart enough to research those investments instead of taking the banks word for it.
Report Post »I’m not even a college grad and I could see that the mortgage mess was bogus. When I paid my house off my deed came from a different company than the one I had been making payments to.
I saw loans being made to people who couldn’t possibly keep up the payments, loans where all they paid was interest – with the hope that the value of the property would go up enought in 5 years and your salary would increase enough to refinance.
All BS and they couldn’t see it?
Do you really trust these people with your money?
jackact
Posted on August 10, 2011 at 6:47pmI think this is why the NY Mets really suck this year…right Fred?
Report Post »packsack54
Posted on August 10, 2011 at 5:05pmRemember these companies are all to big to fail? They will never learn a lesion if keep bailing them out. That where most of the tarp money when to the French banks and England banks from the AIG bailout plus all those bonuses?
Report Post »Jenny Lind
Posted on August 9, 2011 at 9:07pmBofA has cheated customers with mortgages who fall behind. The string them along for months telling them the paperwork is in underwriting then pouncing on them with foreclosure. It happened to my son. I had warned him and he went to HUD and got a new loan, while waiting for underwriting, got the foreclosure notice, took it to HUD who stopped it. He has a new loan and still gets paperwok from BofA. They deserve everything they get, hope AIG reams ‘em.
Report Post »Jaycen
Posted on August 10, 2011 at 1:04pmYou know, if what you said is true, I would also hope for a reaming.
However, since both companies took bailout money, one company is about to profit off the taxpayers through another company.
In other words, you hope the rest of us get screwed in order to teach someone else a lesson. That’s pretty far out.
No more bailouts. If a business fails, it fails. By bailing a company out, you’re preventing them from learning an important lesson, and you’re injecting more instability into the market.
Report Post »cmabillm12
Posted on August 10, 2011 at 5:42pmDoes anyone remember J.P Getty, AT+T, Bell Tel., etc. Under anti trust laws thay were deemed to have become too large and forced to break up. Time to do it with these cos., too large to fail!!
Report Post »PelositheGreat
Posted on August 9, 2011 at 7:01pmwhy do I feel like this is about to cost American taxpayers even more money…..
Report Post »christos
Posted on August 9, 2011 at 5:56pm……Crop insurance getting them down thought they were able to control the weather,,,TA
Report Post »weneedrubio
Posted on August 9, 2011 at 5:03pmA new twist on the old saying “there’s honor among thieves” huh. When I found out twenty years ago or so that all the biggest bankers were Democrats I knew the end was near. It took longer than I thought it would.
Report Post »righthanddrive
Posted on August 9, 2011 at 3:17pmThe Empire strikes back. Our government, (i.e., you and me) through the US Treasury owns 75ish% of AIG. BofA is not so owned. So how best for our Government to keep the mortgage bond maket from reviving? Have AIG sue BofA. That’s $10 billion smakaroos for Obama’s re-election Or, maybe BofA did not participate in the last Obama fundraiser. Anyway it is bye bye BofA (I wonder if we can still buy the puts?). Sad thing is Barney is still fouling up the air wherever he goes and some good folks are going to get hurt with a BofA CHP 7.
Report Post »Konacow
Posted on August 9, 2011 at 3:06pmBank of America should be called the “BANK OF THIEVES”, they want to CHARGE me $6.00 fee for cashing a check from their own bank, the check was for $23.00 and was for my heart medication.
Report Post »Jaycen
Posted on August 10, 2011 at 1:02pmYeah, that’s crap service. You should change banks.
Report Post »Richard Compton
Posted on August 9, 2011 at 2:47pmThis is part of what is wrong with the world today the Sue Me, Sue You mantality both of these companies should have gone the way of the DoDo bird instead they got bailed our by their politicl buddies who should be hunted down like the mad dogs they are and put in cages where they belong. if your business is so corrupt that you need a bailout that doesn’t include the firing of all decision makers and a complete restructuring of the company then something is terribably wrong with the deal. Instead we got business as usual and cocktails at the country club, and no apologies. stock owners took the hit and executives got bonuses, my what a strange world we live in.
Report Post »Jaycen
Posted on August 10, 2011 at 1:05pmAMEN, brother.
Thank you for some logic and reasoning.
Report Post »Drakkhanlord
Posted on August 9, 2011 at 2:42pmSoured Mortgages …The Millions of Americans ripped off from the Banks, and Fannie,Freedy BS…Any body gets Money ..Should be the American People … These silly banks OWE the American PEOPLE more money than they can than they can print…
Any left…Put back IN SS..where u took it
Report Post »affinnity
Posted on August 9, 2011 at 12:47pmWhy didn’t our government just let all of these financial institutions go bankrupt?
Report Post »thomasdaddy
Posted on August 9, 2011 at 1:18pmBecause it would have been a domino effect! These financial institutions go bankrupt and it affects all of the businesses they lend to, and the businesses those businesses use, and so on…….The bail out was a necessary evil. What they don’t tell you is that most of the money was paid back with interest!
Report Post »Saved Forever
Posted on August 9, 2011 at 1:39pmThis is where most people who support the bailouts have missed the mark. No evil is ever necessary. The actual effect of the bailouts punished success and rewarded failure. Having the government pick winners and losers is not the answer. It would have been tough, but the overall outcome of letting failures fail is a whole lot better than what we have now.
Report Post »ConstitutionalPatriot
Posted on August 9, 2011 at 1:48pmThomasDaddy, stop B.S.’ing, They should have gone out of business. The reason they didn’t was because Barney, Nancy, Dodd and Maxine where directly involved in the money scam, so they covered and bailed them out.
For us to get straight we need to be honest. If they go under they go under, GM and Chrysler as well.
Report Post »Saved Forever
Posted on August 9, 2011 at 1:58pmAnd by the way, many institutions that file for bankruptcy are able to restructure and come back even stronger if they’re smart or they are bought up by other stronger companies. The domino effect is bull corn, just look at what happened to Bear Sterns.
Report Post »thomasdaddy
Posted on August 9, 2011 at 2:36pmsad,
You are assuming other companies were strong enough to acquire these failing companies! The U.S. government secured the Bear Stearns mortage back assets to the tune of $29 billion in order to make that deal go through! Saying that we would have been better off if the government did nothing is BS!
“The actual effect of the bailouts punished success and rewarded failure.”
Report Post »This makes not sense what so ever! You couldn’t have typed that with a straight face!
Just in time
Posted on August 9, 2011 at 12:25pmMore and more, we will begin to see how our govt. was behind this. Bring out the spot lights. The american people need to know the truth
Report Post »affinnity
Posted on August 9, 2011 at 12:45pmI agree.
Report Post »babylonvi
Posted on August 9, 2011 at 11:20amThey should be suing S&P, Moody and Fitch as well because they RATED these CDOs.
p.s. No more bailouts for B of A!l
Report Post »SamIamTwo
Posted on August 9, 2011 at 11:10amshould have never bailed out any of these mucks…leave them to their own ways of fighting it out in the courts. Existing laws are in place and no bail outs were needed…Thanks for the mess.
Report Post »Junter
Posted on August 9, 2011 at 10:58amAs a customer of B&A I can tell you they do a terrible job helping consumers. One rep offered us a mortgage refinance that she claimed would save us money. The catch? She told us we had to agree to accepting it before she could tell us the conditions. Another time they sent refinance paperwork with the wrong terms and dates and when we called them asking for corrections to the agreement they said they’d take that as a refusal and canceled the offer.
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