There is more bad news for Bank of America today, as insurer AIG plans to sue the bank. Bank of America bought Countrywide Mortgage, so the bank bought this problem and many others.
Earlier today BofA said estimated subprime losses were underestimated, while analysts said the bank has no idea how to estimate losses due to subprime, or how much they will be.
Now the AIG story:
American International Group Inc. (AIG), the bailed-out insurer, plans to sue Bank of America Corp. (BAC) to recover more than $10 billion in losses on mortgage bond investments. The bank dropped 8.2 percent in New York trading.
AIG bought more than $28 billion in residential mortgage- backed securities marred by a “massive fraud” from Bank of America and businesses it took over including Countrywide Financial Corp. and Merrill Lynch & Co., the insurer said in a draft copy of a complaint obtained by Bloomberg News.
“Bank of America’s fraud caused billions of dollars in damage to AIG and we are bringing this suit today to protect AIG and the taxpayers’ stake in it,” Mark Herr, a spokesman for New York-based AIG, said in a statement. “This is not the first lawsuit that AIG has filed against counterparties that have sought to profit at our expense, and we anticipate that it will not be the last.”
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