AIG Suing Bank of America for Over $10 Billion
American International Group Inc. (NYSE:AIG) is suing Bank of America (NYSE:BAC) for over $10 billion. Bank of America is denying allegations that it cheated AIG by selling residential mortgage-backed securities that were overvalued, saying AIG knew the risks involved in those investments.
Between Bank of America (NYSE:BAC) and its two recent acquisitions, Countrywide and Merrill Lynch, AIG purchased $28 billion in residential mortgage-backed securities between 2005 and 2007. Analyzing over 260,000 of the underlying mortgages, AIG (NYSE:AIG) claims to have found that about 40% of the “stated metrics” for the securities were false. In one instance, a borrower claimed to have owned her construction business for 25 years, though she was only 35 years old at the time.
However, Bank of America (NYSE:BAC) blames AIG, saying the insurance company, “recklessly chased high yields and profits throughout the mortgage and structured finance markets.” Furthermore, Bank of America spokesman Lawrence Grayson says AIG “is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors.”
Bank of America (NYSE:BAC) shares are down 15.06% today to $6.94. Earlier today they fell to a two-year low of $6.83. AIG (NYSE:AIG) shares have fallen 8.01% today to $23.09. Earlier today AIG shares hit $23.02, a one-year low for the stock.