$10bn!! Now that is huge. But its normal considering that both the parties are big financial giants. Insurance group AIG is accusing Bank of America of “massive fraud” on bad mortgage debt.
AIG alleges that BoA exaggerated the quality of the $28bn worth of mortgage-backed investment products it bought from the bank prior to the 2008 turmoil in the financial markets.
BoA has rejected AIG’s allegations.
Last month, BoA reported that it had agreed to pay $8.5bn to settle other claims related to bad mortgage debt.
AIG, which remains majority owned by the US government after it required $182.3bn of bail-out funds due to its exposure to bad US mortgage debt, said BoA was “engaged in a massive scheme to manipulate and deceive investors”.
Its lawsuit also names BoA subsidiaries Countrywide and Merrill Lynch.
BoA spokesman Lawrence Di Rita said: “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. We reject its assertions and allegations.”
BoA made a loss of $8.8bn in the three months to the end of June, largely as a result of the $8.5bn settlement to investors and other insurers related to bad mortgages debts.
It was bad US mortgage debt that sparked the 2008 credit crunch and resulting turmoil in the global financial markets.
Source: BBC News