AIG sues NY Fed over right to sue Bank of America, others

Fri Jan 11, 2013 9:04pm EST
 

By Jonathan Stempel

NEW YORK (Reuters) - American International Group Inc has filed a lawsuit against a vehicle created by the Federal Reserve Bank of New York to help bail out the insurer, in a bid to preserve its right to sue Bank of America Corp and other issuers of mortgage debt that went sour.

The complaint filed in the New York State Supreme Court in Manhattan seeks a declaration that AIG has not transferred billions of dollars of "litigation claims" to Maiden Lane II, including many related to the insurer's $10 billion lawsuit against Bank of America.

Maiden Lane II was created in December 2008 to buy residential mortgage-backed securities (RMBS) from AIG and ease liquidity strains.

According to the complaint, New York Fed officials in December told Bank of America that Maiden Lane II had, by agreeing to buy the securities, assumed from AIG all litigation claims relating to what it bought. AIG said this included more than $7 billion of damages claims against Bank of America.

AIG is not seeking monetary payments in the lawsuit, but wants the court to clarify that the New York-based insurer still has the right to sue issuers of securities in Maiden Lane II.

New York Fed spokesman Jack Gutt declined to comment. Bank of America spokesman Lawrence Grayson also declined to comment.

The lawsuit is part of the fallout from AIG's $182.3 billion federal bailout that began in September 2008, and which was fully paid off last year.

It came after AIG provoked a firestorm in Congress and from the American people this week as it mulled whether to sue the government that bailed it out by joining a $25 billion lawsuit by former Chief Executive Maurice "Hank" Greenberg. AIG eventually decided to stay out of that case.   Continued...

 
The logo of American International Group Inc. (AIG) on the outside of their corporate headquarters in New York, November 10, 2008. REUTERS/Mike Segar