American International Group contends it never forfeited its right to sue mortgage bankers that sold it virtually worthless mortgage-backed securities, and the insurer says a Federal Reserve official has made inconsistent statements to the court on the matter.
AIG is claiming that it is owed perhaps $10 billion from the banks.
AIG’s statement is contained in a March 28 filing related to its case against BankAmerica, the successor to Countrywide Financial, and Merrill Lynch in federal court in California.
The suit was filed in January in New York State Supreme Court, in Manhattan, but the case was transferred to Los Angeles in February in order to consolidate all MBS claims against Countrywide.
AIG is at odds with the Federal Reserve Bank of New York regarding whether the insurer gave up its ability to sue the mortgage bankers when it transferred the mortgage-backed securities in question to Maiden Lane II—a facility set up by the Fed to relieve AIG of the toxic assets as part of the government assistance the insurer received beginning in 2008.
In the current court battle, AIG is arguing that the Fed had earlier allowed it to pursue the lawsuits against the banks, but later supported the banks by stating that AIG lost its ability to recoup its losses through lawsuits when it turned the securities over to the Fed via MLII.