AIG sues New York Fed over lawsuit rights
American International Group has filed a lawsuit against an investment structure created by the Federal Reserve Bank of New York to help bailout the insurer, in a bid to sue mortgage debt issuers.
According to the complaint filed in the New York State Supreme Court in Manhattan, AIG is seeking a declaration that the bailed out insurance giant has not abandoned its right to file suit against banks and other creditors by selling residential mortgage-backed securities to Maiden Lane II in 2008.
Maiden Lane II was created to purchase the securities, which had become unsellable at the the height of the financial crisis, from AIG.
The government took control of AIG in September 2008 through a $182 billion federal bailout to prevent its imminent collapse from sparking a cascade of gigantic failures throughout the global financial system. The bailout was fully paid off last year.
AIG, which accuses Bank of America and other issuers of mortgage debt to have misled it about the value of the securities, is not seeking financial compensation from Maiden Lane II but wants the court to state whether AIG can still sue entities that issued securities in Maiden Lane II.
The insurer has filed a $10 billion lawsuit against Bank of America as reparations for fraud claims.
On Wednesday, AIG decided not to join a private shareholder lawsuit against the US government over its bailout.
The lawsuit filed by Starr International, which is controlled by former AIG chief executive Maurice “Hank” Greenberg, argued that the massive bailout of AIG did not fairly compensate shareholders. Starr sued the government for about $25 billion in November 2011.