It has been reported that AIG sued Bank of America Corp. for $10.5 billion for its massive fraud on mortgage debt. Apparently AIG was cheated by Bank of America who was selling residential mortgaged back securities which were priced way more then they were worth.
Bank of America denied all these allegations and said that AIG was aggressively chasing investments that had high yields, and they were big enough and extremely complex so they should have known the risks that were associated with them. They also mentioned that AIG was a seasoned investor and was able to make its own logical decisions.
In the height of the housing boom, AIG claimed that Bank of America, and two other companies bought out by Bank of America, Countrywide, and Merril Lynch sold $28 billion securities backed by home mortgages in the years of 2005 through 2007. They looked at over 260,000 of the underlying mortgages and realized that 40% of the value of the securities were false.
Executive emails from Countrywide were revealed in New York court before its collapse. In these emails revelaed some damaging comments that were said about the sub prime mortgage lenders collapse, showing that executives were aware that they were giving loans to consumers who could not pay them back and also misrepresenting the risk level involved with the companies to whom they were passing the loans onto. Countrywide’s chief executive and co-founder Angelo Mozilo wrote emails to his senior colleagues expressing his concern that the sub-prime loan products were no good and are detrimental to the company’s future.