By Jonathan Spicer
NEW YORK, March 1 The Federal Reserve Bank of
New York this week made public a mortgage-securities settlement
with Bank of America that could bolster the BofA's case
against American International Group Inc over claims on
AIG filed a $10-billion lawsuit against Bank of America
aimed at recouping losses from the U.S. lender.
AIG claims it did not lose the right to recoup these losses
when it transferred $18 billion in litigation claims to the New
York Fed after the U.S. central bank bailed out the insurer
during the 2008 financial crisis.
The settlement the New York Fed submitted to a Los Angeles
court on Thursday showed that, when it agreed to purchase assets
from AIG as part of its bailout, it understood that it was
acquiring all "right, title and interest" in them. That included
litigation claims associated with those securities, the
Earlier this week, a federal judge in New York put a related
AIG dispute with the New York Fed on hold while the Los Angeles
court addresses the insurer's lawsuit against Bank of America.
The Los Angeles court will ultimately have to decide who
owns the Bank of America litigation claims.
The settlement filed on Thursday showed that Bank of America
agreed to pay the New York Fed some $62 million, including $43
million related to the residential mortgage securities.
As part of the settlement, the New York Fed unit that held
the assets, called Maiden Lane II, released all claims it had
against Bank of America related to those securities.
Asked why the New York Fed did not instead pursue further
claims against Bank of America, given the size of AIG's claims,
a spokesman said the Fed bank wanted to secure the $62 million
It made the decision after "an analysis of the strength of
the potential claims, the cost of pursuing such claims and the
likelihood that it would succeed if it was to pursue them," the
AIG's bailout eventually totaled $182.3 billion. The bailout
was fully paid off last year, however, with a realized public
net gain of $2.8 billion.