By Jonathan Spicer
NEW YORK, March 1 The Federal Reserve Bank of New York this week made public details of a settlement it reached with Bank of America that could bolster the BofA's case in a lawsuit with American International Group Inc over mortgage-securities claims.
AIG's $10 billion lawsuit against Bank of America is aimed at recouping losses from the U.S. lender. AIG claims it has the right to recoup these losses and did not transfer them when it transferred $18 billion in litigation claims to the U.S. Federal Reserve in relation to the Fed's bailout of the insurer.
The settlement the New York Fed submitted on Thursday to a Los Angeles court shows that when the Fed agreed to purchase troubled assets from AIG, it understood that it was acquiring all "right, title and interest" in them. That included litigation claims associated with those securities or their acquisition by AIG, according to the settlement.
The details from the settlement between the Fed and BofA could undermine AIG's assertion in its lawsuit filed Jan. 11 that it did not transfer litigation claims to the Fed, including more than $7 billion in the Bank of America case.
Under the settlement between the Fed and Bank of America, BofA agreed to pay the New York Fed some $62 million in settlements, including $43 million related to the residential mortgage securities.
A Los Angeles court will ultimately have to decide who owns those claims.