American International Group (AIG), the insurer bailed out by the Federal Reserve in the wake of the 2008 financial crisis, plans to sue Bank of America (BAC) to recover more than $10 billion in losses on mortgage securities, according to The New York Times. The paper reports AIG claims BofA and Merrill Lynch, as well as Countrywide, which was acquired by BofA, misrepresented the quality of mortgages sold to investors within securities. AIG has had a rocky three years since the federal bailout of the group insurer three years ago. The New York-based company posted a $1.8 billion profit for the second quarter, up from a loss of $2.7 billion, or $19.57 per share, a year earlier. The firm’s financial services segment reported an operating loss of $146 million, while AIG’s parent and other operations posted operating income of $344 million, up from an operating loss of $131 million a year earlier. Those gains included $13 million in operating income from the mortgage guaranty operations and income of $1.5 billion from AIG’s holdings of Asian insurer AIA. Toxic assets that ended up under AIG’s umbrella were eventually assumed by the Fed and placed into the Maiden Lane II residential mortgage securitization portfolio. Write to: Kerri Panchuk.
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