The New York Supreme Court validated bond insurer MBIA’s 2009 corporate restructuring in an opinion Monday, ending years of litigation over the insurer’s quick transformation in the heat of the financial crisis.
Early on, 18 banks, including Wells Fargo (WFC) and Bank of America (BAC), filed suit against MBIA (MBI) under New York state’s Article 78, challenging the insurer's decision to create a second firm using $5 billion from its original insurance subsidiary.
Banks with transactions insured by the bond insurer grew suspicious, prompting 18 financial firms to challenge the restructuring and the New York Insurance Department’s approval of MBIA's plan.
Over time, 16 plaintiff banks dropped out of the suit.
This week, the New York Supreme Court rejected the arguments of the remaining two bank plaintiffs.
"After almost four years of court filings, discovery and hearings, we are pleased that the New York State Supreme Court has affirmed what was obvious all along — that the New York State Insurance Department's approval of our Transformation was proper in all respects," said Jay Brown, MBIA CEO.
"With the court's ruling now in hand, we look forward to resolving the remainder of our litigation so that we can support the financing needs of towns and cities across America by re-establishing National Public Finance Guarantee Corporation, our U.S. muni-only insurer, as a leader in the U.S. public finance insurance market."