Remember when the Treasury bailed out AIG and the bailout money was funneled to foreign and/or mollusk counterparties and everyone freaked out? Those were good times. Less good for banks is today, when, in addition to the world ending, AIG started to sue to get some of that money back.
Okay not exactly – AIG is actually suing Bank of America because it thinks BofA did bad things like overstating the credit quality of 40% of the mortgages in MBS pools that it underwrote and sold to AIG. BofA responded that AIG has only itself to blame, since it “recklessly chased high yields and profits throughout the mortgage and structured finance markets,” which seems about right, and also that even if BofA lied a little AIG should have known better because "It is the very definition of an informed, seasoned investor,” which, if BofA’s definition of an informed investor is AIG then, um, actually a lot of things make more sense. So carry on then.
But you’re next, everybody else! As the Timesreports:
A.I.G., still largely taxpayer-owned as a result of its 2008 government bailout, is among a growing group of investors pursuing private lawsuits because they believe banks misled them into buying risky securities during the housing boom. At least 90 suits related to mortgage bonds have been filed, demanding at least $197 billion, according to McCarthy Lawyer Links, a legal consulting firm. A.I.G. is preparing similar suits against other large financial institutions including Goldman Sachs, JPMorgan Chase and Deutsche Bank, said the people with knowledge of the complaint, as part of a litigation strategy aimed at recovering some of the billions in losses the insurer sustained during the financial crisis.
So - is there any symmetry in who got AIG money in 2008 and who's gonna give it back now? Too early to say but just for fun let's look at market cap losses (normalized to the S&P's miserable -6.66% today) for the four banks that the Times names:
There are those who claim that the AIG bailout was a transfer of money from taxpayers to Goldman Sachs. Viewed from a certain perspective maybe it was a transfer of money from Bank of America to Goldman Sachs?