AIG To Begin Firing Off Lawsuits Targeting Banksters Over Insurance Deals Involving Crappy Mortgage Securities

The New York Times reports:

• The American International Group, the giant insurer rescued by the federal government during the financial crisis, on Thursday will file the first of what could be a series of lawsuits against Wall Street firms, contending that it was the victim of fraud.
• The initial suit, against ICP Asset Management and Moore Capital, will claim that A.I.G. suffered losses insuring mortgage securities created by ICP. The suit says ICP manipulated those securities in a way that benefited itself and Moore Capital, which is not accused of fraud, but harmed A.I.G.
• Though the insurer received a hefty bailout, much of that money ultimately flowed to banks. Now, A.I.G. is trying to “recoup potentially billions of dollars from the fraudulent conduct of these defendants and other parties,” according to a copy of the suit obtained by The New York Times. Because A.I.G. is still largely owned by the government [reportedly 92%], taxpayers would share in any recovery.

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• A.I.G. is preparing several suits against banks, like Bank of America and Goldman Sachs, that created the $40 billion in mortgage bonds, according to the person with knowledge of the litigation, who was not authorized to talk about it publicly. The company says it believes the banks issued misleading statements about the quality of the mortgages within those bonds, the person said.

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• A.I.G.’s suit against ICP mirrors a lawsuit filed by the Securities and Exchange Commission last summer [story, SEC lawsuit]. The commission cited four mortgage securities, including two deals known as Triaxx, that were insured by A.I.G. ICP caused Triaxx to overpay for mortgage bonds to benefit itself and a favored client, the commission said.

For more, see A.I.G. to Sue 2 Firms to Recover Some Losses.