CHARLOTTE, N.C. — Bank of America Corp. shares have
fallen below $7, amid continued concerns about the bank’s
mortgage-related woes.
The Charlotte-based bank’s shares sank as markets
reacted to a lawsuit filed by insurer American International Group Inc.
alleging the bank and its subsidiaries sold it faulty mortgages during
the housing boom.
Financial markets in general tumbled Monday on
renewed concern about the economy and the Standard & Poor’s decision
to downgrade U.S. government debt.
Bank of America shares haven’t been this low since
late March 2009, when the stock was emerging from the depths of the
financial crisis. The stock bottomed out at a closing price of $3.14 on
March 6, 2009.
The AIG suit, filed in New York Superior Court, seeks
$10 billion in damages stemming from $28 billion in securities that
Bank of America, Countrywide Financial and Merrill Lynch sold the
insurer in the mid-2000s. It’s possibly the largest lawsuit filed by a
single plaintiff over mortgage-backed securities.
AIG is the insurer that required a massive government
bailout in 2008 after suffering huge losses on bets related to
securities tied to subprime mortgages.
“As AIG has said in the past, we are looking
carefully at what counterparties and others have done to AIG, and we
intend to take legal action against those who have harmed us,” AIG
spokesman Mark Herr said. “Bank of America’s fraud caused billions of
dollars in damage to AIG, and we are bringing this suit today to protect
AIG and the taxpayers’ stake in it. This is not the first lawsuit that
AIG has filed against counterparties that have sought to profit at our
expense and we anticipate that it will not be the last.”
Bank of America spokesman Larry Di Rita said the bank rejects AIG’s “assertions and allegations.”
“AIG recklessly chased high yields and profits
throughout the mortgage and structured finance markets,” he said. “It is
the very definition of an informed, seasoned investor, with losses
solely attributable to its own excesses and errors.”
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