Yep, that's the same AIG that came close to bankruptcy in 2008 before being bailed out by the government. The insurance giant is expected to seek $10 billion, claiming that Bank of America - and its Merrill Lynch and Countrywide Financial units - misrepresented the quality of the mortgages that were packaged up as securities and sold to investors. From the NYT:
The private actions stand in stark contrast to the few credit crisis cases brought by the Justice Department, which is wrapping up many of its inquiries into big banks without filing any charges. The lack of prosecutions -- the Justice Department has brought three cases against employees at large financial companies and none against executives at large banks -- has left private litigants, mainly investors and consumers, standing more or less alone in trying to hold financial parties accountable. "When federal authorities don't fulfill their obligation to enforce the law, they essentially give an imprimatur to the financial entities to do whatever they want and disregard the law," said Kathleen C. Engel, a professor at Suffolk University Law School in Boston. "To the extent there are places where shareholders and borrowers can pursue claims, they are really serving the function of the government. They are our private attorneys general."
B of A shares are getting killed this morning - down almost 16 percent, to below $7. That's on top of big losses last week. Actually, all the major banks are taking sizable hits this morning.
*Update: B of A spokesman says that the bank does not have to raise additional capital. (Business Insider)