American International Group and the Federal Reserve Bank of New York are at odds concerning whether the insurer has authority to sue banks over virtually worthless mortgages they sold that drove AIG to seek a federal bailout.
The new development is spelled out in a lawsuit AIG filed Friday in the New York State Supreme Court in Manhattan.
The Fed had earlier allowed AIG to pursue the lawsuits against the banks even though the defective mortgages in question were contained in a facility known as Maiden Lane II, which is partially funded by the FRBNY, AIG alleges.
But the lawsuit says the Fed is now supporting the banks by contending that AIG lost its ability to recoup its losses through lawsuits when it turned the securities over to the Fed via MLII.
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