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AIG sues BofA over $10 billion in mortgage losses


American International Group Inc., the bailed-out insurer, sued Bank of America Corp. over $10 billion in losses on mortgage-bond investments. The bank dropped 20.3 percent in New York trading.

AIG bought more than $28 billion in residential mortgage-backed securities marred by a "massive fraud" conducted by Bank of America and businesses it took over - Countrywide Financial Corp. and Merrill Lynch & Co., the insurer said in a complaint filed today in New York State Supreme Court.

"Bank of America's fraud caused billions of dollars in damage to AIG and we are bringing this suit Monday to protect AIG and the taxpayers' stake in it," Mark Herr, a spokesman for AIG, said in a statement. "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."

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