AIG Suffers Setback in Case against BofA

American International Group Inc. ( AIG ) suffered a setback Tuesday in a case against Bank of America Corp. ( BAC ) over $10 billion in losses on mortgage investments.

A federal judge in New York denied AIG's request to expedite a legal case in which it asserts that it retains the rights to sue the Charlotte, N.C., company over losses it suffered on the investments. The Federal Reserve Bank of New York purchased the securities as part of a 2008 bailout.

The case was brought by AIG in 2011 in a California federal court. AIG in January filed a lawsuit against the Fed vehicle, called Maiden Lane II, arguing that the court should first decide whether AIG retains the rights to sue over the securities before the case against Bank of America proceeds.

The judge ruled that the California case should proceed first because that case is "in a relatively advanced state." He said AIG could ask the California judge again whether she would put her case on hold until this matter is decided.

The Fed in the California case is backing Bank of America's claim that AIG no longer retains the right to sue over the investments. The judge said he found the Fed's actions "unattractive" and "wrongful."

A spokesman for AIG said that "we remain hopeful that, in light of the Court's decision, the New York Fed will honor its commitment to have the matter addressed in that forum." A spokesman for the New York Fed declined to comment.

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  (END) Dow Jones Newswires
  02-26-131935ET
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