MBIA files lawsuit against Merrill Lynch
-
- April
- 30
MBIA Inc. filed a lawsuit alleging that it faces several hundred million dollars in losses related to soured subprime mortgage investment products because of the misrepresentations by investment banking giant Merrill Lynch.
MBIA, an Armonk-based bond insurer, said that its insurance subsidiary is seeking damages from Merrill Lynch in the case filed in New York State Supreme Court.
“Today’s action is consistent with our intention to pursue all available remedies against those parties whose improper actions have directly resulted in substantial losses for MBIA and its shareholders,” MBIA Chief Executive Officer Jay Brown said in a written statement.Merrill Lynch, now owned by Bank of America Corp., pursued a strategy to offload billions of dollars in souring subprime residential mortgages on its books by packaging them into collateralized debt obligations (CDOs), according to the lawsuit. That hurt MBIA because it had insured more than $5.7 billion of credit default protection on four of the CDOs based upon Merrill Lynch’s misrepresentations concerning the credit quality of these toxic products, the suit added.
Brown said that Merrill Lynch has unfairly benefited from the MBIA insurance coverage.
“Consequently, we are asking the court to rescind the contracts with Merrill Lynch and require them to compensate us for our payments to other counterparties,” Brown said.
MBIA’s shares plunged 79 percent during 2008 after the company was hobbled by the global credit crunch, a weak housing market and exposure to souring mortgage bonds.
Merrill Lynch declined comment.
This entry was posted
on Thursday, April 30th, 2009 at 5:12 pm by Jay Loomis.
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Category: Lawsuits
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