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AIG & GE Agree to Settle MBS Investment Suit

jobline-handshakesAmerican International Group Inc., (AIG) and a group of General Electric Inc., (GE) pension and investment funds recently agreed to put a New York federal court suit brought about by the funds to rest.

Multiple media reports revealed that the suit alleged that AIG lied about the health of its mortgage-backed securities (MBS) between 2006 and 2008 as the housing market crashed.

Allegedly  five GE trusts lost "significant" amounts of money following AIG stock purchases in 2006 to 2008, according to a report from Law360.

After U.S. District Judge Laura Taylor Swain dismissed Exchange Act claims based on statements before May 2007 as time-barred nearly a week ago, both AIG and GE filed a stipulation to end the suit.

The stipulation outlined that “all claims asserted by plaintiffs General Electric Pension Trust, GE RSP U.S. Equity Fund, GE Institutional Funds, GE Investment Funds Inc. and Elfun Trusts … in the above-captioned action are discontinued and dismissed with prejudice."

As part of the agreement, both parties will pay their own costs, the Law360 report explained.

In February, the GE funds sued AIG after rejecting a $960 million deal reached with the investors to settle credit default swaps claims.

Following the retirement of Hank Greenberg, CEO of AIG in 2005, AIG Financial Products Corp., (AIGFP) CEO Joseph Cassano started to grow AIGFP's CDS portfolio, which were backed by securities that included mortgages, according to the complaint.

These very same risks led to "a massive liquidity crisis that would have forced AIG into bankruptcy proceedings if not for the $85 billion government bailout it received before the opening of the market on Sept. 17, 2008," the complaint said.

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About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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