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A company run by former American International Group Chief Executive Maurice "Hank" Greenberg has sued the United States, claiming that the government takeover of the insurer was unconstitutional.

Top Bank of America Corp lawyers knew as early as January that American International Group Inc was prepared to sue the bank for more than $10 billion, seven months before the lawsuit was filed, according to sources familiar with the matter.

The insurer AIG is suing Bank of America Corp to recover more than $10 billion of losses from a "massive fraud" on mortgage debt, deepening the morass of litigation faced by the largest U.S. bank.

American International Group, the insurer that sold off several major units in its effort to repay its 2008 bailout, plans to keep its once-troubled but now rapidly growing mortgage-insurance unit.

A bellwether index of subprime mortgage bonds rallied, a day after the New York Fed suspended further auctions of so-called Maiden Lane II securities acquired in the AIG bailout.

Shares of American International Group Inc fell more than 3 percent on Wednesday after the insurer and the U.S. Treasury sold $8.7 billion worth of stock.

Taxpayers won't foot the bill for raises for the chief executives at any of the four firms—GM, Chrysler, AIG, Ally Financial—still receiving assistance under the federal bank bailout.

Troubled insurer AIG is to repay a $21bn bail-out loan, paving the way for a share sale by the US Treasury.

American International Group Inc and the U.S. government agreed on a plan that would see the insurer repay taxpayers fully for bailing it out at the height of the financial crisis.

American International Group's application to list its main pan-Asian life insurer contained a record 11 bookrunners, people familiar with the matter said, a further sign that the company is determined to raise as much money as possible.