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Wells Fargo & Co. was cleared by a jury of claims it misrepresented a securities-lending program to Blue Cross Blue Shield of Minnesota and other institutional investors and a demand it pay for $8.2 million of losses, Bloomberg News reported today. A federal court jury yesterday returned a verdict rejecting allegations in the plaintiffs’ 2011 lawsuit that the bank marketed a risky program as safe, leading to losses the bank blamed on the financial crisis alone. The case is one of at least five filed in Minnesota against Wells Fargo over the securities-lending program, which was based in the state. Under the program, Wells Fargo held its clients’ securities in custodial accounts and made temporary loans of the instruments to brokers. The brokers used the securities to support trading activities such as short sales and option contracts.

Twenty-five Nuveen Investments Inc. funds sued American International Group Inc., claiming that the company and executives committed securities fraud leading to the U.S. financial crisis that intensified in 2008, Bloomberg News reported yesterday. Also named yesterday as defendants in a 237-page complaint in federal court in Chicago were former Chief Executive Officer Martin J. Sullivan, ex-Chief Financial Officer Steven Bensinger and Joseph Cassano, who led the AIG Financial Products unit. The funds accused the company, Sullivan and others of violating Illinois and federal securities laws, common law fraud and unjust enrichment. They asked for unspecified money damages.

American International Group Inc. will return funds to customers at its banking unit and shut their accounts amid a retreat from deposit-taking as the Dodd-Frank Act places limits on insurers, Bloomberg News reported yesterday. AIG Federal Savings Bank “will no longer be servicing retail deposit accounts as of Sept. 30,” according to a letter to customers. “All accounts will be automatically closed as of that date and any funds, including all interest due on your accounts, will be returned.” AIG is joining Principal Financial Group Inc. in narrowing its focus ahead of rules that limit proprietary trading and investments in private-equity or hedge funds by insurers with deposit-taking banks. MetLife Inc., Hartford Financial Services Group Inc. and Allstate Corp. have sold deposits or retreated from banking as regulators increase oversight.

Federal Reserve Chairman Ben S. Bernanke will have to give testimony in a lawsuit against the U.S. brought by Maurice “Hank” Greenberg over the government’s bailout of American International Group Inc., Bloomberg News reported yesterday. Greenberg’s Starr International Co. sued the U.S. for $25 billion in 2011, claiming the assumption of 80 percent of AIG’s stock by the Federal Reserve Bank of New York in September 2008 was an unconstitutional seizure of property that violated shareholders’ rights to due process and equal protection of the law. Switzerland-based Starr contended Bernanke’s role in the transaction made his testimony critical. “The court is persuaded that Mr. Bernanke is a key witness in this case and that his testimony will be highly relevant to the issues presented,” Judge Thomas Wheeler of the U.S. Court of Federal Claims wrote in the ruling yesterday. “Because of Mr. Bernanke’s personal involvement in the decision-making process to bail out AIG, it is improbable that the plaintiff would be able to obtain the same testimony or evidence from other persons or sources.” Judge Wheeler, who said he will attend the deposition to provide judicial oversight, said obtaining testimony from high-level U.S. officials has been a “relatively routine practice” in claims court when the individual has personal knowledge of relevant information.

Global insurers identified as too big to fail will have to hold higher reserves and draw up recovery and resolution plans to limit the economic fallout should they go bust, the industry’s watchdog said, Bloomberg News reported yesterday. The International Association of Insurance Supervisors (IAIS), which collected data from 50 insurers in 14 jurisdictions, including the U.S., to help the Financial Stability Board (FSB) draw up a list of systemically important firms, released its assessment methodology and policy measures today. The list of insurers will be announced by the Basel, Switzerland-based FSB in coming days. The companies on the FSB insurer list will be included based on criteria such as size, global activity and the amount of non-insurance businesses they have. The IAIS would impose tougher capital standards on the systemically important insurers to increase their capacity to absorb losses and require them to design recovery and resolution plans to meet cases of severe financial distress. The FSB said in June it will follow up next year with a list of too-big-to-fail reinsurers.

Prudential Financial Inc., the insurer contesting a decision deeming it systemically important, won the support of the Federal Housing Finance Agency (FHFA) during a vote of U.S. regulators last month, Bloomberg News reported yesterday. The Financial Stability Oversight Council (FSOC) voted 7-2 to designate an unidentified company as systemically important, meaning the firm could endanger the financial system if it were to fail, according to minutes of the June 3 meeting released yesterday by the Treasury Department. The company was Prudential, according to sources, who asked not to be identified because the information wasn’t officially released. The FHFA’s acting director, Edward DeMarco, voted “no,” as did Roy Woodall, a former Kentucky state insurance commissioner who is the council’s independent member with insurance expertise, the panel said. Prudential is the only one of three companies appealing the FSOC’s ruling subjecting them to heightened Federal Reserve oversight. The Newark, New Jersey-based insurer said on July 2 that it requested a hearing to explain why it shouldn’t be designated.

New York State regulators are calling for a nationwide moratorium on transactions that life insurers are using to alter their books by billions of dollars, saying that the deals put policyholders at risk and could lead to another taxpayer bailout, the New York Times DealBook blog reported today. Insurers’ use of the secretive transactions has become widespread, nearly doubling over the last five years. The deals now affect life insurance policies worth trillions of dollars, according to an analysis done by SNL Financial, a research and data firm. These complex private deals allow the companies to describe themselves as richer and stronger than they otherwise could in their communications with regulators, stockholders, the ratings agencies and customers, who often rely on ratings to buy insurance. Benjamin M. Lawsky, New York’s superintendent of financial services, said that life insurers based in New York had alone burnished their books by $48 billion, using what he called “shadow insurance,” according to an investigation conducted by his department.

A federal judge expressed “concern” that the U.S. scared off American International Group Inc. from joining a lawsuit by Maurice “Hank” Greenberg, its former chairman, challenging the insurer’s 2008 federal bailout, Bloomberg News reported on Friday. “I had this lingering concern,” Judge Thomas Wheeler said today at a hearing in the U.S. Court of Federal Claims in Washington, D.C., on whether grant a request by AIG and the government to dismiss Greenberg’s lawsuit. Starr, Greenberg’s closely held investment firm and an AIG shareholder, sued the government for $25 billion in 2011, calling the assumption of 80 percent of the company’s stock by the Federal Reserve Bank of New York in September 2008 a violation of the shareholders constitutional rights to due process and equal protection of the law. Starr also claims AIG’s board, which Greenberg said was unduly influenced by the government, failed to conduct a full and independent review of whether to join the lawsuit. Starr asked Judge Wheeler to find the board wrongly decided to stay out of the case. Wheeler declined to dismiss Starr’s complaint in July and reaffirmed his ruling in September. The hearing on Friday was on an amended complaint aimed mainly at the board’s actions on the lawsuit.

MBIA Inc., the bond insurer that reached a $1.7 billion settlement with Bank of America Corp. this week, will pay $350 million to Societe Generale SA to resolve litigation, Bloomberg News reported yesterday. The agreement settles claims over the insurer’s 2009 restructuring, which Societe Generale and other banks had sought to reverse, saying that it exposed them to losses by transferring assets. Societe Generale is the last bank to settle with MBIA in the case following the accord with Bank of America, and the agreement will end the litigation against the insurer.

Bankrupt Stockton, Calif., has reached a settlement with Ambac Assurance Corp. over $13.3 million of city debt that the company insures, the trustee for the debt said yesterday, Reuters reported. Wells Fargo Bank NA served as trustee for the city's certificates of participation, sold by Stockton in 2003 for redevelopment projects. Details of the settlement were not provided in the filing by Wells Fargo with the Municipal Securities Rulemaking Board. The judge overseeing the bankruptcy case has already given his approval to settle the matter.