American International Group

(AIG) - Get Report

is spending money to lobby states to soften new controls on the mortgage industry, the

Wall Street Journal

reports.

When the government took control of mortgage companies

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

, it prohibited them from lobbying. But it hasn't banned the practice at AIG, the

Journal

reports.

The insurer is working to ease some provisions in a new federal law that establishes strict oversight of mortgage originators, according to state regulators. The law requires that originators be licensed by the states, and to supply comprehensive information so state regulators can track their activities, the newspaper reports.

The goal of the new rules is to hold originators accountable if they engage in the sorts of improper or fraudulent lending that ultimately contributed to AIG's downfall, the report said. The law was passed by Congress in July.

Meanwhile, New York Attorney General Andrew Cuomo on Wednesday asked AIG to recover millions of dollars worth of "unreasonable" and "outrageous" payments it made to executives as the big insurer neared collapse, or face legal action for violating state law. Cuomo is conducting a probe into allegedly "unwarranted and outrageous expenditures" at AIG, the

Journal

reports.

The U.S. government extended an $85 billion loan to AIG in September to help it stave off bankruptcy. The loan amount was raised to $122.8 billion earlier this month.

Image placeholder title

This article was written by a staff member of TheStreet.com.