Insurance giant Allstate is suing Bank of America and others for over $700 million in losses it incurred after buying bad Countrywide mortgage-backed securities. BOA purchased the Countrywide, formerly the biggest private mortgage lender, in 2008. Here's what Allstate alleges, via Jonathan Stempel at Reuters:

Allstate said that starting in 2003, Countrywide quietly decided to boost market share by approving any mortgage product that a competitor was willing to offer, in a "proverbial race to the bottom." It said Countrywide then passed on the added risks to investors who bought debt backed by the mortgages.

"Defendants knew the loans offloaded onto Allstate were a toxic mix of loans given to borrowers that could not afford the properties, and thus were highly likely to default," said the 150-page complaint filed Monday in Manhattan federal court.

This all may be true. But then why, pray tell, did Allstate's investment team purchase these securities? If Countrywide didn't provide investors like Allstate with fraudulent data about the loans backing the bonds they purchased, then how could it be held responsible? If it provided whatever information Allstate demanded to know about the bonds prior to purchase, then how could it be blamed? Certainly no one held a gun to those Allstate investors' heads and forced them to buy these mortgage-backed bonds -- so why did they?

If you buy Apple stock, and the company knows it's out of good ideas, so instead plans some truly awful, money-losing products for release in 2011 that decimate its stock price, can you sue the company? Should the burden lie with the seller or buyer of securities to determine how they will perform in future years? It seems a court will let us know.

Read the full story at Reuters.