Report: State Street Subprime damages may reach $8 billion

State Street Corp., the largest money manager for institutions, may face damages tied to subprime investments reaching as high as $7.8 billion -- or more than 12 times the $625 million it set aside for damages from lawsuits over losses from subprime mortgage investments made for pension funds.

Insurance giant Prudential Financial Inc. has filed a suit against Boston-based State Street (NYSE: STT) on behalf of 200 retirement plans, alleging that State Street inappropriately invested their money in risky securities, Bloomberg News reported.

Bloomberg reported that the value of subprime-related assets on State Street's books fell to $6.1 billion at the end of 2007, versus $13.9 billion on June 30 of last year, leaving State Street's exposure at as much as $7.8 billion.

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State Street released a statement in response to the Bloomberg report in which it said that measuring the fall in assets doesn't present an accurate picture of the risk.

``Taking the decline in assets under management from point to point ... is not an appropriate or accurate way to calculate potential investment losses or the company's potential exposure,'' the company said in a statement.