Subprime questions stalk State Street

State Street (STT) can’t shake the subprime mess. The Boston-based institutional money manager shrugged off questions Thursday about its possible legal exposure to bad bets in the subprime market, after Bloomberg reported that the company’s costs could substantially exceed its reserves. State Street said in January it was setting aside $618 million to cover possible costs associated with lawsuits filed by clients who alleged the firm inappropriately put their money in risky mortgage-related securities.

On Thursday, Bloomberg reported that State Street could face as much as $7.8 billion in damages, citing a 56% decline in State Street’s subprime mortgage-related assets between June 30 and the end of 2007. State Street rejected that calculation, though, saying in a statement that measuring the change in assets “is not an appropriate or accurate way to calculate potential investment losses or the company’s potential exposure.” The company adds that it stands by the reserves it took back in January, which it says were underpinned by what it calls a detailed analysis.

“The company makes its determination of adequacy based on the best available information,” State Street said. “The views of third parties who appear to have a vested interest in advancing their own agenda are not taken into account.” Shares of State Street, which have suffered far less than those of most financial companies during the past year’s mortgage mess, dropped 1.5%.