State Street may face legal action by the state attorneys general of Idaho and Alaska over steep losses suffered during the credit crisis in August, according to a newspaper report.

The Wall Street Journal reports that the Public Employee Retirement System of Idaho and the Alaska Retirement Management Board thought they invested in two relatively low-risk bond funds, but the funds held mortgage-backed securities and derivatives.

Both states have since pulled their investments from the funds, which has led to large losses during the summer, the paper says.

Last week, a unit of Prudential filed a suit against State Street over its losses in the same funds.

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