Investment firm takes on Carney over Fannie Mae

• Fairlight Capital disagrees with a number of John Carney's assumptions - the sum of which led to essentially a zero valuation for the common stock of Fannie Mae (OTCQB:FNMA). Applying what it believes to be a conservative earnings growth rate and a 0% commitment fee on the senior preferred stock, Fairlight sees a current value of $2.81 per share.
• More importantly, says Fairlight, Carney assumes a 5% regulatory capital level. Carney makes the mistake of comparing that to other financial institutions, says Fairlight, forgetting Fannie would be an insurer, not a bank - a 2.5% capital level should be adequate.
• Assuming that and also assuming the government would allow the redemption or refinancing of the senior preferred stock leads to a valuation of $7.11 per share, even under very conservative earnings growth rates, concludes Fairlight.
• Previously: Carney at it again on Fannie Mae