As a worst-case scenario, Morgan Stanley says Fannie Mae may have overstated the fair value of its common equity by $3 billion, a figure the investment banking firm stresses is an "arbitrary estimate."The figure is mentioned in an analyst report written by Morgan Stanley analyst Ken Posner. The report says the best-case scenario is that the examination of Fannie by the Office of Federal Housing Enterprise Oversight will not force Morgan to materially change its earnings forecast on the company. On Thursday, however, Morgan cut its price target on Fannie's stock to $81 from $89, saying OFHEO's allegations of accounting improprieties could lead to the imposition of growth limits on the company. Fannie Mae had no comment on the Morgan report. Fannie Mae can be found online at http://www.fanniemae.com.

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