Bank analyst who foresaw toxic dangers says worst isn't over for big banks

[BeyondGeography]

Plus, the Obama Administration needs to channel funds to smaller banks and local lending:

Whitney: Banking Woes Likely to Get Worse in 2009

A surge in borrower defaults and unemployment pressures will make 2009 an even uglier year for banks than last year, analyst Meredith Whitney said.

She predicted "breakups and M&As on a grand scale" as the industry seeks to remake itself in the face of all its capital pressures.

"I don't think this year is going to look any better than last year," Whitney said in an interview Tuesday on CNBC. "In fact it will look worse because there's so much credit coming out of the system."

Whitney, a former analyst at Oppenheimer who recently opened her own firm, is renowned for calling out the problems with banks' toxic assets before the issue became widespread.

...As a solution to some of the banking system's woes, Whitney said the government should focus less on ever-changing rescue plans and instead start helping smaller institutions ramp up their community lending to local businesses and homeowners.

"You can re-energize the local lending scene and then supercharge those banks," she said. "You supercharge those so they're able to gain critical mass and start getting loans on a super-regional basis to businesses, to homeowners that qualify. At least that mitigates some of the capital that's surely going to come out of the market."

..."There's a spirit that can't be dislodge by the economic turmoil," she said. "Now is a great opportunity to capture that spirit as opposed to set expectations too high which is what (Treasury Secretary Timothy) Geithner did with the original plan and then just disappoint. People will give you the benefit of the doubt until you keep disappointing them."


http://www.cnbc.com/id/29735000

[PBS Poll-435]

1. Huh?

Both breakups and M&As?

Which is it?