Meredith Whitney Says Don't Even Think About Buying Bank Stocks (WFC, BAC, C, JPM, GS, MS)
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Today, Oppenheimer's Meredith Whitney was a guest on Blooomberg television. Yes, even though Bloomberg is laying off part of its TV staff, it is still getting top-notch guests like Meredith Whitney. Below are some of the highlights from Meredith Whitney on Bloomberg TV today.
-Whitney doesn't necessarily think a Bad Bank is a bad idea, but she doesn't think it's the best idea. She'd like to see some constructive solutions. For example, she'd like to see some good businesses put together and let those businesses start lending money again.
Whitney said, "You have good assets with bad banks that are being crippled, and so you free that up a little bit by putting assets into a toxic reciprocal, but it doesn't solve the problem of money really coming out of the system whether its good asset or bad asset."
She thinks businesses should make smart combinations. Bank of America (NYSE: BAC) selling its Merrill Lynch prime broker asset and First Republic banks, and Wells Fargo (NYSE: WFC) could sell a bunch of Northeast Banks. She said banks should sell 'crown jewels' sooner rather than later.
Whitney thinks we'll go back to an older and smaller bank system, where the local banks lend off what they have in deposits.
Whitney did have this to say to investors thinking about buying stock in banks, "Investors should not even consider owning banks at this point on an equity basis."
-Whitney does not like the pay caps on Wall Street. She says that the employees won't be financially motivated by having caps at $500k. She thinks an incentive bonus structure is necessary and helpful for all businesses.
-Whitney still thinks that Citigroup (NYSE: C) will not exist in its current form, but she does think JP Morgan (NYSE: JPM) and Bank of America (NYSE: BAC) will exist in the future.
When Whitney was asked about Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS), she said the investment banks are 'grossly overstaffed'. She thinks the banks will cut another 30% and the banks will not make money until they right size their expense structure.
Finally, why isn't the Obama Administration consulting with Wall Street's top analyst on how to remedy the financial system and get the lending market going again?
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Bank Losses
How will our new president deal with 45 + Trillion of OTC Derivitive Losses these banks are sitting on...?
Smart Idea for BofA
Like Meredith staes, it would be wise for BofA to sell off FIrst Republic Bank now, rather than later. They got stuck with losers due to acquisition, but are profitable on their own. FRB customers will not stay with BofA.
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Older and smaller bank system
Paul on Feb 6, 2009 06:56 PM"Whitney thinks we'll go back to an older and smaller bank system, where the local banks lend off what they have in deposits." Really? Then what use would The Federal Reserve and The Central Banking System be? Does she think the Fed. would actually allow that to happen? They put THIS system together themselves. There is way too much money to be made from lending 9X the deposit amount out. It would be nice to take the power away from The Central Banking System, but it will never happen.