Meredith Whitney Says While You Eat Your Turkey Dinner, The Banks Will Be Eating Up Your Cash

In a research report today from Oppenheimer banking analyst Meredith Whitney, who has been dead-on about the troubles with banks, said the TARP capital will likely be eaten up by write-downs and reserve builds. She appropriately titled the report "Gobble, Gobble" in honor of Thanksgiving and the black hole that is the U.S. banking system.

In the report, Whitney said with this week's announcement of the Citi (NYSE: C) bailout, "we clearly have entered the next phase of the TARP plan, or the "3.0" version of the original plan." Whitney notes that banks she covers have accessed over $110B of TARP capital during Q4, but she sees those same banks incurring $44 billion in write-downs and loss provisions in the same quarter. Whitney also said accounting rule changes will require the banks to post an additional $25B in loss reserves over the next 12 months.

Whitney is cutting estimates on the financial stocks she covers to reflect net write-downs, deteriorating credit, preferred dividends for TARP and other capital raises. She lowered FY08 and FY09 estimates by 17% on average.

Whitney cut EPS estimates on Banc of America (NYSE: BAC), Citi (NYSE: C), JPMorgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS), and Morgan Stanley (NYSE: MS).

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