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'Neighbor vs. neighbor' in US cities, Whitney says

Wednesday, 24 Jul 2013 | 4:05 PM ET
Jin Lee | Bloomberg | Getty Images

Meredith Whitney painted a dire picture in a CNBC interview Wednesday of cities slashing services and communities battling for mere survival.

The financial advisor and analyst said the financial woes facing bankrupt Detroit will become common around the country as local governments do whatever they can to escape onerous debt burdens.

"I think you're going to see a real issue of neighbor against neighbor on these very issues," she said during a "Closing Bell" conversation. "That has been glossed over for years. What's at stake are social services we count on."

(Read more: Judge halts lawsuits seeking to block Detroit bankruptcy)

Two and a half years after Whitney famously—and thus far inaccurately—predicted a rash of devastating municipal bankruptcies, the biggest one in history took place last week.

Detroit has sought Chapter 9 protection after years of struggling to regain its financial footing after the collapse of the auto industry and the financial crisis.

(Read more: Detroit bankruptcy case judge proposes mediator for toughest disputes)

Whitney on 'Detroit's vicious cycle'
Meredith Whitney, CEO of Meredith Whitney Advisory, weighs in on Detroit's Chapter 9 bankruptcy.

Whitney said other cities are sure to follow suit.

"In Detroit's case, it was in near-third world operating conditions in the richest country in the world," she said. "Finally, the city said enough's enough."

Residents in areas hit by the real estate collapse or fiscal mismanagement, she said, can expect cuts in basic social services such as police protection as well as education.

On the bright side, she repeated her belief, expressed in her recently released book, that communities in the heartland unaffected by the real estate collapse can prosper.

"As tragic as Detroit may be, there's so much good that's going on with the U.S.," Whitney said.

By CNBC's Jeff Cox. Follow him @JeffCoxCNBCcom on Twitter.

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