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What's Got Whitney Worried?
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Oppenheimer’s Meredith Whitney sees some real dangers ahead in the banking sector..
In an op-ed piece that Whitney penned for the Financial Times she says the U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending.
And she tells Maria Bartiromo, "there’s not a doubt in my mind that all the banks I cover will need more capital.”
Credit Card Crisis
The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.
"In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."
Bank of America [BAC
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], Citigroup [C
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] and JPMorgan Chase [JPM
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] represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.
Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults.
"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view."
Most of the solutions to the situation involve government intervention, and all of them require more dilutive capital to existing lenders, she said.
"Accordingly, we continue to be cautious on our outlook on US banks."
Is There A Trade?
And when CNBC's Maria Bartiromo asked, as a result what’s your biggest sell, Whitney replied “Wells Fargo [WFC
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Trader disclosure: On Dec. 1st, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (WMT), (MSFT), (UUP), (DIS); Macke Is Short (YHOO), (TM); Finerman's Firm Owns (MSFT); Finerman's Firm Is Short (IYR), (IJR), (MDY),(SPY), (IWM), (COF), (BBT), (USO), (VNO), (EQR); Finerman's Firm Owns (DSX) And Is Short (GNK); Seymour Owns (AAPL), (AA), (BAC), (F), (MER); Seygem Asset Management Is Short (EEM); Seygem Asset Management Owns (EEV)
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