(August 13, 2013) — Meredith Whitney, a Wall Street analyst who famously called the financial crisis, sees another crisis ahead for finance employees.
“We are on the precipice of a seismic downsizing on Wall Street, the likes of which have never occurred before,” Whitney wrote in a recent research note to clients, according to New York Post reports.
Banks and public markets have benefitted from the Federal Reserve’s quantitative easing programs. Likewise, she argued, these institutions will feel the loss of cheap credit on their bottom lines as Bernanke’s tapering actions take effect.
“Because central bankers have done everything to avoid an economic slowdown,” she wrote, “they have created a dangerous and highly inter-dependent global [interest] rates’ markets and policy has separated from reality.”
Whitney rose to prominence on Halloween 2007, when she downgraded her rating of Citigroup from “Sector Performer” to “Sector Underperformer”.
In a CIBC World Markets report co-authored with Carla Krawiec, Whitney contended that the financial giant had dangerously overextended itself.
“Our thesis is simple,” they wrote. “We believe over near term, Citigroup will need to raise over $30 billion in capital through either asset sales, a dividend cut, a capital raise, or combination thereof. We believe such a catalyst will pressure the stock significantly lower.”
By the end of the trading day, Citigroup’s stock had indeed fallen, dropping by 8%. Four days later, Citigroup CEO Chuck Prince resigned.
Whitney’s research firm did not respond to a request for original documentation.
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