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In Meredith Whitney We Trust?


Being interviewed recently on CNBC.  

Ooh! who are those from?” Whitney squeals, catching sight of a congratulatory box of cookies by her assistant’s desk. “That is so sweet!” She is working out of a bare room she refers to as the “fallout shelter” until the renovations are complete. Her assistant, Bobbi, is across the hall, and the room beside them contains two young men, both junior analysts. Whitney says that the company’s focus will be on the same type of research she was doing at Oppenheimer. She’ll have at least five analysts working for her as well as a chief operating officer and a chief financial officer. She plans to hire five salespeople and is applying for a broker-dealer license, and because she believes the investment banks are distracted by their problems, she thinks she can grab a piece of the business advising banks on restructuring and acquisitions. She expects to grow out of her new office within a year.

“I have a clear and evolving view of how things should go, and since a lot of banks are gonna need direction, I want to be the one to give it,” Whitney says. The phone rings. “Oy! Our phone system—we have these temporary phones,” she says, slightly flustered. “I’ve got to answer my own phone!” Bobbi wanders in and hands her a stack of papers.

“What I love about this model is the simplicity. If clients want my research, they pay for it,” Whitney continues. “What’s frustrating for so many sell-side analysts is, your research goes off into the never-never land, and so many people get access to it and don’t pay for it. I imagine I’ll cut thousands from my distribution list. That’s cathartic.”

Whitney believes the problems in the financial system are best addressed by doing two things—first, “supercharging” some of the smaller banks around the country, the ones that aren’t mired in toxic mortgage debt. She thinks the government should inject them with capital, enabling them to make up for the lending that giants like Citigroup and Bank of America aren’t doing. Meanwhile, troubled institutions should hold a “yard sale,” selling whatever parts of their businesses they can for whatever they can get. Giving them more money is throwing it down a black hole. “The banks can’t hold on to their prized assets while being bailed out for their bad assets,” Whitney says. “These are simple solutions. And they’re politically viable.”

“It’s so offensive to suggest I’m someone’s puppet. I don’t need a bear market to stay in business.”

Whitney is unimpressed by recent declarations by Citi and Bank of America that they were profitable in the first two months of the year, which led a strong rally in the sector. These giants have massive problems coming down the pike, in the form of deteriorating loan portfolios and growing rates of credit-card defaults. The doubling of Citi shares is, in her view, no cause for celebration. “Most of their businesses don’t make money, and the one business that did [Smith Barney], they sold half of,” she says. All that’s left to do is salvage the viable parts, such as its deposit accounts and credit-card business, and merge them with a company like American Express. Whitney thinks that Bank of America, which is selling assets more aggressively, is better off.

She isn’t terribly inspired by Treasury Secretary Timothy Geithner’s handling of the crisis so far, though. “Obviously he overpromised and underdelivered,” she says. “But people will give him another shot. We need to give him another shot.

“These are not complicated solutions,” she adds. “This is why I write op-ed pieces, why I go beyond servicing my clients to provide solutions. It’s to be a good American. I know that sounds corny, but the onus is on all of us.”

At the end of last year, CNBC asked viewers to vote for something called the “Power Player of the Year.” The contenders were then–Treasury secretary Henry Paulson, Geithner, JP Morgan Chase chief executive Jamie Dimon, Federal Reserve chairman Ben Bernanke, and Whitney. John Tashjian, a close friend of Whitney’s, says she called him up as it was happening: “Meredith’s like, ‘Can you believe this?’ ” Tashjian recounts. “She got 67 percent of the vote. The next closest was Paulson, with 15 percent.”

Whitney’s darling status irks some of her peers. “I have heard of analysts with publicists,” sniffs an analyst at a major firm. “We don’t do that.” Adds another, “She’s very, very good. But I swear to God, she’s got Sallie Krawcheck’s PR”—a reference to the ex-Citi executive whom the press adored.

Whitney insists that she has no public-relations help, but maybe that’s because it comes naturally to her. She pulls off a winning high-low combination—a brainiac with an Ivy League pedigree (Brown) and a glammy party girl who’s married to a WWE wrestler. His name is John Layfield, and in the ring, he plays an evil oilman inspired by J.R. Ewing, of the eighties hit TV show Dallas. He’s not the sort you’re likely to meet at Manhattan cocktail parties. He’s a postmodern jack of all trades, peddling something called Mamajuana Extreme, a “virility” elixir, online, and also working gigs as a stock analyst. In 2004, he was fired from CNBC after he goose-stepped like a Nazi in a wrestling skit in Munich.


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