Meredith Whitney the famous blonde banking analyst was on CNBC and gave a clear view of the banking industry and the U.S. housing market.
Whitney’s big idea is that banks are “de-banking”.
The big banks continue to “de-risk” and move away from lending because the banks have forgotten how to price risk for riskier borrowers. The banks are making money in the capital markets and their processing businesses, not from lending.
The corporation has recovered… small business and consumers… they’re on their rears and things have not gotten better and you see credit continue to contract.
The mortgage market is contracting dramatically because banks have forgotten how to price these product accurately. “Banks can’t price risk.”
Corporates have done well and those with access to credit have done well. Their is no revival on Main Street and there is no revival for the consumer and that gets worse.
The future for banks all boils down to U.S. housing. Housing prices have stabilized because the banks have held so much property from the market. Whitney believes the banks will test the market this quarter and release some of this shadow inventory onto the market.
She is firm believer in a double dip in housing. Lower housing prices nationwide will call into question the value of housing assets carried by the banks.