Tuesday, May 27, 2008

Whitney says credit crunch 'far from over'

Oppenheimer analyst Meridith Whitney on the credit crisis, the shut down in the securitization market and its impact on the consumer.

There has been an over reliance on consumer liquidity coming from the securitization market. For every one dollar of mortgages that has been put on bank balance sheets seven dollars of mortgages have been securitisised. When securitization market shuts down the bigger issue is it constrains consumer liquidity.

Regulator will make it so prohibitive for credit card lenders to make profits, maybe that's a good thing long term, but what its going to do is extract over two trillion dollars from the consumer balance sheet. Consumer spending is going to decline and consumer defaults are really going to pick up.
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video: Whitney, Analyst, Says Credit Crunch 'Far From Over'

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