The Prophet Motive

October 6th, 2011

Wall Street Journal
By Duff McDonald
Sept. 29, 2011

Meredith Whitney is a troublemaker. Even though she is speaking barely above a whisper, over breakfast at New York’s Core Club, her words have sharp edges. “Bankers complaining about new regulations and higher capital requirements remind me of melodramatic soccer players,” she says. “You know, the ones that get barely brushed and they’re on the ground rolling around and moaning? There are plenty of countries that have higher capital standards than the U.S., and they deal with it. We’re supposed to be dealing with the smartest minds out there, and they can’t adjust to a different environment?”

She’s not finished. Her breakfast of tea, egg whites, salsa and a side of bacon is getting cold.

“It’s a reflection of the fact that over the last 20 years it’s been so easy to make money off the mortgage industry that they can’t figure out how to rationalize their businesses,” she continues. “Rules change. Deal with it. This is what companies do time in and time out. Bankers are embarrassing themselves with all this moaning. This may get me into trouble, but they could learn something from the rest of corporate America.”

The rest of the analyst community could learn a thing or two from Meredith Whitney about how to grab a microphone and not let go. She has been holding on to it since October 31, 2007, when she was an analyst at Oppenheimer & Co. and made what has become famous as The Call, the pronouncement that foretold the Great Recession. It came in the form of a critical research report on Citigroup that hit the financial world like a concussion grenade. Suddenly, she had everyone’s attention, and she focused that attention on the issue that would soon shake the whole world: In the frenzy of the housing boom, Wall Street had taken on risks it no longer understood—or even knew it was taking—and a reckoning was coming. Soon.

She put the report out on a Wednesday. By the following Monday, Citigroup’s CEO, Chuck Prince, was out of a job. The accolades came rolling in. Superstar financial writer Michael Lewis called her “a woman who moves markets” and “the closest thing Wall Street has to an oracle.” Fortune referred to her as the woman who “called Wall Street’s meltdown.” And suddenly, Whitney’s every utterance could move the markets.