Wall Street's Grim Prophet

Fortune reports:

Meredith Whitney, the Oppenheimer analyst who has become the Jeremiah of the financial crisis, says there is a way out of the wilderness for banks like Citigroup. But like many of her pronouncements over the last five months, it's grim.

"The best-case scenario is that financial firms take the pain quickly and purge assets from their balance sheets. That could bring stock valuations down by as much as 50%, which would be enough so that you could legitimately buy long-term positions," says Whitney.

Given the fact that many large investment banks have lost a third of their value since the credit crisis began last summer (with Citi down by more than half), it's unlikely they'll take the pain. So Whitney fires off a worse case scenario.

"They don't purge and there is a slow bleed of capital and pressure on share prices for an extended period of time," she says. "We'll most likely see a combination of the two, with more of the latter scenario. It won't be pretty."

Whitney may be singing from the same hymnbook as most Wall Street pundits these days, but she has the distinction of being one of the first and harshest critics of the financial services sector. Throughout the credit crisis she has been willing to throw stones at banks, monoline insurers like MBIA and Ambac, and the alphabet soup of bonds (CDOs, SIVs, RMBS) that have taken down stocks and the economy, cementing her place as this era's star prognosticator.