"Meredith Whitney, who was the first banking analyst to call the crisis in financials, and has made some notably astute calls"

Yves Smith likes this post better than I did:

"Two of the most accurate forecasters of the credit crisis anticipate that economic conditions will deteriorate further. Nouriel Roubini, who has been consistently been on the dire end of the opinion spectrum, characterizes our current situation as stag-deflation. Meredith Whitney, who was the first banking analyst to call the crisis in financials, and has made some notably astute calls, recently said her outlook for the industry had been "too optimistic."

In a comment in today's Financial Times, Whitney gives some recommendations for the financial services industry, all of which are sensible."

I liked the following:

"I strongly recommend reading the entire piece. One of her suggestions for regulators to focus on encouraging regional rather than national lending operations. Whitney stresses, as we have, that local/area knowledge is necessary for sound credit judgments; reliance on FICO scores has proven to be a disaster.

Whitney does not call for breaking up big banks (and that would be more interventionist than anything on the table right now), but the idea that big banks are better has proven to be a canard. One of the key selling points, that bigger banks are more efficient, is utter baloney. Every study ever done of US banks has found that the industry has an slightly positive cost curve, meaning that costs rise as assets under management grow beyond a certain size threshold (some studies have found as low as $100 million, but the more common level is in the low-mid single digit billions). That means that all the cost savings achieved in mergers could have been realized by each institution separately.

So what has been the real impetus behind bank consolidation? Bank CEO pay is highly correlated with the size of the bank. "

I didn't like the flowing credit proposals, which seemed more like special pleading to me. But who knows?