Meredith Whitney: A New Enemy of the People

02-11-2011 • EconomicPolicyJournal.com

In Henrik Ibsen’s 1882 play An Enemy of the People, Dr. Thomas Stockmann tries to tell his town that its popular tourist baths are so polluted that they sicken those who visit them for a cure. The town, led by Stockmann’s brother the mayor, brands Stockmann an alarmist rather than face the expensive repairs that must be made. The world has changed since 1882, but people have not. We still tend not just to blame the bearer of bad news, but to vilify him – or her, in our modern times. Meredith Whitney is a Wall Street analyst who was best known, until recently, for having been part of the minority that forecast big problems for the banking industry before the credit crisis began in earnest. She has since become even more prominent because of her prediction that scores of America municipalities, as many as 100 of them, are in such bad financial condition that they may default on their debts. This opinion has thrown the municipal bond market into turmoil. It has also triggered attacks against Whitney from players in that market. Whitney may be correct, or she may be mistaken. Analysts are not oracles. Their opinions are just opinions. The choice to listen or not lies with us. When people’s pocketbooks are threatened, however, it is sometimes hard for them to keep this in perspective. Often, those with a great deal to lose will strike back, rather than say “thanks for the heads-up.” Rep. Patrick McHenry, R-N.C., is striking back. He tried to haul Whitney in front of his House panel to justify her negative comments on the municipal bond market. Whitney has declined to appear in front of the House Oversight and Government Reform Committee, having astutely decided she has more pressing business than to appear as a punching bag before the cameras. McHenry darkly warned, however, that “she’s going to be part of the hearing, whether or not she participates.”