elected in a fluke election. >> tonight on "q&a," meredith whitney. then, british politics -- a debate among five candidates vying to lead britain's labor party. . this week on q&a our guest is meredith whitney of meredith whitney advisory group llc. >> meredith whitney, and michael lewis's book , "the big short.", he says that meredith whitney was a obscure analyst of financial firms for an obscure

financial firm, oppenheimer and co., who ceased to be obscure. she predicted that citigroup had so mismanaged its affairs that they would need to slash its dividend or go bust. were you surprised at how much michael lewis relied on the? >> i was surprised that i would even be in a page of michael lewis' book. he is one of the most important authors in the financial times that we know them. when he called me in march of 2008, i asked if this was michael lewis, "the blind side" michael lewis. he is an extraordinary personality. i wanted to talk to him when he

called and i was open with him because what ever you tell him, you can tell him a story and he will tell you the story back. he is amazing. i am surprised. i never thought of myself as an obscure analyst at an obscure firm. prior to that time, people did not care about financials. how was obscure in the world of financial, but financials were not on anybody's radar screen. certainly, rest perspective, banks were never associated with high risk. >> let me let michael lewis say it in his own words one would talk to him about his book. >> she was what is called a soft side analyst. she works for a wall street firm that offers stocks to the public. she worked for a firm called

oppenheimer. she was a bank analyst. a financial sector analyst. meredith, who i never heard of, started saying things in late 2007 when i first or paying attention, about the wall street firms. it was different from anything but i had ever heard. she said they did not understand the risks they were taking. they did not understand their own balance sheets. she predicted that citigroup would have to cut or eliminate its dividend a week before they actually do. she seems to know more about what is going on inside places than the people that run them. it is almost her tone that was interesting. she was actually condescending to these wall street people. so, i called her up. she was making a different sound. i was writing about this world, but i was curious about who this woman was and what she thinks

this. she persuaded me early on that the wall street firms have become the dump money at the poker table. somehow, these firms that used to be the smart money, the last thing you wanted to do is be on the other side of solomon brothers trades. what had happened is that somehow the firm's had turned stupid. they became the dump money. -- dumb money. the question was, if they were the dumb money, who was the smart money? as he said that you let him to steven eisman. who is he and why was that important to this story? >> i think that his task was going to be different from what

it originally was going to be. we started speaking in march of 2008. his perspective was fresh and he just wanted to learn. it was not until september 2008 that steve eisman was even mentioned during conversation. he asked me about investors that were involved in buying the brokers and investing in brokers and have now become demoralized by the spirit of the brokers and would never invest in brokers again. there was this group the was investing in brokerage companies, but there was also a group that invested in a different type of game. i told him he should meet my mentor, stephen eisman. he is really well depicted in the book. you either love him or hate him. i happen to love him.

he is smart and the hits keep coming. when i work for steve, we wrote on the fall of last stiegel and the industry. i learned how to do this, his craft. we get every single turn and look at financial from a point of history from a cultural angle. that got you into layers of the financial system that you would have missed otherwise if you have just looked at bank stocks. people that did not connect the dots missed the system. people who connect the dots were the ones that got it. for the ones that got it, it was an organ -- unorthodox way of approaching the system. it is not that steve is really smart, because michael knows a

lot of smart people, but if i did not know steve, i would find it hard to believe what he wrote about on paper because the guy is different. >> you mentioned selling short. define that. >> that is when you bet a gus -- a company's stock price is going to go down. >> why would they allow that to happen? >> there is a market. there is a buyer and seller. a good reason that that trade exists, oftentimes the short sellers contend to see a witness before anyone else does and ends of shining the like. it is the greatest disinfectant on an otherwise dubious company or story. >> as you know, i actually have analysis that was done by a law firm on the dot/frank financial situation. you keep the -- i wanted to go

back to where you started in this business. how did you train yourself and the first place and why did you get into it? what i was a history major in college. i went to brown university. in college, i studied what was interesting. the berlin wall was crashing and i wanted to study german history. it was the linchpin to all of modern european history. when i graduated, i wanted to go to d.c.. i worked on the hill and worked tirelessly until i went to college in politics. i wanted to go to the most competitive environment. the most competitive environment is dc. new york is the most competitive industries for finance. i did not even know that research existed. once i discovered what research was, i really narrowed my

search. i did not want to sell in the one office products. i wanted to make my own products and sell my own product because that is, but i trusted. research into that being a field of work were you get paid to learn. it is fascinating. the access to information is incredible. the harder that you work, the more that you can do and the better work you can do and the farther you can advance. my first job in research was working for an oil and gas analyst who ended up firing me because he thought i was too aggressive. i was 23 at the time he was in his '40's. getting fired by him was the best thing that could have happened to me. i began working for steve eisman. when i had my first job in oil

and gas, people would say, " remember the oil crisis in the '70s." i was in the back of my mom's station wagon. without any experience, it was a real detriment. getting into financial when i did in the early 1990's was the perfect time because that was when the securitization market was really getting under way. that is when subprimal is really getting under way. -- as of prime was really getting under way. -- subprime really getting under way. i was growing up with the industry growing up. from an accounting standpoint, instead of a history major, you could learn on the job. anything i was going on, you just dug into it and it was a level playing field. i really wanted to work. >> what did your mother and father do? >> my mother was an executive

recruiter and my dad was in finance in different areas. , they did not have a lot of say in terms of me going into research. i am the youngest of three kids. i am pretty strong headed. >> explain what a researcher does. >> a research analyst typically is silent -- siloed into an industry. you cover the banking industry. you will rate a bank stock by seller holds and you will have relative ratings and you will ds.e three buys and three hole you were just talking to investors and the investors would be the people that you give your money to that run for a 1 k plans and i am advising those fund managers.

michael lewis referred to oppenheimer. it seems like i have heard of oppenheimer for years. is it still there? what's oppenheimer is a great old name. when i joined oppenheimer originally, it was a research boutique and it was one of the best research boutiques. it was small, but things were small back them. -- back then. they became cibc and then cibc sold off into another retail operation. it is small and it is not what it once was. >> i have a list your somewhere of all of the things that happened to you after this prediction back in 2007. this is something called bu

zzle.com. they said that whitney made great strides in a short period of time. if that is the reason that she made the forbes list of the best analyst stock pickers in addition to being included in the new york post 50 most powerful women in business. why do you have to be one of the 50 most powerful women? why can't you be one of the 50 most powerful people? >> i do not know. most powerful woman, i was glad to make the list is a great group of women. we have all of fonder it is a great networking opportunity. women do not typically network. i do not know why. they focus on the task at hand. that opened a lot of doors to meeting incredible people. it is a lot of -- it is amazing to me that i look around when i

go to conferences or when i have the events and i call it a man zone. there are a bunch of guys. it has been a great advantage to me. i do not care about how i look because i am the only one there. i do not have a lot of comparison. i will ask questions of other people will not ask. -- that other people will not ask. i do not mind asking dumb questions. it is sad to say that there are so few women in finance. >> are they scared to mess with you because who you are married to? >> my husband is a retired royal wrestling entertainment champion. he is 6 ft. seven and 250 lbs..

i really do not get messed with that often, maybe -- >> i was really kidding. >> i was a tough city girl. >> talk about that. the other things that they say is that you are in the 100 most influential people. this -- did this happen over night? not your learning, but the words you were given and the list you were put on? >> it happened over a period of about 12 to 18 months. it seems that after a lot had already gone on, after the " time" 100 list, that was may 2008, so much had gone on by them.

-- by then. it sounded like a great group of people to be around. i hope the do not figure out that i do not belong here. -- they do not figure out that i do not belong here. i remember in the late 90's -- 1990's, you could not follow financial stocks to save your life. people wanted telecom, the internet, there was zero interest in financials. the high point was the s&p. it was not a sexy ticker. i think that is what it costs so many people off guard. -- why is caught so many people off guard. people all the sudden cared and cared a lot. -- all of a sudden caird and cared a lot.

i work all the time. i am always on to the next issue. i do not stay on one issue for too long. a good analyst with market their pieces over and over again. it i would finish a report and beyond to the next one. -- and the bond to the next one. -- and be on to the next one. the regulatory capital was determined by the ratings of the s&p on securities. this is november 15 of 2007. that was a much bigger called. -- better call. a month later, it was staggering the amount of work we were putting out. it happened right at the time that people care. it was the perfect form.

>> back to the enron situation. there was a short seller on a telephone call that started that entire process and here you are. who is city and what happened to it after you make your call? >> going back to enron common during my brief time as an oil and gas junior analyst, i actually knew what enron was. i did not know how complex the organization had gotten. i certainly knew how revered the company was. at the time, in 2001, everyone was worried about argentina default in. i wrote a note on a sunday, december 1, and said that it would be bigger than anything you can imagine. that was a big call.

the citi called was about one of the largest banks in the world. it had made so many acquisitions over the years that you could not really see what was coming or going with the company. when a company restates, it is hard to get a perspective on what is really happening because they would restate every line adam and you do not know what your looking at. >> was sent in charge at that time? -- was sandie in charge at that time? >> know. there were major deals between citibank and he was the architect behind a lot of that. >> was bob rubin there? >> yes. >> he was involved in speculating. >> yes.

in the summer of 2007, and they have a new -- they had a new cfo who had come over from american express, who i had a huge amount of excess -- its huge amount of respect for. that was before all of this. i remember listening to one analyst. i worked in a complete nerd factory -- built factory. -- bork factory botched dork factory. -- dork factory. the areas said they had given up on modeling. it had just gotten too complex. at the time, i said you can give

up because that is your job and that is what you get paid for. i tried to make citi as simple as possible. this is a huge deal for an analyst. you want everybody to like you. putting a sell on a company turns out to be dangerous. it is highly unpopular. >> why dangerous? what's people are losing money -- >> people are losing money. everybody likes to when you put a buy and they make more money did >>. the day i put out this report, everybody was reading it. to go back to that time, they had just reported -- a few weeks

after they reported their third quarter numbers, i looked at how much debt they had compared to the equity they had and i looked to the leverage compared to the outer banks -- other banks. they needed to get to a tangible equity leverage ratio comparable to their peers. they would need to waive the $30 billion and sell $100 billion in assets. they were not one to make enough money to pay their dividends. it was a three-pronged of report. -- three-pronged report. that is how present things. if i do not understand things, i will work until it is laid out

in a way that an art teacher or a veterinarian can understand it. it is not that complicated. he does have to have it explained to you in a way that is understandable. >> why were you the only analyst that figure this out? >> i do not know. during that point until now, when i was getting a ton of attention, i became very concerned -- i became -- not only were more people interested, but people would start working harder. anyone could do what i was doing to read why were they not? -- anyone could do what i was doing. why were they not? >information is everywhere.

i was using information that anyone could get. it was as simple as could be. it was just a course of several conversations with the fdic. anybody could have done that. i remember thinking, "why aren't other people doing this?" this was great for me, but it makes you wonder if you are crazy and if you are right. that alone, you have to be right on this. >> i want to show you a headline on "the wall street journal." when i saw this, i thought of you. i want to ask you about regulation. when the new credit card wall

came into effect, "the wall street journal" said credit-card rates rise. the last thing that you want to see is a headline like that. how you write legislation and the first day goes into effect, everything goes up? >> this happened before the dodd/frank bill. all the fine print that you cannot really read would explain to you that if you are over your limit, you get charged a fee. if you are late on your payment, you get charged a fee. they call those hidden fees. there were some really bad things that were going on.

double cycle billing and excessive fees charged. the bad side of this is that they put into effect measures that prevented banks from repricing. a credit card loan, this is very interesting and important, a credit-card loan is an unsecured loan. if you go bust on your credit card line, i have nothing to collect. that is it. i look atportant is your monthly credit scores and your behavior on a monthly basis to assess the risk. if you are late on your phone bill, i am smiling because i get to -- about to get to my funny line. if you are like on your phone bill for your electrabel, i make a mental note of that. if you are late on your cable bill, that is the biggest red flag to lenders because men will pay their cable bill among any

other bills. the lender knows that the person is in trouble or has a higher probability of going default. i will put into mechanisms and i will do this on the fly. if i now want to reprice your loan and i see that you spent a lot of time in atlantic city gambling and i have seen you be doing what a bunch of bills, i have to give you 45 days notice to reprise. -- to reprice. the lender will not make that loan. $1.50 trillion has been cut. we are over $1.50 trillion. it was may 2008 and i had gotten

so much grief from people who were so angry. the idea was that you cannot price for risk and you will not extend the rest. -- the rest. they have to figure out a way to make money. -- extent of the risk. it becomes expensive. for the guys that get kicked out of the system, the less wealthy or poor people, it gets more expensive to be poor. now, the consequences of this is the growth in prepaid card and pay the lenders and that is a very expensive way of paying for things. >> what is your basic feeling about the bill that was passed, the financial-services bill was passed in congress a couple of months ago.

>> is or to take a long time to figure of what the results or to look like. the toughest part of the bill was given a much longer runway timetable. in some respects, many years to implement. i think it is very complicated. i think they tried to put a lot of basic outlines together and let committees work out. we will see. it is changing on the fly. bill that passed at the last minute, it came out of nowhere. i take it as an outline. >> i have a document that was prepared by david hunting tim who was a partner in a company.

it was published on the harvard law school forum. i assume it was somewhat credible. i do not want to bore the audience, but i want to see if you interpreted it. significant direct regulation of over-the-counter derivatives transactions. among the most notable provisions affecting the otc derivatives markets are clearing and trading. the act authorizes the cftc and the sec to mandate central clearing of otc derivatives that are determined to be a corporate for clearing and capable of being cleared. does that sound like something

that is when to work? >> i think that will work. the more that you can put in a transparent system, the better. when you wanted to get a stock price just by looking at a ticker 25 years ago, you would have to call a stockbroker. today, you can pull up on a -- pull up on a computer screen. the bond market in the credit markets need to move towards that. more and more will move towards open exchange. that is so much better for the consumer. there should be transparency. the difference between someone is offering and what someone is willing to sell, with transparency, you would narrow the spread. that is better for the system.

>> when you say bonds, what is the difference between a bond and stock? what's a bond -- will typically be a collateral holding. if a company goes bust, the equity shareholders are wiped out but the bond owns the capital of the company. you will know you are getting a 5% and out for a stated period. it is a company borrowing and you are financing the borrowing of the company. a stock is the equity of the company. your sharing on the upside. it is a higher risk vehicle and a bond is a lower risk vehicle. equities are more transparent and bonds. it is kind of crazy. >> how did she learn that?

when did you learn that? what's i think most people know the difference between a stock and bond. >> you went to work as an analyst. when did you start learning the language? how do you recommend somebody who is totally confused by all of this to learn it? >> first of all, start with something that really interest you. say that you're dying to go to spain. figure out what you want out of the equation, first and then get there. there is nothing about finance that is rocket science. you think about ponzi schemes, the biggest ponzi scheme for wall street is telling someone who has worked really hard to earn a dollar and they are not

start -- smart enough to know how that dollar is for to be invested. figure out what interests you. find out what area of that you can invest in. it is very interesting. there are stories with and all of this. if you do your homework, you can be just as smart as anyone. loud, i was at whil history major. >> michael said that you let him to steve eisman. what was he doing at the time? >> steve eisman is a lawyer by training. he reads will do well -- he

reads really well. he would take the new york book review which is 300 pages and we did during lunch and remember everything. -- and read it during lunch and remember everything. read everything there is you don't know where you will get ideas from. -- we everything. you don't know where you get ideas from. there was no rock unturned. i will give you an example that is not mentioned in the -- in short." whitne"the big banks were only allowed to have 10% or below of their revenues come from the capital markets

business. that would be a to raise up to 25%. -- they would be able to raise it up to 25%. steve would get the quick fix immediately. we initiated coverage for the banks. we launched -- i was his junior analyst and i was working the phones. i would work until the cows come home. i would call d.c. until someone answered the phone the head of the -- answer the phone. the head of the congressional banking committee would take my calls. i found out later, he did that because i was the only girl that was calling him. >> it works for you. there is information all over the place.

we can up with this report and people poo-pooed it. there was massive competition between all the banks. that is just one of the things of going for it. taking an idea and all of these convictions and being so out of favor and so of consensus and in being right -- and so out of consensus, and then being right. this is nothing else. it is being right and standing on your principles. on the flip side, we came out with coverage. we cannot with a short report on some prime -- subprime.

subprime

>> people need to have a guidepost on where the risk lies. i know i am going to get paid this, but i know that i will assume that risk for it. rating agencies are fine in principle, they just have to rham right and be done well. why would anyone pay for any type of ratings? you protect people and you make people money. every business should be that same way. the rating agencies have been a duopoly for 20, 30 or 50 years. >> meredith with his list of seven most powerful people in finance, been burning the and others. by the time this runs, they may have made a decision on who heads the consumer agency.

>> i think elizabeth warren, she is pulling together all her lobbying power to get this job. she is well respected. i think she could offer confidence back to that role. she is very well liked, as well. i might take larry summers off of that list and replace them with al franken. the white house was a big proponent of home affordability and modification program, but elected to the treasury to execute. -- but they left it to the treasury to execute. they have done a terrific job. there is -- there are hundreds of more banks to fail, but she

is doing it in an orderly process and that is no small feat. >> you mentioned that you work for jeff davenport. >> he was not there. i was 15. i do not know. i work for her. -- i work for her. -- worked for her. >> i bring it up but because, are you very political today? do you see the republicans or the democrats doing a better job? >> i am a registered independent. i have been every since i could i could vote bausch i could vote. -- i could vote. the states have a really impossible job with the fiscal crises. the best men and women -- may be

best man win. you have a stalemate a policy- making where we need a stimulus and we need to extend the tax cuts in every income category. this economy has been cruising toward a double dip in a bad way. we have to do something about it. housing will surely take a double dip in the fourth quarter. you have to let that happen. you have to create structural reform. that is non-partisan. partisan politics is maddening right now. it is causing a tremendous amount -- that is why approval ratings are so low across the board. if you alienate your audience, your audience will turn on you. politics has grossly underestimated the american people and that is dangerous. >> financial stability over site

council. the fact that seeks to litigate several legislative and regulatory initiatives, the most substantial of which is a 10 voting member oversight council which will be chaired by the secretary of the treasury, the chairman of the sec, the chairman of the s t i c, one will any of those agencies be able to fulfil this goal? why is there another agency required in this process? >> is in politics about quitting committees and create other committees? -- isn't politics about creating committees that create other committees? >>they were not doing their job.

you or -- you are put into a in the the collector's banks had never seen a bad run. the had to completely recalibrate themselves once they realized that loans that they made were not want to repay as easily as they had -- not going to repay as easily as they have. coming from somebody who doesn't want to be in politics, it is more bred take -- more red tape. >> is that good or bad? what's that is good. -- >> that is good. this was designed to make sure

that two big to fail was an issue. >> treatment of certain former bank holding companies. in a company that was a bank holding company, having total consolidated assets of $50 billion or more as of january 1, 2010 and received financial assistance under for participated in the program established under the troubled asset relief program will be treated as a nonbank financial company supervised by the federal reserve. if they seize being a bank holding company -- what i just say? what people call that the hotel california provision. i call to fail attraction provision. -- i called the fatal attraction

provision. those banks that sought shelter under the bank holding companies during tough economic times can all the sudden be free of responsibility during tougher economic times >> the act mandates to newly created financial stability oversight council to impose special assessments on the nation's -- the fifth billion dollar figure is magic in this whole process. what is so special about $50 billion? >> the $50 billion are the top commercial banks. what they wanted to do is a -- it is very hard to be a

community bank. over the last 20 years, so much of the landing in this country was consolidated to a national level. it was controlled by the top six banks. the top six banks control two- thirds of the mortgages. the little banks really became selected business models. if you in danger the little banks, the communities go under. the small bank lobby works like crazy to protect the community banks, so they cannot afford a special assessment. certain fdic insurance had to

opt in and pay an assessment fee. the fees for small banks are becoming prohibitive to stay in business. they wanted to eliminate them and tax the guys that could afford it. the never let the guys that truck tarp forget that they took patarp. >> how does someone who deals in the integrity and truth in up marrying a guy that dealt in show business in the world wrestling entertainment? when i read his background, i just have to ask you about this. in late 1998, he was among the nation of domination to form the

tag team of hell's henchman, managed by the jackal. after the jackal left, -- left the wwf, they joined the undertakers' new ministry of darkness. he dealt in show biz and a lot of people believe that at that stuff is not rigged. >> as he would say, the story lines are scripted, and the physical activity is not read. he is banged up. >> why do they go through that? >> i do not know. i do not know. he had been wrestling fan when he was a kid. he was a professional football theer and thehe played for raiders. he has been in contact sports for a really long time. he is a tough guy.

but despite the packaging, he is one of the nerdiest guys that i know. he has a photographic memory. he is almost more interested in stocks that i am. i would never have expected to marry someone with that packaging, but i expected to marry somebody like that. he is 5000 times a better person than i am. if we read something, i will give it to him because he will remember all the details. we met when he was promoting a book. we were on a fox television program and it came to a point where you have to recommend a stock and this was august of 2003. the stocky recommended was citigroup -- of the stock he recommended was citigroup.

i turned to him and i had never watched wrestling before. i remembered that they were wrestling on saturday. i did not know him. i asked why he suggested a financial and a rising rate environment. here is a guy that does not work in finance and i just gave him such a low blow. i do not know why i did it. i was not thinking. then we went to dinner next door and the group that we were on the television program with one a to set us up, so they set us right next to each other. a year later, we got married. on that note, we are out of time. meredith whitney, of meredith whitney advisory group. but he very much.

>> thank you very much. >> next, a debate among candidates campaigning to become the next leader of the british labor party and then a look at the house and senate will races. after that, another chance to see "q&a" with financial analyst meredith whitney. >> the british house of congress is currently in recess. prime minister's questions returns next sunday at 9:00 p.m. eastern and pacific. now, a debate for the five candidates for leader of the party. party.