03/18/2010 05:12 am ET | Updated May 25, 2011

Meredith Whitney: Banks 'Grossly Overvalued,' Wall St. Should Have Its Own Compass

Wall Street analyst Meredith Whitney appeared on Bloomberg Radio this morning to respond to comments made by John Mack, the CEO of Morgan Stanley, that the government "has to step in to control Wall Street."

"That would never be something I would say. Your responsibility as a steward of shareholder capital is to abide by norms of business," Whitney said. "What's happened is the regulatory pendulum has swung from being complacent to now one of being hyper active in industry. We don't know what the world is going to look like, we don't know what the landscape is going to look like. That's so much uncertainty in terms of the ability of these businesses to make money. A lot's to be determined. I wouldn't surrender should have your own compass."

Whitney also responded to comments that Mack and others have made, saying that pay limits tied to federal rescue funds have prompted employees at major firms to leave.

Whitney, who left Oppenheimer and Company in February to start her own eponymous firm, also cast doubt on the recent run-up in bank stocks. "The banks are still grossly overvalued," Whitney said. "People are expecting something great to happen in 2010 and I think they are going to be severely disappointed."

She added that, as the government has cracked down on compensation, Wall Street firms have seen an exodus of talent. Goldman Sachs, in particular, has lost several top-notch employees to the hedge fund industry, Whitney added.

"I think for me, [and] for others, it just became a scary prospect of having the government determine what you make," she said.


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