Is Meredith Whitney a ratings’ driver for CNBC?
It’s more than a little frustrating that CNBC continues to feature equity analyst Meredith Whitney as she talks about municipal bonds over and over again. I’m not really sure she evens knows what she is talking about.
Matt Fabian, managing director at Municipal Market Advisors, shined on this same topic in this interview with Tom Keene on Bloomberg Television in May. Matt Fabian of MMA or Daniel Berger of Thomson Reuters Municipal Market Data would both be far superior in terms of talking accurately about muniland. Both have analyzed muni bonds for over a decade and can talk about the unique conditions each issuer is facing. Neither of them work for a sell-side firm, so they would not be arguing for issuers that they favor or that their firms hold inventory in.
Here is what the National League of Cities said in May about Ms Whitney (emphasis mine):
“In a piece that reads more like political commentary than market analysis, Whitney claims that fiscal pressures on states threaten economic recovery. But, this is hardly news. Over the last several years, NLC, a host of state-focused groups … have been calling attention to state-local fiscal pressures requiring layoffs and service cuts, and the potential drag on the economic recovery.
“But, fiscal pressure from cyclical revenue declines and pension liabilities does not add up to Whitney’s doomsday predictions of sizeable defaults and social unrest.
“Whitney’s op-ed is an example of the misinformation permeating the national dialogue about state and local finances. She’s in good company, as poorly constructed arguments about state-local insolvency have, in recent months, riddled airwaves and policy debates: confusion over structural deficits versus budget shortfalls, a lack of understanding of local municipal budgeting processes that place debt service payments above all else, and a near-total lack of understanding of the difference between municipalities with general obligation bonds as opposed to revenue bonds and conduit bonds.
“Once again, Whitney’s ‘call’ is a distraction from the real story, which is about the difficult choices local and state leaders are making about delivering services. There are real implications when the wrong information is pushed and repeated over and over in the media for ratings, report-sales, and celebrity status.
One of the real and substantial implications occurred last November when Ms. Whitney spoke on “60 Minutes” and the muni markets sold off. This caused losses to investors and raised borrowing costs for muni issuers.
Kate Marshall, the State Treasurer of Nevada, had even more pointed criticism of Ms. Whitney. CNBC itself reports:
Notable analyst Meredith Whitney told CNBC earlier this month that the fiscal situation in Nevada is “terrible,” something Nevada’s State Treasurer rebukes.
“If I take Nevada’s debt and if I add in the pension liability, and I add in the benefit liability, I’m still only at 8.6 percent. I can’t speak for Ms. Whitney … but I do have to say it would be nice if she did a little homework, drilled down a little bit into what those numbers are,” Kate Marshall told CNBC Friday.
I could go on and on with the Whitney rebuttals. They are very easy to make. But I want to ask again why CNBC continues to feature Ms. Whitney. Is it her ability to drive controversy, or are they unaware how inaccurate her analysis is? We’ll be better able to address our real problems with the real facts rather than hyperbole.
National League of Cities: Meredith Whitney and the Misinformation Campaign on Local Finances