Most industries get to spread out their bad news. The current exceptions appear to be the automotive and banking sectors.Some days they can be hit from three or four sides.

An impression that the credit markets will still get worse has pushed Morgan Stanley (MS) down 18% today to $12 and Citigroup (C) off by 12% to $7.28.

Meredith Whitney, who is considered the least friendly and most rabid bank analyst, said that large financial firms will have to cut the amount of credit that they offer consumers. She expects that contraction to be $2 trillion or about 45% of the borrowing pool which is currently available to credit card customers.

While the move will save the banks a lot of money on defaults, it will lose them huge sums from the exorbitant amounts they charge their cardholders on outstanding balances.

The other prediction from Whitney is that US banks will write-down another $44 billion in the fourth quarter. That means the Paulson bailout capital will have been thrown into an increasingly large hole and firms like Citi (C) may need more money. Current common shareholders are almost certain to get burned.

There is silence from other bank analysts on these matters.They either don’t have the guts to contest the predictions or they are happy to stand by and quietly agree.

In either case, no one is making a bull case for banks.

Douglas A. McIntyre

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