Yesterday, Bank of America (BAC) said it would miss its 2008 numbers. There has been a good deal of talk that Jamie Dimon will be pulled off his thrown at JPMorgan (JPM) once the integration of Bear Stearns and write-off of consumer and business credit starts to hit its earnings.

No one in the banking industry likes analyst Meredith Whitney. She is actually the most loathed person covering big financial firms. She is pessimistic about the future of banking in America and with each new forecast that gets worse.

According to Reuters, Whitney said "U.S. banks will have to raise fresh capital in 2009, and a sharp increase in credit-rating downgrades on mortgage-related securities will lead to further stresses on the companies’ capital." She cut her estimates on Bank of America and JPMorgan,. Wells Fargo (WFC) and Citigroup (C) are likely to get the same treatment when they put out fourth quarter numbers.

The calculus on bank stock pricing is remarkably simple Bank of America trades at $14 against a 52-week low of $10 and a 52-week high of $45. Its market cap is $71 billion.

If BAC has to raise $20 billion, it will almost certainly have to do the deal below market, unless the federal government will give it special treatment the way that it did Citi. There is no demand for investing in bank equity. A transaction might go through as low as $10 with warrant coverage on top of that. What happens to the stock of a company with a $71 billion market cap with that kind of dilution at very low pricing? It takes the stock down by 40% or so.

Bank of America is an $8 stock. It may take awhile for the market to see that.

Douglas A. McIntyre

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