[ by Melanie Gretchen ]

Meredith Whitney is not impressed.  As banks fail to downsize to the changing industry, employees are paying for it with their jobs, analyst Meredith Whitney told CNBC.  She says, Bank of America's 16,000 layoffs are just the tip of the iceberg.'

What to Expect. The elimination of half a million jobs since the beginning of the financial crisis in 2008 isn't going to cut it in this economy.  Going forward, the industry should brace itself for more to come as the shrinking big institutions struggle to compete, Ms. Whitney said.

"The banks have been overstaffed for a really long time. If you think about all of the other industries that have gotten more competitive, more profitable, the banking sector and the insurance sector have been laggards behind it, and they employ a lot of people." -- Ms. Whitney, on "Closing Bell."

As new banking regulations, particularly the Dodd-Frank financial reform bill, have entered the industry consciousness, banks have shrunk to avoid the too-big-to-fail syndrome that caused the industry to push the country into recession.

"Interesting for Goldman (Sachs) — they're cutting all of their highest-paid people.  "The industry is as bad as I've seen it. So it's certainly not a great time to be on Wall Street."

Changing Tides. Nevertheless, the other side of increased regulation could shed some much needed growth on the industry.  The newest Federal Reserve quantitative easing program in which the central bank will buy $40 billion a month of mortgage-backed securities will help housing-sensitive businesses like Wells Fargo and the mortgage service industry, Ms. Whitney said.

"Wells has a very large mortgage portfolio that it can ride up.  A lot of these mortgage servicers look very good.  I'm most interested in the financials in terms of around the edge. As the banks have to get smaller...who benefits?  Because clearly there are winners in the banks getting smaller.  There are a lot of interesting names there."

For further details, go to [CNBC, 9/24/12].