Meredith Whitney on her 60 Minute warnings

December 21, 2010, 9:45 PM UTC

by Patricia Sellers

Meredith Whitney dropped a big lump of coal on municipal bond investors’ holiday.

Sunday night, on 60 Minutes, the Wall Street analyst — who warned early and famously in October 2007 that bank stocks would collapse, and soon they did — blared her warning about the dire financial conditions of the U.S. states. Since her TV turn, Whitney told me this morning, she’s been fielding lots of emails and calls, some congratulatory and others charging that she’s overly worried and alarmist.

“I didn’t put on that debt!” says Whitney, standing her ground that the 15 largest states, including California and New Jersey and Illinois, are wildly over-leveraged — like the big banks were three years ago. This time, Whitney sees a similar level of investor complacency — and another dreadful outcome. There may well be more than 100 municipal-bond defaults and restructurings in the next 12 months, she predicts. That, she adds, would cascade into hundreds of billions of dollars in investor losses.

Whitney’s 600-page report on the state of the states is available only to clients of Meredith Whitney Advisory Group. But if you care to see the market-moving analyst, who is No. 38 on Fortune‘s Most Powerful Women list, on 60 Minutes, here’s the segment, “State Budgets: Day of Reckoning” that is sure to add a tad more stress to your holiday season.