We've noted that star analyst Meredith Whitney faced a lot of criticism for her bold, perhaps rash, prediction of extreme pain in the muni-bond market. That criticism continues to mount, stoked by her decision not to participate in a Congressional hearing that will examine, among other things, whether her prediction roiled the market and allowed some traders to profit unfairly, according to the New York Times.

Certainly, Whitney didn't count on this sort of controversy when she released her firm's report. You have to ask now whether it all backfired on her.

My sense is that  she was trying to make a big media splash with her muni-bond report, which dovetails with her plans to be designated as a credit rating agency, from a marketing perspective. This report was likely designed to establish some credentials in a splashy way.

But the reportage played up Whitney's prediction of up to 100 defaults, and that sent some investors running for the exit. To be sure, investors were exiting certain bonds and bond funds before she issued the report. But some think she only made matters worse.

The knives are sharp right now. One executive told the Times: "I've seen a copy of the report, and frankly, I've seen better papers from graduate students in finance. It's ludicrous, reckless and irresponsible, and it's being done without any regard for the consequences."

For more:
- here's the article

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