Meredith Whitney has rightfully made a name for herself throughout the current credit crisis -- mostly by being right in her calls -- and her latest call in a research note late Monday is a doozy. The prominent Oppenheimer & Co. analyst suggested that the pace and effect of securities downgrades in the fourth quarter alone will be enough to eat through the roughly $300 billion in funding provided to banks via the U.S. Treasury through its Troubled Asset Relief Program and associated capital purchase program. "From July 2007 to date, over $5 trillion worth of securities have been downgraded, but our concern here is that the pace of downgrades has only accelerated through 2008," she wrote in a research note dated January 6, as quoted in a Reuters story Wednesday. Sam Jones at FT Alphaville has more on the report, and it's well worth reading. "We now believe that, at a minimum, capital ratios will be meaningfully lower in the fourth quarter versus post TARP pro forma levels," he quotes from Whitney's research note. "Aside from the greater than $40 billion in writedowns and provisions we expect for the group of bank stocks under our coverage, and earnings pressure related to chronic negative operating leverage, we also expect capital strains to become apparent from ratings change pressures." In other words: all that TARP money has essentially been used to cushion portfolio losses tied to an increasing pace of downgrades by various rating agencies. As HousingWire readers know well, the agencies have spent much of Q4 slashing ratings on prime mortgage credits, including a wide range of previously AAA-rated securities. That will be felt on the income statement of most banks. It also explains why so many large banks receiving capital from the Treasury have been hesitant to begin lending it out aggressively; the TARP initiative itself was designed primarily as a banking rescue, with the idea being that such a rescue would benefit customers in the form of unlocking credit. While credit has thawed only somewhat since TARP's inception, if Whitney is correct in her Q4 analysis and projection, we may soon find banks heading back to the well and needed further credit to buttress against losses in their loan and security portfolios. Whitney's research found that during fiscal Q4 2008, agencies issued $1.84 trillion -- yes, trillion -- in downgrades, compared to $186 billion one year earlier and $863 billion in Q3 2008. Stock traded sharply lower as investors digested the report, along with other dour economic news (ADP payroll data found massive layoffs in December); the Down Jones Industrial Average was at 8,857.71, off 1.75 percent, when this story was published. Write to Paul Jackson at