Sept 23 (Reuters) - The credit crisis that began last summer has intensified so much that any U.S. government bailout plan has "little hope" of improving core fundamentals over the near and medium term, said analyst Meredith Whitney, who expects the country's GDP to take a hit from likely moves by state governments to cut costs.

The Oppenheimer & Co analyst cut her outlook on U.S. banks and expects further dividend cuts and capital raises.

Whitney also said home prices were not close to bottoming and expects prices to ultimately be at least 25 percent lower from current levels. She expects homeownership rate to decline further.

The analyst also noted that unemployment was up over 40 percent year-on-year in key states, and said unemployment is "headed materially higher."

Given that over 12 percent of the U.S. GDP is driven by state and local government spending, and with many key states' 2009 budgets being under-funded, governments will be forced to cut costs and this will weigh significantly on GDP, Whitney said.

"Credit market disruption has had underappreciated consequences on the economy... A virtual suction of liquidity has occurred in the credit and lending markets, and consumer and corporate credit is already showing the effects," Whitney wrote in a note to clients.

"Since the onset of the credit crisis, over $2 trillion less liquidity has flown through the U.S. domestic capital markets than during the same time period a year prior," she added.

Q3 OUTLOOK

Analyst Whitney forecast a third-quarter loss of 36 cents a share for Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz). She had a prior profit view of 8 cents a share.

Whitney widened her third-quarter loss forecast for Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) to 31 cents a share from 15 cents.

She cut third-quarter earnings estimates for Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) to 40 cents a share from 75 cents, for JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) to 21 cents a share from 40 cents a share, and for Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) to 13 cents a share from 17 cents.

Shares of Citigroup closed at $20.01 Monday on the New York Stock Exchange, while those of Bank of America closed at $34.15.

Shares of JPMorgan closed at $40.80, Wachovia's at $18.75 and Wells Fargo's at $35.18. (Reporting by Tenzin Pema in Bangalore; Editing by Jarshad Kakkrakandy)

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Last modified: 2008-09-23 08:15:22 by passivesf