Goldman Sachs Group Inc., Morgan Stanley and other U.S. banks need to raise more capital after downgrades of mortgage-backed securities surged in the fourth quarter, said Oppenheimer & Co. Inc. analyst Meredith Whitney. U.S. banksâ earnings will be hurt in 2009 by as much as $40 billion of further writedowns as asset prices continue to drop, and credit-ratings are cut on home loan-related securities, Whitney said in a note to clients Jan. 6. Downgrades force banks to hold additional capital in reserve, so U.S. lenders will need to raise more cash, according to Whitney. Ratings cuts accelerated last year, with about $2.3 trillion of securities in the fourth quarter alone, she added. âThere is an undeniable correlation between downgrades and increased capital demands by the banks,â Whitney wrote. âThe banks will once again have to raise fresh capital in 2009.â Banksâ credit ratings and capital ratios will be âof critical focusâ in the first quarter, Whitney said. Tier 1 capital ratios, a measure of financial strength, are likely to decline âmateriallyâ for U.S. lenders, she wrote. Further downgrades on pools of mortgage-backed securities may lead to corporate ratings cuts, Whitney added. Whitneyâs report also covered Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Merrill Lynch & Co., Wachovia Corp. and Zurich-based UBS AG. http://www.bloomberg.com/apps/news?pid=20601087&sid=am_PuPZeNRQk&refer=home The Citi terminator has spoken...