Meredith Whitney, the CIBC Oppenheimer analyst who was one of the first to identify the bank crisis in 2007, now says the idea floating through the Obama administration to create a “bad bank” will do little to spark lending.

A bad bank would buy up damaged assets to remove them from banks’ books. Yet that won’t be enough by itself, she warns.

“Simply removing ‘toxic’ assets from bank balance sheets will not directly cause banks to increase lending,” Whitney wrote in a note to investors Thursday.

If the Obama administration insists on paying fair market value for the bank holdings, which some estimate would be about 20 cents on the dollar, banks probably wouldn’t participate, she argues.

That’s because “capital hits would be too dear,” she says.

Whitney maintains that banks would do better to dump their “crown jewel” assets to cover their losses.

“We believe private capital will readily invest in businesses that make money and grow. However, the banks do not fit this description,” she says.

“If a bank were to sell its ‘bad’ assets into a ‘bad bank,’ it would still be left with lower earnings power from higher losses on ‘good loans’ and the requirements to build reserves, lower earnings power from lower assets and a higher legacy expense structure,” Whitney writes.

Some say a bad bank is the best option available.

Fox-Pitt Kelton analysts argue in a report that creation of a bad bank is “far more productive and common-shareholder friendly than direct nationalization.”