It's Worse Than We Thought

The Wall Street Journal devotes its top spot to, and the Washington Post fronts, news that the GDP actually fell 6.2 percent in the fourth quarter of last year. That figure is significantly worse than the initial 3.8 percent estimation reported by the Commerce Department at the end of last month and the 5 percent most analysts were expecting. “The worse-than-expected data fueled doubts about whether the Obama administration had adequately sized up the challenges it faces in trying to pull the country out of recession,” the WP says, adding that Obama said he would slash the deficit in half by the end of his term based on those predictions. The WSJ highlights other economic indicators, such as unemployment insurance figures—600,000 people filed new claims each week this month; the unemployment rate rose to 7.6 percent last month from 7.2 percent in December—that “point to a deepening recession and the prospect of a dismal first quarter.”

Bloomberg is reporting that China, on the other hand, is seeing improvement, thanks to its own $585 billion economic stimulus. The country’s “consumer spending jumped by 18 percent in January, bank loans surged, and power output and consumption regained growth since the middle of this month,” it says. Premier Wen Jiabao presented the news during an online chat with the public on the government’s Web site today. In the fourth quarter, China’s economy (the world’s third-largest), expanded by only 6.8 percent, the slowest pace in seven years.

The New York Times and Bloomberg are saying that analysts are skeptical that Citigroup’s third bailout, giving the government up to a 36 percent stake in the bank, will be its last. “Wall Street’s judgment was swift and brutal. Citigroup’s share price, which a little over two years ago was flying high at $55, plunged 96 cents to a mere $1.50,” the NYT writes. The bank’s share price has contracted 78 percent since the beginning of the year, its lowest since November 1990, Bloomberg adds. The rescue, and its result, has lawmakers on both sides of the aisle fuming. “Taxpayers are being ripped off,” Congressman Brad Sherman, a Democrat from California who sits on the House Financial Services Committee, told Bloomberg in a statement. “The only thing worse than nationalizing a bank is to pay for the entire bank and only get one-third of it,” he said.

The WSJ has the inside scoop on talks between Treasury Secretary Timothy Geithner and other government officials about whether to remove Citigroup CEO Vikram Pandit. Ultimately, “government officials concluded it was impractical to oust him, partly because of a lack of strong potential successors. A boardroom shake-up already is in motion, largely due to pressure from the Fed,” the paper writes.

CNN Money included in its news roll an article on General Electric, which announced yesterday that it plans to cut its dividend by 68 percent, or to 10 cents from 31 cents a quarter. The move should save it $9 billion a year. Shares of GE closed down 59 cents, or 6.5 percent, the company says. The story also gets top billing from the WSJ, which points out that the cut is the first the company has made since the Great Depression. “It is hardly alone,” though, says the paper. “Dividends also have recently been cut by JP Morgan Chase & Co., Dow Chemical Co., Motorola Inc., Pfizer Inc., Textron Inc., CBS Corp. and the New York Times Co. On Friday, beleaguered Citigroup Inc. and Blackstone Group LP also trimmed or suspended their own dividends.”

The University of Pittsburgh got duped by Westridge Capital Management's two hedge-fund managers just weeks before the duo was arrested for allegedly misappropriating $554 million in client funds, Bloomberg says. The school’s $2.33 billion endowment invested $21.3 million with hedge-fund managers Paul Greenwood and Stephen Walsh less than three weeks before the arrests. Pitt began investing with the firm in 2002 and had a total of $65 million invested, according to a complaint filed against the firm by the school and Carnegie Mellon University, which also had $49 million invested with Greenwood and Walsh. Lawyers speculate that as a result, Wilshire Associates, the schools’ consultant, which introduced the endowments to the fund, may face lawsuits.