February 27th, 2009
03:46 PM ET

Financial Dispatch: GDP tumbles in fourth quarter

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/02/27/art.citi0227.gi.jpg]

Andrew Torgan
CNN Financial News Producer

The nation's economic slide during the last three months of 2008 was even sharper than previously estimated, with the broadest measure of economic activity suffering its worst decline in 26 years.

Gross Domestic Product, which measures the output of goods and services produced in the United States, fell at an annual rate of 6.2% in the fourth quarter. That’s far worse than the 3.8% drop reported in the previous reading just last month.

Citigroup and the Treasury Dept. announced a deal early today that will give the government control over up to 36% of the bank's common stock.

The deal - which doesn’t involve any additional taxpayer dollars - will convert preferred shares that Treasury already holds in the bank for common shares, a shift that is designed to better protect shareholders against future losses and improve the embattled bank's capital base, which in turn will hopefully allow it increase lending.

The U.S. government has already given Citigroup $45 billion, for which it received preferred shares and warrants in the company.

Bank of America's CEO spent four hours on Thursday testifying in an investigation into the $3.6 billion in bonuses that Merrill Lynch paid out just before it was acquired by the bank last year, but still refused to give out the details of those payments.

The New York Attorney General's Office served a subpoena on Bank of America during CEO Ken Lewis' testimony Thursday evening, seeking the full list of individual bonus recipients at Merrill Lynch, according to Benjamin M. Lawsky, a special assistant to Attorney General Andrew Cuomo.

Hammered by the ailing housing market, mortgage finance giant Fannie Mae said late Thursday it would tap its lifeline from the Treasury Dept. after reporting nearly $60 billion in losses for 2008.

The company, a crucial source of funding for mortgage lenders, said it would draw down $15.2 billion of its $200 billion federal line of credit. In return, the government will receive preferred shares.

Gas prices rose 1-tenth of a cent overnight to $1.882 a gallon, snapping a string of 11 straight increases. 8 states have regular unleaded gas prices of $2 and higher. 42 states and the District of Columbia have regular unleaded gas prices below $2. The highest gas prices are in Alaska ($2.519). The cheapest gas prices are in Missouri ($1.674)

And finally, CNNMoney.com asks the question: “Is Citigroup the next AIG?”

Filed under: Andrew Torgan • Economy • Finance • Gas Prices • Oil • Wall St.
soundoff (8 Responses)
  1. Brendan Meehan Costa Rica

    An interesting note from San Jose Costa Rica: Citigroup, featured in your graphic, was on the receiving end of TARP funds prior to the Christmas holiday 2008. What did they do with the funds? They bought TWO Central American regional banks: BancoUNO and Banco Cuscatlan. These banks now have CitiBank signs and accounts.

    Tax dollars at work in the wrong place...

    February 27, 2009 at 8:18 pm |
  2. Sharon S

    They refused to give out details? Are you kidding me! Well all I can say is Thank you Mr Paulson you did such a wonderful job of handing out our money with NO stipulations on it, maybe Mr Paulson and Bush would like to pay that money back to us since it is their fault that we can't seem to make anyone tell us who or where they gave all our money to!

    February 27, 2009 at 8:14 pm |
  3. Larry

    What did the democratically-controlled Congress do to improve the GDP from 2006 to today?

    February 27, 2009 at 8:12 pm |
  4. Annie Kate

    Bush and McCain must have been talking about the economy for rich people and not for the rest of us. If you are rich enough the economy probably seems pretty good all the time. I hope that the GOP who complains about everything Obama does or tries to do is embarrassed by this piece of news – economic depression on their watch well before Obama took office or was even elected for some of the period.

    February 27, 2009 at 7:43 pm |
  5. Maria

    What is going on is natural process; we should expect the worse in the following days before we should see a kind of improvement following the stimulus bill. It is crucial though for individuals to balance their budgets and adhere to wise spending to overcome current turbulence. With wise regulation and reprogramming, we should see a recover in the near future.

    February 27, 2009 at 5:48 pm |
  6. Joe G. (Illinois)

    In any other regular situation usually what happens it that during slowdowns “Some Business” increase their spending.. Such as investing in new computers, office furniture and the such… To keep money from stagnating and catching someone’s attention in the books.. Now.. What’s this dilemma we are having with the economy? Is it about getting it started again? What advice does Obama offer?

    February 27, 2009 at 4:58 pm |
  7. Isabel, Brazil

    The revision to GDP will lower down the projections for growth also in 2009. This is because the carry over will be less this year.

    Each news, the people is more terrified, lost and confused. The best in this case, in my view, is that President Obama is really well-intentioned, but although not enough to finish an economic crisis, this is very important and essential.

    February 27, 2009 at 4:52 pm |
  8. Gene Penszynski from Vermont

    Well, Well, Well while the economy was SHRINKING by 6.2% G W Bush and John McCain were telling us that the 'fundamentals' of the economy were SOUND ! What a Bloomin' WHOPPER of a LIE !!!!!!

    February 27, 2009 at 4:44 pm |