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Monday, January 23, 2012
The Most Exuberant 404 Error Ever [Humor]
Sunday, January 22, 2012
PSU trustees hope to address alumni concerns (AP)
STATE COLLEGE, Pa. ? Penn State's embattled Board of Trustees meets Friday for the first time since the chaotic week in November when shocking child sex abuse allegations were brought against a retired assistant football coach.
In the frantic first few days after authorities charged Jerry Sandusky, trustees ousted Hall of Fame coach Joe Paterno and school President Graham Spanier, and pledged to uncover the truth. Their actions have since left some anguished alumni and former players questioning the trustees themselves.
After remaining mostly silent the last two months, trustees this week began to divulge the reasons behind their actions, hoping to sway skeptics and critics seeking change.
Leadership positions will be up for election at Friday's meeting, which is open to the public. Also listed on the agenda is an overview of athletic programs.
"We have lots of things that we need to do in terms of the board and how it operates, and I think you'll see some positive things come out of that," trustee Mark Dambly said Thursday.
Some critics of the trustees have called for wholesale changes in how the board operates in order to better promote transparency. Trustee Stephanie Deviney said governance and the administration are among the topics trustees plan to consider.
The issues have also drawn unprecedented interest among potential candidates for three alumni-elected seats on the board up for a vote this spring.
Typically, about six to 12 candidates express interest. But the group Penn Staters for Responsible Stewardship alone has received 30 applications seeking an endorsement. The group started in mid-November, growing out of what a spokeswoman said was a common frustration among members over a lack of due process at the school.
Comments this week by the trustees about why the board ousted Paterno on Nov. 9, four days after Sandusky was charged, failed to convince the alumni group, too.
Trustees interviewed Thursday by The Associated Press said they decided to force Paterno out in part because he didn't meet a moral obligation to do more to alert authorities about a child sex abuse allegation against Sandusky.
The trustees interviewed also cited statements from Paterno in the days and hours leading to his dismissal ? after nearly a half-century of leading the Nittany Lions ? that they felt challenged the trustees' authority. Board members saw that as inappropriate, particularly at a time of intense scrutiny over the Sandusky case.
Sandusky was charged with dozens of child sex abuse counts four days before Paterno was pushed out. The head coach had testified before a state grand jury about a 2002 allegation against Sandusky that was passed on to him by a graduate assistant.
A day after the graduate assistant, Mike McQueary, came to see him, Paterno relayed the accusations to his superiors, one of whom oversaw campus police. Board members didn't think that was enough.
"There's an obligation, a moral responsibility, for all adults to watch out for children, either your own or someone else," Dambly said. "It was in our opinion that Joe Paterno did not meet his moral obligation and for that reason ? me, personally for that reason, I felt he could no longer lead the university and it was unanimous."
But Dambly and three other trustees interviewed Thursday on the Penn State campus said they still intended to honor Paterno's accomplishments and contributions to the school. He won a Division I record 409 games over 46 seasons and the Paterno family has donated millions of dollars to the school.
"Obviously Joe Paterno is a worldwide icon and has done a tremendous amount for the university," trustee Joel Myers said. "We have sorrow and all kinds of emotions, empathy, sympathy for what has occurred. That's universal.
"But the university, this institution is greater than one person."
An attorney for Paterno on Thursday called the board's comments self-serving and unsupported by the facts. Paterno fully reported what he knew to the people responsible for campus investigations, lawyer Wick Sollers said.
"He did what he thought was right with the information he had at the time," Sollers said.
In a separate statement, Penn Staters for Responsible Stewardship said the board's comments have "done nothing but raise additional questions."
"We can conclude, that consequently, their hasty and panicked damage control efforts in the first days of November, and the uncomfortable position they found themselves in, being caught flat-footed, instead of in a proactive leadership position, led to the unjust firing of Joe Paterno, without so much as a conversation, let alone complete due process," the group's statement said.
The trustees described the long deliberations in the days leading up to Paterno's ouster as emotional and nerve wracking, echoing the confusion and anguish also felt among students and alumni as the scandal unfolded. They were shocked by the lurid details that had emerged about the case that week, after having been given a short briefing about Sandusky months earlier by Spanier and general counsel Cynthia Baldwin. That session lasted roughly 7 minutes and provided few insights, trustees said.
Paterno was dismissed the same day Spanier also departed under pressure. The board initiated an internal investigation into the Sandusky case and the role of Penn State officials.
Since then, some alumni and former players have been questioning the actions of the trustees ? criticism that boiled over in three town hall-style meetings last week hosted for alumni by new school President Rodney Erickson.
According to Dambly, trustees had been advised not to speak because of the ongoing investigations but changed their minds following the town hall sessions.
They began a series of interviews this week with media outlets. Also sitting in Thursday's interview with the AP was Lanny Davis, a prominent Washington attorney who has been retained by Erickson and the trustees as an adviser.
"We determined as a group that the Board of Trustees needed to answer the questions of what we knew, when we knew it and why we made the decisions that we made," Dambly said.
The trustees on Thursday cited three reasons for Paterno's immediate removal as head coach. Besides the moral obligation to do more in conjunction with reporting the 2002 allegation and statements issued by Paterno they felt may have challenged trustees' authority, the trustees also said there was concern that Paterno would not be able to properly represent the school if allowed to stay on as head coach the rest of the 2011 season.
According to The Washington Post, trustees vice chair John Surma told Paterno, "In the best interests of the university, you are terminated." Paterno hung up and repeated the words to his wife, who redialed the number.
"After 61 years he deserved better," Sue Paterno said. "He deserved better." Then she hung up.
According to Davis on Thursday, Surma never got the chance to say two more things that night: that he regretted having to tell him the decision over the phone; and that the school was going to honor his contract and retirement package as if he had retired at the end of 2011.
Dambly insisted Paterno was not fired, although he never appeared as coach again. He remains a tenured faculty member.
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Saturday, January 21, 2012
Insight: Top Justice officials connected to mortgage banks (Reuters)
(Reuters) ? U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department's criminal division, were partners for years at a Washington law firm that represented a Who's Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.
The firm, Covington & Burling, is one of Washington's biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.
Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.
Reuters reported in December that under Holder and Breuer, the Justice Department hasn't brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.
The evidence, including records from federal and state courts and local clerks' offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.
In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners' lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven't responded publicly to any of the requests.
While Holder and Breuer were partners at Covington, the firm's clients included the four largest U.S. banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co - as well as at least one other bank that is among the 10 largest mortgage servicers.
DEFENDER OF FREDDIE
Servicers perform routine mortgage maintenance tasks, including filing foreclosures, on behalf of mortgage owners, usually groups of investors who bought mortgage-backed securities.
Covington represented Freddie Mac, one of the nation's biggest issuers of mortgage backed securities, in enforcement investigations by federal financial regulators.
A particular concern by those pressing for an investigation is Covington's involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.
Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. -- roughly 60 million loans.
But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS "vice presidents" or "assistant secretaries."
Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment on Covington legal work done for MERS.
It isn't known to what extent if any Covington has continued to represent the banks and other mortgage firms since Holder and Breuer left. Covington declined to respond to questions from Reuters. A Covington spokeswoman said the firm had no comment.
Several lawyers for homeowners have said that even if Holder and Breuer haven't violated any ethics rules, their ties to Covington create an impression of bias toward the firms' clients, especially in the absence of any prosecutions by the Justice Department.
O. Max Gardner III, a lawyer who trains other attorneys to represent homeowners in bankruptcy court foreclosure actions, said he attributes the Justice Department's reluctance to prosecute the banks or their executives to the Obama White House's view that it might harm the economy.
But he said that the background of Holder and Breuer at Covington -- and their failure to act on foreclosure fraud or publicly recuse themselves -- "doesn't pass the smell test."
Federal ethics regulations generally require new government officials to recuse themselves for one year from involvement in matters involving clients they personally had represented at their former law firms.
President Obama imposed additional restrictions on appointees that essentially extended the ban to two years. For Holder, that ban would have expired in February 2011, and in April for Breuer. Rules also require officials to avoid creating the appearance of a conflict.
Schmaler, the Justice Department spokeswoman, said in an e-mail that "The Attorney General and Assistant Attorney General Breuer have conformed with all financial, legal and ethical obligations under law as well as additional ethical standards set by the Obama Administration."
She said they "routinely consult" the department's ethics officials for guidance. Without offering specifics, Schmaler said they "have recused themselves from matters as required by the law."
Senior government officials often move to big Washington law firms, and lawyers from those firms often move into government posts. But records show that in recent years the traffic between the Justice Department and Covington & Burling has been particularly heavy. In 2010, Holder's deputy chief of staff, John Garland, returned to Covington, as did Steven Fagell, who was Breuer's deputy chief of staff in the criminal division.
The firm has on its web site a page listing its attorneys who are former federal government officials. Covington lists 22 from the Justice Department, and 12 from U.S. Attorneys offices, the Justice Department's local federal prosecutors' offices around the country.
As Reuters reported in 2011, public records show large numbers of mortgage promissory notes with apparently forged endorsements that were submitted as evidence to courts.
There also is evidence of almost routine manufacturing of false mortgage assignments, documents that transfer ownership of mortgages between banks or to groups of investors. In foreclosure actions in courts mortgage assignments are required to show that a bank has the legal right to foreclose.
In an interview in late 2011, Raymond Brescia, a visiting professor at Yale Law School who has written about foreclosure practices said, "I think it's difficult to find a fraud of this size on the U.S. court system in U.S. history."
Holder has resisted calls for a criminal investigation since October 2010, when evidence of widespread "robo-signing" first surfaced. That involved mortgage servicer employees falsely signing and swearing to massive numbers of affidavits and other foreclosure documents that they had never read or checked for accuracy.
Recent calls for a wide-ranging criminal investigation of the mortgage servicing industry have come from members of Congress, including Senator Maria Cantwell, D-Wash., state officials, and county clerks. In recent months clerks from around the country have examined mortgage and foreclosure records filed with them and reported finding high percentages of apparently fraudulent documents.
On Wednesday, John O'Brien Jr., register of deeds in Salem, Mass., announced that he had sent 31,897 allegedly fraudulent foreclosure-related documents to Holder. O'Brien said he asked for a criminal investigation of servicers and their law firms that had filed the documents because they "show a pattern of fraud," forgery and false notarizations.
(Reporting By Scot J. Paltrow, editing by Blake Morrison)
Investors like the back-to-basics Bank of America (AP)
NEW YORK ? Bank of America is back to basics ? slimmed down, stripped of its swagger and no longer the biggest bank in the country. And investors, after pummeling the company for two years, finally like what they see.
The stock jumped 2.4 percent Thursday after Bank of America reported that it made $2 billion from October through December, reversing a $1.2 billion loss from a year earlier. The stock is up 25 percent this year.
Almost none of the profit came from improvements in Bank of America's basic businesses. In fact, it lost money in the fourth quarter in real estate and investment banking.
But the bank raised $2.9 billion by selling its stake in China Construction Bank and $2.4 billion more by selling debt and issuing common stock to replace its higher-cost preferred stock, which paid out annual dividends as high as 8 percent.
"We enter 2012 stronger and more efficient after two years of simplifying and streamlining our company," CEO Brian Moynihan said.
The cash has strengthened Bank of America's balance sheet, a key factor as it undergoes a Federal Reserve "stress test" and tries to meet international regulatory standards that demand banks hold more cash against risky loans.
"It would be a big step if Bank of America can prove to the Street it doesn't need to raise additional capital," said Shannon Stemm, a banking analyst at Edward Jones, a financial advice company.
After the stock dropped 63 percent drop in 2010 and 2011, Bank of America is eager to start over. But it won't be easy.
Paying $4 billion for Countrywide Financial Corp., the nation's largest subprime mortgage lender, in 2008 seemed like a bargain but has cost Bank of America tens of billions in mortgage losses, fines and litigation.
"The biggest problem with Bank of America is that you never know what litigation expense lurks around the corner," Stemm said.
The bank has also been forced to buy billions of dollars' worth of mortgages from the government-sponsored mortgage financing companies Fannie Mae and Freddie Mac.
In 2011, the bank lost about $14 billion just on legal settlements tied to mortgages issued in years past. On Thursday, the bank said it put aside an additional $1.5 billion in the fourth quarter for future litigation, most of it tied to mortgages.
In addition to the legal costs, the Federal Reserve last year refused to let Bank of America increase its stock dividend, citing uncertainty about the depth of its mortgage problems.
It was the only denial issued to any of the four largest U.S. banks by the Fed, which is closely monitoring how the largest banks use their cash since the bailouts of 2008.
This year, Bank of America hasn't asked the Fed to raise its dividend.
As the U.S. economy slowly comes back, investors are betting Bank of America is poised to capture some of that growth. But that won't be easy, either.
Loans to people and businesses aren't as profitable as they were before the financial crisis. Not only are interest rates at historic lows, but regulators have limited the fees banks can collect for overdrafts and late credit card payments. The government has also reduced the fees banks can ollect from stores on debit-card transactions.
Bank of America knows something about debit card fees. Last fall, it caused a public uproar when it announced it would charge customers $5 a month to use debit cards. The bank quickly backed off.
Bank of America serves about half of American households, and its results showed that housing continues remains a concern in the economy. The bank's real estate business lost $1.5 billion after a 74 percent decline in new home loans. The bank lost some market share and closed a division that helped third-party home lenders.
But Americans seemed to be getting their financial houses in order by paying off more debt on time.
Bank of America, one of the largest credit card issuers, said customers who paid bills a month late declined for the 11th consecutive quarter. New credit card accounts also grew 53 percent, and the division posted a profit of $1 billion.
Bank of America's investment banking business reported a loss of $433 million due to lower investment banking fees and lower sales and trading driven by the rocky stock and bond markets in the last three months of the year.
The bank's quarterly earnings came to 15 cents per share, which was less than the 22 cents expected by analysts surveyed by FactSet, a provider of financial data. The earnings were in line with other estimates.
The bank reported fourth quarter revenue rose 11 percent to $25.1 billion from last year. For the year, the bank made $1.4 billion. It lost $2.2 billion in 2010.
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Friday, January 20, 2012
Popular file-sharing website Megaupload shut down
This undated image obtained by The Associated Press shows the homepage of the website Megaupload.com. Federal prosecutors in Virginia have shut down one of the world's largest file-sharing sites, Megaupload.com, and charged its founder and others with violating piracy laws. (AP Photo)
This undated image obtained by The Associated Press shows the homepage of the website Megaupload.com. Federal prosecutors in Virginia have shut down one of the world's largest file-sharing sites, Megaupload.com, and charged its founder and others with violating piracy laws. (AP Photo)
McLEAN, Virginia (AP) ? One of the world's most popular file-sharing sites was shuttered Thursday, and its founder and several company officials were accused of facilitating millions of illegal downloads of films, music and other content.
An indictment accused Megaupload.com of costing copyright holders at least $500 million in lost revenue. The indictment was unsealed one day after websites including Wikipedia and Craigslist shut down in protest of two congressional proposals intended to make it easier for authorities to go after websites with pirated material, especially those with overseas headquarters and servers.
Megaupload is based in Hong Kong, but some of the alleged pirated content was hosted on leased servers in Virginia, which gave federal authorities jurisdiction, the indictment said.
The Justice Department said in a statement said that Kim Dotcom, 37, and three other employees were arrested Thursday in New Zealand at the request of U.S. officials. Three other defendants are at large.
Before Megaupload was taken down, it posted a statement saying allegations that it facilitated massive breaches of copyright laws were "grotesquely overblown."
"The fact is that the vast majority of Mega's Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch," the statement said.
The indictment may have prompted a response from the loose affiliation of hackers known as "Anonymous," which claimed credit for attacking the Justice Department's website. The site was inaccessible Thursday evening.
A spokesman for the Motion Picture Association of America said in an emailed statement Thursday that the group's site had been hacked, although it appeared to be working later Thursday evening.
"The motion picture and television industry has always been a strong supporter of free speech," the spokesman said. "We strongly condemn any attempts to silence any groups or individuals."
Megaupload was unique not only because of its massive size and the volume of downloaded content, but also because it had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy. Before the website was taken down, it contained endorsements from Kim Kardashian, Alicia Keys and Kanye West, among others.
The company listed Swizz Beatz, a musician who married Keys in 2010, as its CEO. He was not named in the indictment and declined to comment through a representative.
According to the indictment, Megaupload was estimated at one point to be the 13th most frequently visited website on the Internet. Current estimates by companies that monitor Web traffic place it in the top 100.
The five-count indictment, which alleges copyright infringement as well as conspiracy to commit money laundering and racketeering, described a site designed specifically to reward users who uploaded pirated content for sharing, and turned a blind eye to requests from copyright holders to remove copyright-protected files.
For instance, users received cash bonuses if they uploaded content popular enough to generate massive numbers of downloads, according to the indictment. Such content was almost always copyright protected.
The site boasted 150 million registered users and about 50 million hits daily. The Justice Department said it was illegal for anyone to download pirated content, but their investigation focused on the leaders of the company, not end users who may have downloaded a few movies for personal viewing.
A lawyer who represented the company in a lawsuit last year declined comment Thursday. Efforts to reach an attorney representing Dotcom were unsuccessful.
Megaupload is considered a "cyberlocker," in which users can upload and transfer files that are too large to send by email. Such sites can have perfectly legitimate uses. But the Motion Picture Association of America, which has campaigned for a crackdown on piracy, estimated that the vast majority of content being shared on Megaupload was in violation of copyright laws.
The website allowed users to download some content for free, but made money by charging subscriptions to people who wanted access to faster download speeds or extra content. The website also sold advertising.
The indictment was returned in the Eastern District of Virginia, which claimed jurisdiction in part because some of the alleged pirated materials were hosted on leased servers in Virginia. Prosecutors there have pursued multiple piracy investigations.
Steven T. Shelton, a copyright lawyer at the Cozen O'Connor firm in New York, said opponents of the legislation are worried the proposals lessen the burden for the government to target a wide variety of websites. Shelton said he expects to see the government engage in more enforcement in the future, as technology makes it easier to catch and target suspected pirates.
"I think we'll be seeing more of this," he said. "This is just the beginning."
Dotcom, a resident of both Hong Kong and New Zealand, and a dual citizen of Finland and Germany, made more than $42 million from the site in 2010 alone, according to the indictment.
Dotcom had his name legally changed. He was previously known as Kim Schmitz and Kim Tim Jim Vestor. He is founder, former CEO and current chief innovation officer of Megaupload.
Officials estimated it could be a year or more before Dotcom and the others arrested in New Zealand are formally extradited.
The others arrested were Finn Batato, 38, a citizen and resident of Germany, the company's chief marketing officer; Mathias Ortmann, 40, a citizen of Germany and resident of both Germany and Hong Kong, who is the chief technical officer, co-founder and director; and Bram van der Kolk, aka Bramos, 29, a Dutch citizen and resident of both the Netherlands and New Zealand, who oversees programming.
Still at large are Julius Bencko, 35, a citizen and resident of Slovakia, the site's graphic designer; Sven Echternach, 39, a citizen and resident of Germany, head of business development; and Andrus Nomm, 32, a citizen of Estonia and resident of both Turkey and Estonia, head of the development software division.
Several sister sites were also shut down, including one dedicated to sharing pornography files.
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'Thor' Star Chris Hemsworth, Wife Elsa Pataky Expecting Baby
'We don't care if it's a boy or girl, our only wish is that it's healthy,' Pataky says.
By Jocelyn Vena
Chris Hemsworth
Photo: WireImage
"Thor" star Chris Hemsworth and his actress wife, Elsa Pataky, have announced that they are expecting their first child together.
A rep for the actor confirmed the news to People.com, and the "Fast Five" actress is opening up about the baby in a new interview in Hola! magazine, revealing that their bundle of joy will join them this spring.
"Since it's our first child, we don't care if it's a boy or girl, our only wish is that it's healthy," Pataky said. "I'm only going to speak to the baby in Spanish. I already told my husband, 'Get ready fast with Spanish because, if not, you're not going to be able to understand what we say.' "
The news comes the same week the twosome was spotted on vacation in St. Barts with Pataky sporting a baby bump. "Having the person that you love by your side and starting a family with them is the best thing that can happen to you in this life," Pataky said. "You can't ask for more."
Hemsworth and Pataky were married in December 2010. In addition to impending fatherhood, Hemsworth has a busy 2012 slated for the big screen, with a number of highly anticipated flicks set for release, including "Snow White and the Huntsman" (along with "Twilight" star Kristen Stewart) and "The Avengers," in which he'll once again play the hammer-swinging Thor. Pataky also has a few films coming out, including "The Wine of Summer" and "All Things to All Men."
Related VideosSource: http://www.mtv.com/news/articles/1677521/chris-hemsworth-baby.jhtml
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Thursday, January 19, 2012
China GDP growth at 2-1/2 year low but tops forecast (Reuters)
BEIJING (Reuters) ? China's economy grew at its weakest pace in 2-1/2 years in the latest quarter and it appeared headed for an even sharper slowdown in the coming months as export demand fades and the housing market falters.
The fourth-quarter year-on-year growth of 8.9 percent, although slightly stronger than the 8.7 percent that economists polled by Reuters had predicted, may give Beijing yet another reason to gently ease monetary policy, most likely by reducing the amount of reserves that large banks must hold.
The data released on Tuesday may not satisfy investors, who were looking for figures that were either weak enough to provide a clear-cut case for policy easing or strong enough to allay fears that the world's second-biggest economy might unravel.
"The slowdown is not scary, so we are not going to get massive policy easing," said Kevin Lai, an economist with Daiwa in Hong Kong.
Shanghai stocks pared gains in low-volume, volatile trading after the data was released. The euro and Australian dollar both extended gains against the U.S. dollar as investors took some solace in the fact that China's growth rate was a bit faster than expected.
With Europe in danger of slipping into a recession and U.S. growth looking lackluster, China's role in the global economy is magnified.
Although economists widely expect China's 2012 growth will be the weakest in a decade, a more pronounced slowdown would put a major drag on already shaky global growth.
The fourth-quarter growth rate was the slowest pace since the second quarter of 2009, when the global economy stumbled out of a deep recession. It also marked the fourth straight quarter in which growth slowed down.
Ma Jiantang, the head of China's statistics agency, said China's growth was likely to slow further as Beijing tries to restructure the economy away from exports and towards domestic consumption -- something the United States and other trading partners have long pressed China to do.
Tuesday's data showed net exports subtracted from 2011 growth while consumption contributed more than half.
Some analysts think China's first-quarter growth will be below 8 percent threshold seen as the minimum for assuring sufficient job creation.
"Further weakness lies ahead," Mark Williams, an analyst at Capital Economics, said before the fourth-quarter data was released.
"European demand for Chinese products has already slowed and is likely to remain subdued. The outlook for real estate construction -- a 10th of GDP -- is potentially an even greater concern."
Europe is China's top export market, and all signs point to much of the continent falling into recession in coming months, with no end in sight as governments push austerity programs.
Mass ratings downgrades in the euro zone over the weekend and a breakdown in Greek bailout talks have added to financial market jitters.
NEW YEAR SKEW
An early Lunar New Year holiday on January 23-24 probably skewed the fourth-quarter data and the effect will likely linger through the first three months of the year.
Factories typically step up production to clear orders before the festive period, and then temporarily shut down as workers head home to visit family.
That means fourth-quarter growth probably benefited from the surge in manufacturing, while first-quarter activity will be even slower.
"We are in a period where the early Chinese New Year is boosting activity ahead of the holiday, which is setting us up for a disappointment after," Ken Peng, an economist at BNP Paribas, said before the data release.
Peng sees China's annual economic growth slipping to 7.9 percent in the first quarter, the worst in three years.
A BOTTOM IN Q1?
Other Chinese data painted a mixed picture of the economy.
Retail sales grew 18.1 percent from a year earlier in December, faster than the consensus of a Reuters poll of 17.2 percent. Industrial output also exceeded expectations, up 12.8 percent year on year.
But housing investment dropped precipitously in December, and many property developers have warned that 2012 looks grim.
A booming housing market helped drive China's explosive growth in recent years, but Beijing has tried to cool prices in hopes of avoiding a devastating bubble and bust.
A modest housing market slowdown would be a welcome development, but a crash would be catastrophic, both for China and its trading partners around the world.
Some analysts think a more pronounced economic slowdown in the first quarter could be a blessing in disguise of sorts.
It may compel stability-obsessed Beijing to unveil more stimulus measures this year, giving the Chinese and world economy the lift that many investors are hoping for.
Possible stimulus could include further cuts in the levels of reserves that banks need to set aside at the central bank, and more aggressive state investment aimed at providing more public housing for low-income households.
Daiwa's Lai expects four cuts of 50 basis points each in bank reserves in 2012.
The central bank cut bank reserves in November for the first time in three years in a signal from Beijing of its concern about the economic slow down, reducing levels for big banks to 21 percent from a record 21.5 percent.
Beijing has also allowed the pace of bank lending to pick up and the central bank is injecting cash into money markets.
"When growth dips to below 8 percent, the political consensus for protecting growth will be stronger. That helps to bring back activity," Peng from BNP Paribas said.
($1=6.3066 yuan)
(Additional reporting by China economics team, Clement Tan in HONG KONG, Anthony Slodkowski in TOKYO; Writing by Emily Kaiser: Editing by Kim Coghill and Neil Fullick)
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