According to an internal memorandum obtained by Bloomberg, Citigroup Chief Executive Officer Vikram Pandit said his bank is having the best quarter since 2007.

“I am most encouraged with the strength of our business so far in 2009,” Pandit wrote. “In fact, we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.”

The bank has posted over $37.5 billion of losses over the past five quarters since it posted a $2.1 billion profit in the third quarter of 2007.

“I am, like you, disappointed with our current stock price and the broad-based misperceptions about our company and its financial position,” Pandit wrote.

Citigroup’s deposits are “relatively stable,” Pandit said in his memo to employees. The bank has also conducted its own stress tests, using assumptions more pessimistic that the Federal Reserve’s. Citigroup is “confident” about its capital strength. Expenses totaled $8.1 billion in the year through February, less than Citigroup’s target, Pandit said.

Economist, Nobel Laureate and New York Times blogger Paul Krugman is concerned that the latest data suggests the Obama administration’s economic policies are already falling behind the curve.

For one thing, the administration is figuring unemployment will average 8.1% this year, hardly likely since we're already there and because job losses are accelerating to over 600k/month.

Mr. Obama’s promise that his plan will create or save 3.5 million jobs by the end of 2010 looks underwhelming, Krugman said in his blog. Saving or creating that many jobs within that timeframe won't come close to covering the losses, already pegged at 4.4M (with 2.6M of those coming in the last four months alone), since the start of the recession in December 2007.

Krugman said Mr. Obama was out of touch with his recent assertion that we will get all the pillars in place for recovery this year.

Krugman painted a scenario where Mr. Obama will see the need to implement another stimulus, possibly as early as September of this year. But, because his policies will be viewed as having failed, congressional passage of a new plan will prove to be difficult, and the recession will rage on.

Banking analyst Meredith Whitney, who correctly predicted the fall in many of the bank stocks, is concerned that credit cards represent the next problem area in the credit crunch due withdrawal of credit lines by issuers.

Just six months ago, I estimated that at least $2 trillion of available credit-card lines would be expunged from the system by the end of 2010, she wrote in the WSJ.”However, today, that estimate now looks optimistic, as available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone. My revised estimates are that over $2 trillion of credit-card lines will be cut inside of 2009, and $2.7 trillion by the end of 2010.

MS. Whitney noted that credit cards have become an essential cash-management tool for many consumers over the last 20 years and see the unused portion of their lines as a what if reserve in cases of unforeseen expenses.

Her research shows that a relatively small portion of U.S. consumers have actually maxed out their credit cards, and most currently have ample room to spare on their unused credit lines. The industry credit line utilization rate (or percentage of total credit lines outstanding drawn upon) was just 17% at the end of 2008, she wrote.

Ms. Whitney warned that credit-card lenders are currently playing a game of hot potato, because many consumers have multiple accounts with different lenders. As lines are reduced, risk exposure increases to the remaining lender with the biggest line outstanding.

The five largest lenders, who currently control two thirds of the market, need to work together to protect one another and preserve credit lines to able paying borrowers by setting consortium guidelines on credit.