Main Street Bailout

In his weekly radio address yesterday, President Obama mentioned the importance of small businesses, noting the difficulty too many small companies are still facing in finding loans. "While credit may be more available for large businesses, too many small-business owners are still struggling to get the credit they need," he said. "These are the very taxpayers who stood by America's banks in a crisis—and now it's time for our banks to stand by creditworthy small businesses, and make the loans they need to open their doors, grow their operations, and create new jobs." Earlier this week, the Wall Street Journal says, Obama announced that the focus of the Troubled Asset Relief Program will shift to bailing out small business.

In the address, Obama also brought up his plans to mitigate “the crushing costs of health care—costs that have forced too many small businesses to cut benefits, shed jobs, or shut their doors for good.” Health care costs are an increasing burden for American small businesses as they’re seeing the “steepest rise” in insurance premiums in years. Today’s New York Times says, “Insurance brokers and benefits consultants say their small business clients are seeing premiums go up an average of about 15 percent for the coming year—double the rate of last year’s increases. That would mean an annual premium that was $4,500 per employee in 2008 and $4,800 this year would rise to $5,500 in 2010.” Since big employers tend to have more “negotiating clout,” these types of increases tend to be less steep for them. 

According to the Washington Post, an early version of the Senate climate bill is taking shape. Late Friday night, Senate Environment and Public Works Committee Chairman  Barbara Boxer, D-Calif., issued a version that includes “big benefits for farmers, provisions for deficit reduction and a ceiling on carbon prices.” The proposal calls for a more ambitious reduction of U.S. greenhouse gas emissions by 2020 to a level 20 percent below 2005 emissions. The legislation favors a cap-and-trade system that lets companies buy and sell permits to meet their greenshouse gas emission needs. It would also “give away the vast majority of allowances for a transition period of 20 years to ease burdens on energy-intensive industries and on consumers in states that rely heavily on coal for electricity.”

Upper management ranks at film studios are downsizing, the New York Times reports. Earlier this month, Universal Pictures ousted its chairman and co-chairman but, instead of hiring new outsiders, pulled people from within to fill the positions. Disney (DIS) announced that it’s cutting 50 employees, including “a number of managers,” at its Miramax unit. Falling revenue, particularly from sluggish DVD sales, has motivated Hollywood’s general efforts to cut back production costs.  The paper predicts, “It’s a safe bet that movies aren’t going to become more daring or interesting as executives become jittery about their thinning ranks.”

According to the Wall Street Journal, “the recession has ruffled the economics of even law and order.” The paper explains that 137 percent capacity rates at federal prisons should be good news for private prisons that profit from absorbing the spillover. Unfortunately for those companies, which includes Corrections Corp. of America (CXW), “cash-strapped states are mulling measures, such as quicker paroles and earlier releases. As a result, private-prison stocks are selling at unusual—and untenable—discounts to their historical multiples or value.”

Finally, though Barnes & Noble’s (BKS) new e-reader, the Nook, has been called a Kindle-killer, it may turn out to be a bigger predator for another company. According to Bloomberg, “If there’s a real loser in the Kindle-Nook shootout, it may turn out to be Sony (SNE), whose Reader models were already overshadowed by the Kindle and now must wonder if they will end up being eclipsed altogether.”