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The Biz Roundup April 6

Happy days are here again, enjoy a beer that’s beer again . . .

. . . according to the latest New York Times/CBS News poll . . . Americans said they approved of Mr. Obama’s handling of the economy, foreign policy, Iraq and Afghanistan; fully two-thirds said they approved of his overall job performance.

By contrast, just 31 percent of respondents said they had a favorable view of the Republican Party, the lowest in the 25 years the question has been asked in New York Times/CBS News polls. . . .

The percentage of people who said the economy was getting worse has declined from 54 percent just before Mr. Obama took office to 34 percent today. And 20 percent now think the economy is getting better, compared with 7 percent in mid-January.

(“Poll Finds New Optimism on Economy Since Inauguration,” New York Times, April 6) Part of the problem, to use Larry-Summers-speak, is that in this recession multiple equilibria are unbalanced. There is very little practical reason why the economy should not be growing rather than shrinking right now. But since everyone believes that everyone else is cutting back or sitting idle, they’re going to cut back and sit idle, too. Households that fear imminent unemployment save money (which is smart); but when all households save money, the economy shrinks and job loss goes from imminent to inevitable (so when everyone cuts back, that’s dumb). Part of what Obama and company need to achieve is to convince everyone . . . and I mean everyone, from bank executives to venture capitalists to Chinese leaders to Joe and Jane Schmoe on Elm Street . . . that the economy is on it’s way up. And, whether you’re Democrat or Republican, that’s why the CBS/Times report is some of the best news you’re going to hear about the economy.

Why is it that Ford — which took no bailout money — can manage concessions from the unions and creditors, and GM and Chevrolet — who can see the axe falling — can’t?

Ford, which appeared to be the weakest of the Detroit carmakers up to about a year ago, said Monday that holders of $4.3bn of senior convertible notes, or 88 per cent of the total, had taken up its shares-and-cash offer.

In addition, its financing arm, Ford Credit, has bought back $3.4bn of its parent’s unsecured non-convertible notes. Ford Credit previously took over $2.2bn of Ford’s term loans at a sizeable discount.

The deals will cut the carmaker’s debt from $25.8bn to $15.9bn, and lighten interest payments by $500m a year, based on current interest rates.

(“Ford strikes deal to cut debt by 40%,” Financial Times, April 6) This might be a textbook example of moral hazard (GM and Chrysler got lazy because they counted on more bailout money), but it’s actually a very different kind of hazard. I’ll call it the lifeline hazard. If someone is drowning and needs a lifeline, that reduces everybody’s confidence in that person’s ability to swim. GM and Chevrolet, by taking taxpayer money, showed the whole world that they were drowning. So a debt-for-equity swap, like the kind Ford used, looks like a bad deal. Will that equity be worth anything six months from now? A year? Would you let a drowning man grab hold of you? That’s why Ford has succeeded while GM and Chevrolet keep grabbing air when negotiating with lenders and the unions.

What happens when the news goes out of business? What usually happens: they sue.

Under the initiative, whose details are still being determined, the AP will work with Web portals and other digital partners to track — and pursue legal action against — publishers that use this content on the Web without a license.

(“AP to Fight Illegal Use of Content on Web Sites ,” Wall Street Journal, April 7) Princeton University Press claims the copyright on the Declaration of Independence (no joke). Now, is AP going to claim the copyright on news? If you quote from an Obama speech, is AP going to go after you just to earn a quick buck?

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