>> as the government gets closer to passing a health care reform plan, a look at the impact it can have on the already troubled small business industry. plus millions of new iou's is are mitting the market as uncle sam is trying to keep running. >> and what the securities and exchange commission is doing to crack down on ponzi schemes. plus a word from you the viewers, all ahead on this edition of first business. >> you're watching first business. with tom hudson and beejal patel. >> it is financial report card system. welcome everybody. ahead of another big week of trading and a big week when it comes to the corporate earnings and profit picture for u.s. corporations. for that matter, beej al, really the outlook for the second half of the year. >> and second quarter

earnings reports this week, caterpillar, 3 m, coca cola as well as testimony from the federal chairman. he heads to capitol hill to talk about the monetary policy and certainly the economic outlook. >> also the situation behind small business lender cit. we spoke a lot about that last week. the question for the market is can it absorb some of these big uncertainties in the market once again? >> small businesses considered the engine of our country, right now that industry is stalled and facing sth big hurdles. not only is lending so tight that business owners cannot get loans, they are also bracing for sweeping health care reform that make threaten to put small business companies out of business. >> small businesses across the country continue to operate in survival mode as this recession drags on and access to credit remains difficult. david joe started a business management firm 15 years ago and says his company's credit lines were recently cut. >> that kind of gave us a wake-up call because we're in the business of telling people what to do. but it happens, you're

trying to expand, you need the credit. so we need to focus on, we, business owners, need to focus more on our cash management, growing the business based on the cash that we have available. >> even companies that continue to bring in revenue facing a tough time getting loans from banks. >> a lot of times just bringing a book of business and saying this is what we anticipate for the next year isn't enough. and a loan can't be had by that. what you have to do is really go in and show them cash or some assets or equity up front, whether that be basically handing them long-term contract or really handing them some credible proof that this business will be viable for a year. >> if the recession wasn't enough, now small and mid sized businesses are bracing for health care reform that will likely cut into company's bottom lines. >> i would say it's going to cut our revenues, i would say at least five to seven percent what we're looking at right now. >> lawmakers will soon debate one senate version of a bill that would require businesses with more than 25

employees to offer health insurance or pay the government $750 per full-time employee every year. another house version would require certain companies to pay up to an eight percent penalty on their payroll if they don't provide health insurance. many small business owners are worried about the potential impact. >> it's going to require a lot from a business owner, and they have to be at the point where they can afford that and continue to grow their businesses. we're not in growth mode for the most part as business owners. we're just trying -- there used to be a time when we were trying to keep up with the joneses. nowadays we're just trying to hold on to what we've got. it will be very difficult. >> some business owners who support theeforms are hoping they will result in more dedicated employees. >> this will give them a chance to have the right health care coverage, so they're not missing days of work, so they're saving money. so they are 100% dedicated to their job when they're on site versus constantly having to worry about how am

i going to pay for that 10,000-dollar hospital bill. >> taz wilson who owns a staffing firm believes the benefits will out weigh the costs when it comes to health care reform. he says having more loyal employees will save on advertising and labor costs. >> paying for health care reform is a sticking point on capitol hill. between taxes on couples earning more than $350,000 a year to eliminating maybe tax-free insurance proposals to a fee to small businesses who don't offer health thshes to their workers. tobi strevell is a management at hiewrt associates. welcome to the program. how closely are large and medium sized companies watching this reform debate and what kind of impact could it have on the insurance for their workers? >> they're pretty fixated on it. we've been having a series of weekly teleconferences and i think it's a big focus and it has been for years. >> so the concern of the reform is trying to gather

up the underinsure and the uninsured. when we're talking about big companies, these are likely companies that are offering already insurance to their workers. how much of an impact could this reform effort have on them? >> what we've seen of late is something that by fur indicates the system -- bifurcates the system. the key to the health care reform proposals that are on the table is creating a fire wall that separates the 160 million people who have employer-sponsored insurance from the 50 or so million that really need the benefits of the reform. >> what could be that fire wall? how could that act? in some cases the legislators want to provide a public option to try to entice these under and non-insured people to get into the insurance market. >> both senate committees reform proposals include a provision that says if your employer offers qualified insurance and it's not unaffordable to you and the percentage of your income that you would have to spend varies depending on the reform bill, you are

ineligible for the public option. if you choose to opt out of your plan you will do so without the employer subsidy and without any kind of proposal credits in the public options. >> one concern in some areas and criticism is that even providing the public option could deter companies from offering insurance in the first place. >> it's a possibility. it's one that we think happens perhaps gradually over time. 99% of large employers provide more than what the minimum standards are in any of the reform bills and most of them need to do that in order to compete for talent in the marketplace. over time will some of the companies that are at the bottom end of that spectrum start to see that the public option will save them money? yeah. and it could turn that way over time. >> finally i have to ask you as many companies are probably looking at different health insurance plans for 2010, is it even -- are they even capable to make informed decisions now even as the reform debate is continuing?

>> it's a tough time to embrace change because the hindsight is going to be 2020. so if you don't already have certain provisions and you think they're on the bubble, most employers aren't willing to pull the trigger. >> could one heck of an open enrollment season. we appreciate the insight. tobi tre vel with us, principal at hewitt associates. >> a lot has gone on in the market the past week. todd colvin with us with the board of trade. one of the things we've seen here in the last week or so was money coming out of the fixed income market, bonds selling, interest rates moving higher, moving into the stock market. and in the week ahead, the government's kind of run a lot of those bond buyers to be back in the market, aren't they? >> it was a big surprise last week to see yields go up over 35 basis point in tent you're with no options on the calendar. typically we see the non-option weeks the yields go lower. you're right, a lot of money coming out of the bond market and not necessarily going into the stock market at this point. i think the early move last week in the stock market was

more short covering relate when had gold man sachs earnings came through the week. later in the week we did see fresh buying. buyer beware. we get to the top of the levels and we may run into resistance. irrelevant let's talk about what the bond market could hold for the stock market in weeks ahead. odds are there could be a lot of activity in fixed income with the government selling several billion dollars' worth of iou's. >> they're adding a 20 year tips auction on the back of that. there will be a lot of supply coming to market, not to mention corporate supply. the fed has had to instead up its issuance. how long can that continue? that will be a question we ask ourselves every couple of weeks when we get these announcements. >> the last time around subscription was pretty good. there was appetite for the bonds which held down interest rates. >> right. part of that is coming out

of foreign central banks. other parts of that is some of the scarcity issues we've seen in the rerepo market and guys want to get them back to repay the repos. the demand we've seen has been very focused in shorter end instruments, albeit with a strong tenure. but it's really the day-to-day buying comes in the short wednesday and that is what we get in a week from next. >> and that means lower super rates at least for the short-term here. we'll leave it there, todd colvin, mf global at the chicago board of trade. for the opening bell on monday we get it kicked off with the index of leading economic indicators. and a couple of significant earnings. oil services giant halliburton and semiconductor company texas instruments see if they can match the good news last week in intel. coming up, viewer mail on missing the crash. investor anger and higher credit card bills. but first the securities and exchange commission cannot prevent fraud and said it can't handle all the tips about possible investment

scams either, coming up. billions for bankers and billions for automakers, but what about you? get ready for a virtual town hall meeting. join first business via online video, voice mail or e-mail and be heard. we want to hear your ideas for fixing the u.s. economy. new president, trillions of dollars in taxpayer money and new efforts to fix the economy. first business will be holding a virtual houston town l meeting. you can submit your questions on youtube and found out how on our website, firstbusinessx.com.

since the boerne madoff ponzi scandal, the securities and exchange commission has been a target of criticism for mig the rip-off for years and has been fielding a huge increase this tips from people worried about investment scams. while the sec has launched actions against at least a dozen ponzi schemes since madoff, the sec is not equipped to handle every tip that comes in, according to merri jo gillette who handles this in chicago. >> ponzi schemes and scams have been around a long time. i've seen them since day one of my career. secondly, they tend to follow cycles that shadow the economy. so when we see the economy sort of dropping off, there tend tobz an inverse relationship and an increase in scams and particularly ponzi schemes. and sometimes the ponzi schemes that we see are

investment schemes or maybe not schemes, maybe even legitimate investment opportunities that are unable to sustain their profitability when the economy takes a downturn and then they cross the line and become ponzi schemes in an effort to keep it going. in terms of what we are trying to do, a number of different initiatives. in the enforcement program, we continue to just sort of jump on these when we get tips. we get thousands of tips. and i have to say that in the wake of the madoff case the tips that we've been receiving on potential ponzi schemes have increased exponentially. >> to that regard does the sec have the staff and capacity to investigate those thousands of ponzi tips that have come in since the madoff case exploded? >> no. our staff has actually decreased since 2005 in the enforcement division.

that is a result of the funding that we received, which was basically flat for a number of years, and a very high percentage, over 85% of our budget, goes to fund staff and staff benefits. what we try to do is to triage what comes in. so there are people who are quickly looking at the tips, trying to assess as quickly as possible whether it looks like something that is -- something we ought to invest additional resources in and pursue. something that could possibly be referred to another investigative or enforcement agency, so that would be, for example, state securities commissions, fenra, which oversees the broker dealer side of the industry or other self-regulatory organizations. what do you tell investors, what's the message to investors of all stripes, retail investors to institutional investors, that have looked at the sec and acknowledged even the

shortcomings that you've acknowledged here and really question its ability to act as a watchdog, as a stock cop, as it were? >> i would say two things. first of all, as we have all heard in the testimony that's been on going since the madoff matter, as well as read in the press, in general there's somewhat of a disconnect between what the public thought that the sec was empowered to do and what our powers allow us to do, number one. and then secondly, what our resources allow us to do. you know, in an ideal world, in a vacuum, everybody would like the sec to be every place on top of everything preventing fraud. i don't think the sec has ever claimed that it could prevent fraud. it tries to deter fraud, it tries to stop it when it finds it, it tries to educate investors so they

don't become victims of fraud, but to the first point that we all would ideally like there to be a cop who could do that, there's a pretty exorbitant cost attached to that. and the cost is not just the cost of running the sec, it's the business cost that is passed on to businessmen and to the industry in terms of complying with regulations and so on, and so when it's time for them to reach into their pockets to actually fund that level of policing, then people aren't as so in favor of it, i guess. i'll just put it that way. >> the sec is getting more money. the white house had proposed a budget of just over one billion dollars next year, an increase of six percent and the commission is asking for more than 1.2 billion in 2011. that would be a 21% jump to pay for more than 300 new hires and millions of dollars in new techtology. the sec's responsibilities could expand under the

proposed regulatory reforms from president obama. on tuesday we'll hear if the sec has the tools it needs to repair its image and morale. and straight ahead on this program, stick with us here. whawhat you the viewer are saying about the troubled economy. we'll tackle viewer mail after this message.

>> welcome back, everybody. as always, our viewers continue sounding off on the troubled economy. so let's get to our first call. >> yes. i'm a disabled veteran. i just wondered, i've been seeing you guys for years and how come you guys didn't see this crash in the stock

market, didn't say anything about it? you guys didn't see it coming? no, thank you. >> i just want to say, tom, i started like three years ago here at first business and i remember in 2006 we were actually doing stories on the subprime crisis. of course it wasn't a crisis back then, but it was a trickle of news coming forth, but even the federal reserve didn't know it would get this bad,. >> check this out, march 27th, 2007, in front of congress, the federal reserve chairman, the guy in charge, problems in the subprime market seem likely to be contained. we certainly know what happened there. gets lets go to the garden state of new jersey. peter sent in a e-mail to comments@firstbusinessx.com. you you asked what are the people angry about? the answer is we are angry at the bush administration did not protect investors, especially the little guys of the the financial mess was not caused by an act of god much it was negligence and incompetence. we are angry that government we trusted did nothing to protect us and allowed this all to happen. >> certainly that anger may

be well placed, but i would add that we have to be angry about consumers in the first place taking on all the debt here, taking on all the obligations that they probably knowingly well shouldn't have taken on. >> as we said before, the blame lies with consumers and banks that really shouldn't have put out these loans in the first place as well. let's get to another call about credit cards. >> i'm calling from pennsylvania. i wanted your show to comment and bring out what chase has just sent out this week, changing on their preferred customers that have low rates on the life of the loan transfers, where now they switched the minimum monthly payment to two percent of the amount to five percent of the balance. this does not seem fair, they're putting at risk several hundred thousand people's credit and maybe putting them at a chance of default. thank you. >> yeah. the credit card companies certainly do not like these new rules. in fact, jp morgan saying recently that these new

credit card rules could cost one of its unit units up to 700 million next year. >> the rules don't come into play until 2010, we can see they are changing some of the rules in advance of the new regulations coming in the first quarter of next year. there's the phone number behind us. or comments@firstbusinessx.com. some big dow components reporting earnings in the new week. and we'll look at the charts coming up. dn

>> focus may be on the dow this week. there's some big dow

components reporting earnings this week just as the dow was trying to break above a recent high set back this june. >> when you look at the six-month chart of the diamonds for the industrial average, you want to say this thing looks kind of positive. we've seen a big rebound since the march lows in the mid 60's. now here yet again at the levels that we saw back in early june, the market topped out on, but we've seen higher highs and lower lows at least until this past week. >> that is a pretty stiff resistance line there. tom, i can't stop talking about this volume. it's pretty anemic. it's clearly falling off a cliff. >> absolutely. you go back the last time we were in the upper 80's region was back six weeks or so ago. the average daily volume in trading in just the exchange traded fund for the diamond you're talking about 20 million shares trade hands. in the last week 15 million was average. the last couple of sessions we've done 10 million or less. >> you would think that the

volume would be better considering we're in the middle of second quarter earning season, but keep in mind, caterpillar, 3 m, coca cola, pfizer reporting in the new week. that will have an impact on the dow. >> let's here an impact on your portfolio. we'll see you back here next time. thanks for watching, everybody.