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QUEST MEANS BUSINESS
E.U. & U.S. Put Heads Together to Regulate; Fed Leaves Rates Unchanged; Burberry Returns to London Fashion Week
Aired September 23, 2009 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Super regulation for a super big problem, E.U. and U.S. both want to rewrite the rulebook.
Reserving judgments, the Fed reveals its assessment of the economy, our results 15 minutes from now.
And Burberry walks tall on the stock market as well as the catwalk at London Fashion Week.
I'm Richard Quest, mid-week, but still, yes, I mean business.
Good evening. World leaders keep on saying they're going to rewrite the financial rulebook. Well, on the eve of the Pittsburgh G-20 summit, the U.S. treasury secretary, Timothy Geithner, has told Congress that we can't walk away and leave the current system unchanged.
Also, within the European Union, the commission has now brought out its proposal. The idea, of course, is to put forward new ways of regulating the financial world. It will all be on the table when they start meeting at Pittsburgh.
But when it comes to financial regulation, the devil is in the detail. You'll see what I mean. The day has all been about regulation. The European Union is looking for a super watchdog. The European system is looking for a systemic risk board, along with a variety of other systems and supervisory boards.
The idea will be to monitor banks, to monitor their health as a financial system, and potentially make sure each member comes to the rescue of the other in the event of systemic collapse, a sort of "prevent Iceland" all over again. That, of course, has worries for the City of London.
In the United States, they have the Obama plan, sweeping overhaul to protect U.S. taxpayers, merge watchdogs, more power for the Fed, and a council or college of regulators is what they are looking for.
The crucial thing in the U.S. system, never mind systemic risk, for the U.S., it's all about no more "too big to fail," as Tim Geithner said before Congress.
(BEGIN VIDEO CLIP)
TIMOTHY GEITHNER, TREASURY SECRETARY: No financial system can function effectively if institutions are allowed to operate with the expectation they're going to be protected from losses. And we can't have a system in which taxpayers are called on to absorb the costs of failure.
REP. BARNEY FRANK (D-MA), CHAIRMAN, FINANCIAL SERVICES COMMITTEE: There is no one magic bullet that does away with "too big to fail." But you have an ability to resolve them in ways that protect taxpayers and give people a disincentive to get into that situation.
And you have a power before you reach that to restrict their activities, both quantitatively and qualitatively. That will be very much a part of what we do.
(END VIDEO CLIP)
QUEST: So that, of course, is the U.S. and the European plans. It all comes together at the G-20, because what they're determined to avoid is this idea of one side going away, or going on their own, because doing that merely creates regulatory misdeeds as banks and countries play one off against the other.
The European Union has set out its stall. And the commissioner, Charlie McCreevy, joins me now from Brussels, the internal market commissioner.
We know -- the broad outline, Commissioner -- firstly, thank you for joining us. The broad outline is designed to prevent systemic risk. But frankly it's going to be difficult to get agreement.
CHARLIE MCCREEVY, E.U. INTERNAL MARKET COMMISSIONER: Of course, because this topic has been around for a number of years and making any progress at all has been done incrementally, and it's (INAUDIBLE) thrown up wide differences of opinion between member states.
But in the last 18 months or so, there has been a better coming together in the minds and the attitudes of many member states, recognizing a lot has happened, and hopefully this occasion we can make some progress as we've outlined today.
QUEST: The City of London stands to lose most by a more rigorous or, if you like, pan-European system of regulation. You can expect a fight- back from the British financial industry.
MCCREEVY: Well, that is not necessarily the case. And over the past six months or so, the United Kingdom authorities have gone along with the broad outlines of what we were proposing today.
At the heads of state meeting, they agreed with the communique, with some provisos put in, namely that it would not -- the biggest one being that it wouldn't (INAUDIBLE) national fiscal responsibilities.
But even the United Kingdom has recognized that it's better to deal with these particular matters, make some progress. But I accept -- I accept now that the proposals are on the table, there will be a fair degree of negotiation.
And the devil, as you said in your earlier remarks, will be in the detail for many member states, including the U.K.
QUEST: The discrepancy between the U.S. system of regulation being put forward, and the European regulation, now at first blush there are similarities in terms of "too big to fail," systemic risk, but fundamentally banks will be looking to find loopholes between the two that can be exploited.
MCCREEVY: Well, I -- hopefully that's not going to occur. It would be a dream to think that we would have the same system of regulation throughout the world, but particularly between the United States and Europe.
But we usually are able to arrive at a modus vivendi which allows the -- to recognize each other's systems in a state of convergence. And you must remember at the G-20 meetings of the second -- the last two G-20 meetings, there has been a coming together of the G-20 leaders in this particular area, culminating in setting up the financial stability board.
So there is broad agreement in a number of the areas. The exact details may differ from region to region, and even in the United States, there is not agreement, as you well know, as to how they're going to.
QUEST: But, Commissioner.
MCCREEVY: . progress there, their different voices coming from Capitol Hill, (INAUDIBLE), and but they hopefully will all be able to come together with a broad agreement in the main areas.
QUEST: Forgive me for stepping on your toes there. Commissioner, when do you hope to have a system of -- a new system of regulation in force within the Union?
MCCREEVY: Well, it's now -- we've proposed something from the European Commission that then becomes the property of the Council of Ministers of the European Parliament. While I said earlier today that we had hoped that this -- these particular topics, there are other areas as well which we have dealt -- some we've dealt with, some we're dealing with, but these two topics, they -- the systemic risk board and the system of financial supervisory areas, I would hope that in 2010 that they will be operational.
QUEST: And between now and then, the downside risk is squabbling, inter-government arguments, financial lobbying against it, all of which derails the plan.
MCCREEVY: Well, no, this shouldn't occur on this occasion, because the background to this is that Mr. De La Rosiere (ph) put forward proposals, the heads of state met and they broadly endorsed them. Then they had another meeting where some other changes were made.
And we were asked to come forward with our proposals. And these proposals are -- broadly are in-line with what the heads of state of the European Union agreed some months ago. We have today put flesh on the bones of that particular agreement, because member states did move on, so I would anticipate not a major row about what we have on the table now.
Yes, some detail on the minutiae in some areas, but not a major row because member states have signed up to doing something at this (INAUDIBLE). And we have been duty-bound and have fulfilled our mandate in following what they agreed.
QUEST: Commissioner, many thanks, indeed, for joining us. Please, as more flesh either gets put on the bones or carved off the carcass, you have a standing invitation to come and talk about it on QUEST MEANS BUSINESS. Many thanks, indeed, for joining us. Commissioner McCreevy joining us from Brussels.
The markets and how they have traded mid-week, the European bourses closed the trading day pretty much unchanged, at Tuesday's levels. Investors were waiting. They wanted to know what the Fed would say on interest rates and the U.S. economic situation.
We'll know that in about six minutes from now, as soon as that does get announced, we'll bring it to you.
Here in London, the FTSE ended practically flat. The Royal Dutch Shell and BP both took a hit as the price of oil dipped below $69 a barrel. The Xetra DAX slipped a quarter of a percent. BMW, Volkswagen, it was the car-makers that were under pressure. And the CAC 40 with Renault, Peugeot, Citroen, all taking a similar bashing.
To the U.S. markets now, and don't -- I will be keeping a sharp watch on our computer screens for the moment we get a result from the U.S. Fed. Not expected to change interest rates, my word, excuse me, me bell has got a bit funny. Shall we try that again?
QUEST: Ah, that's better. The markets are open and doing business. And that's the way the Dow is up 26.2, 9,855. We're all eagerly watching and waiting to see when 10,000 arrives on the Dow. But we've got some way to go.
You're up to date with what is happening in the financial world, busy day. Fionnuala Sweeney is at the CNN news desk.
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Richard, two world leaders are attracting a lot of attention at the United Nations General Assembly: U.S. President Barack Obama, and Libyan leader Muammar Gadhafi, both made speeches before the assembly for the first time. And the content couldn't have been more different.
Let's get to Isha Sesay who is at the U.N. -- Isha.
ISHA SESAY, CNN INTERNATIONAL CORRESPONDENT: Hi there, Fionnuala.
Yes, a day of high drama here at the United Nations. There is one man that everyone is talking about at this hour, and it is indeed Libyan leader Colonel Muammar Gadhafi, who used his maiden address to the General Assembly to basically rail against the institution and effectively rail against what he called the inequality of the body.
He brought along a copy of the U.N. Charter, Fionnuala, and referred to it at many points, basically saying that the actual rules of this international body basically called for the equality of all nations, which he said wasn't the case right now given the structure of the Security Council.
The speech a very bizarre moment, he went on for an hour and 36 minutes. Scores of delegates left before the Libyan leader completely his address. One man who wasn't there to see any of it was U.S. President Barack Obama, who also spoke on this day.
He too made his maiden address to the General Assembly. And basically in his words, signaled a new era of U.S.-U.N. relations, calling for greater cooperation on global issues, one based on mutual concerns and mutual respect.
He outlined four pillars for cooperation. Among them nuclear nonproliferation and the fight against climate change. But he also pointed out that now is the time for the world to come together and work to solve the world's problems and not stand by and complain when the U.S. acts on its own.
So a day of high drama, big speeches, and many colorful characters -- Fionnuala.
SWEENEY: Isha Sesay, at the United Nations.
Well, the General Assembly's annual session has also drawn protesters to the U.N. Dozens of demonstrators used the steps near the headquarters as a stage on Tuesday night in protest to Iran's crackdown on post-election demonstrations, opposition supporters wore white. Organizers then projected scenes of the clashes in Tehran against a backdrop of human screens.
Now to Sweden where one person has been arrested after gunmen pulled off a daring robbery at a cash depot. Police in Stockholm say the robbers used a stolen helicopter and explosives to break through the roof of the building. They flew off with bags of cash. But the security company that owns the facility has not said how much money was stolen.
Huge clouds of red dust, the worst dust storms in 70 years enveloped much of eastern Australia Wednesday. High winds also whipped up a string of bush fires. Health officials are warning those with respiratory problems to stay indoors.
Some amazing images there out of Australia. We'll have more on that amazing storm tonight on "WORLD ONE," including some images sent by viewers. That's "WORLD ONE" 8:30 p.m. London time.
Richard, back to you.
QUEST: And we won't even charge you, Fionnuala, for the advert.
QUEST: It is a business show, after all. Just leave your credit card at the door. All right. Fionnuala Sweeney with the news.
A quarter of a century birthday bash as it brings out a British mega brand, Burberry has returned to London's Fashion Week. It has been away for a decade-long absence. And we will show you that in just a moment. This is CNN news.
QUEST: Welcome back.
Burberry, the check, was flying off the shelves in London on Wednesday. Now that's not a statement on what the clothes were doing, but rather the shares. The company's stock was the most fashionable item in the FTSE 100. It gained 5.5 percent.
Look at the Burberry share price over the last 12 months. It was 402, now up over 502. It has more than doubled. Now as you can see, the range that the shares have gone from there, up there, has propelled them into the index of London's leading shares. They replaced the information company Thomson Reuters.
Interesting the way the price is trading. Burberry's spring 2010 collection rounded off London Fashion Week on Tuesday. CNN's Jim Boulden went along. And as Jim found out, the caliber of guests on hand was an indication of how significant -- and as this will show you, fashion is to the U.K. economy.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENET (voice-over): It was a night of the usual suspects, and the usual hugs and kisses. But the 25th London Fashion Week had a twist, it was capped off by the British of British brands, Burberry.
The launch of its spring collection in London, the first launch in its home town for 10 years, says a lot about its attempt to reassert its British-ness as a way to increase sales. And it has hired one of Britain's hottest young actresses as the new face.
EMMA WATSON, ACTOR: I've always loved fashion. I think it's really good fun. I think it's a great way of expressing yourself.
BOULDEN: Even Britain's business secretary, who usually talks about saving jobs at Vauxhall, or defending the government's ties to Libya, got into the act.
PETER MANDELSON, U.K. BUSINESS SECRETARY: Burberry head to toe, I'm proud to be wearing the Burberry distinctive design.
BOULDEN: Though Peter Mandelson did have a serious reason to focus on fashion for one night.
MANDELSON: But it comes late into huge value to the British economy. I mean, not only the people who are employed directly and indirectly across the British economy, but of course the exports all over the world bring back enormous value and prosperity.
BOULDEN: This high end fashion event also attracted British retailer and billionaire Phillip Green (ph), a man whose empire centers on mid-range clothing stores. Green says he doesn't think retailers are such bad shape for one big reason, as we come out of this recession, many have decent balance sheets.
PHILIP GREEN, OWNER, ARCADIA GROUP: It's not like it used to be. Nothing is overly geared. If you look at the whole retail sector, nobody has overly borrowed in real terms. Money is relatively cheap, you know, in real terms, if you can borrow any.
BOULDEN: Yes, are you able to borrow some if you need it?
GREEN: No, I haven't looked for any, but I'll be disappointed if I could, but I don't want to.
BOULDEN: After the show, relief for American CEO of Burberry, Angela Ahrendts, when the recession hits, even high end brands like Burberry found itself with excess inventory. Now it's making fewer garments, so she says sales as a percentage of inventory are looking good.
ANGELA AHRENDTS, CEO, BURBERRY: Just based on the business model, even if the economy doesn't turn around, everyone's businesses should appear stronger and better.
BOULDEN (on camera): So the catwalk is finished here at London Fashion Week, but how Burberry is doing as a business will be made much more clear in little over a week when the financial results are released.
Jim Boulden, CNN, London.
QUEST: Now while Jim was just talking there about Fashion Week, I have some news to bring you. It has just been announced or reports are now starting to come in that the Fed -- the U.S. Federal Reserve says that "U.S. economic activity has picked up." That has left the Fed rate, the overnight rate, the Fed Funds rate at unchanged.
You'll be aware that the Fed Funds rate is what they call "zero bound" between zero and a quarter of a percent. As we get more information on the exact details from the Fed, we'll bring that to you.
In just a moment, we turn our attention to the "World at Work." Tasty creations, lovely molten chocolate, with just a pinch of gold, frankincense, and myrrh. It sounds like the perfect way to make a living.
(BEGIN VIDEO CLIP)
DAVID ROWE, UNEMPLOYED GRADUATE: Me and my dad were having a conversation about just getting out there on your bike. He said he mentioned this, thought it was a good idea. He didn't think I'd have the guts to do it.
(END VIDEO CLIP)
QUEST: And the graduate who is going the extra mile to get a job.
QUEST: Welcome back. It is QUEST MEANS BUSINESS. I'm just reading the original statement from the U.S. Federal Reserve, which has just been published in Washington. The Fed has decided to leave short-term rates unchanged. That much is not news. We knew that was going to happen, between zero and a quarter of a percent.
The Fed says that economic activity has picked up following the severe downturn. But the Fed also says it expects to continue the policy accommodation, in other words, cheap interest rates well into next year. That's my interpretation. That's not exactly what they're saying. It says "market forces, financial markets, and policy actions."
On this program we are now introducing you to some unusual people doing perhaps some ordinary jobs. Take for example the "World at Work" when it comes to making chocolate. Can there be anything more delightful than the prospect of dealing every day with that delicious edible stuff.
But for one man, it's not just edible, it's a passion, and it's a passion with a trick of the trade for his "World at Work."
PAUL A. YOUNG, MASTER CHOCOLATIER: With chocolate, you can sculpt it, mold it, pour it, pipe it, scrape it, you can manipulate it into anything.
So what we're making is a gold, frankincense, and myrrh bar of chocolate.
So what I'm going to do is temper it. Now you know how chocolate is really shiny when it's finished and it snaps with a clean snap? That's because the structure of the chocolate has been bound back together.
All of my apprentices, all of my new guys, I get them to temper non- stop because it's experience. So all I'm doing is taking the temperature of this from 55 degrees to 27 degrees, which is the crystallizing temperature for chocolate.
QUEST: How important is what you're doing now to the whole thing?
YOUNG: This is the most, the most important part of all chocolate- making. If you don't get this right, you cannot make a single chocolate or chocolate bar.
You're going to fill the mold overfull, so you see, it's too full. You're going to scrape the excess chocolate into the mold. And just go across the edge. This now goes in the fridge because it needs to set.
There you go. And you have -- you've finished your own finished gold, frankincense, and myrrh bars. And you have to share. Chocolate is about sharing, give us a bit.
QUEST: What's the trick of the trade here?
YOUNG: For me, it's creating. It's getting people through the door, to be inspired, to feel brave enough to try something new, to make them go, wow, this is different, and smart. If they walk in my shop on a Friday evening, going, oh, I had such a bad week at work, and they walk out smiling. That's my aim is to change the way people feel.
QUEST: Chocolate, white, milk and dark, all shapes and sizes, and they rely on this man getting the temperature right in his "World at Work."
QUEST: And the "World at Work" can be seen on this program several times a week as we delve into the way you do your jobs.
Now a tasty work if you can get it, but these days not many people get a decent job handed on a plate. You really do have to work for it, as unemployment rates go to more than 10 percent. One man is prepared to go to extraordinary lengths.
This is David Rowe, a graduate of the University of Kent. As you can see from his sandwich board around his neck, well, you will do, "job wanted" is basically what it's saying. History graduate from the university, he wants an interview. He has been walking up and down the streets seeking employment. He is prepared to work the first month for free. Basically try him out and see if you like what he does. David Rowe joins me now.
Good evening to you.
QUEST: Why did you do it?
ROWE: Why did I do it? I thought I'd go for a bit of a change of tactic. Rather than just sending out e-mails and letters to different companies, I thought I'd actually go the whole hog and get my face out there.
QUEST: So you've got the sandwich board, you've been walking around. How long have you been walking around now?
ROWE: Since Monday.
QUEST: Since Monday. What has the result been?
ROWE: Pretty positive, actually. You know, I've been given plenty of business cards and on Monday I was taken off the street and given an interview.
ROWE: . straight off the bat, yes. And today I had another interview as well.
QUEST: What job are you looking for?
QUEST: Well, you're a history graduate.
ROWE: I'm a history grad, yes.
QUEST: Yes. Come on. I'm going to interview you for your job. What job do you want?
ROWE: I'm not quite sure a particular field, but I'm really interested in.
QUEST: You just want a job.
ROWE: I just want a job, yes.
QUEST: You just want a job.
ROWE: I just want to earn some money. But I'm looking to work.
QUEST: Have you got any debts?
ROWE: . with people -- I've got a bit of few debts, about 12,000 pounds in debts.
QUEST: That's over $18,000, right. And you just want a job. So you don't really mind what you do.
ROWE: No. I like working with people, sort of interacting, face-to- face. I like something with a bit of variety in it, something that allows me to develop my own personal skills and other skills that I have.
QUEST: Were you embarrassed to be walking around the street in such a fashion?
ROWE: Yes, I was for the first, I'd say, 20 yards, I sort of had my head down, walked fast. And then I sort of settled into it. I had a few "good lucks" from people, which kind of settled the nerves. Everyone was sort of really nice. And I -- yes, after a while I sort of settled in and now it's not so bad.
QUEST: How much will you settle for a job?
ROWE: How much will I settle?
QUEST: Yes, come on, what do you want?
ROWE: I'd say 22,000.
QUEST: Twenty-two thousand pounds?
ROWE: Yes, pounds, annually.
QUEST: Twenty-two thousand, you're just out of university.
ROWE: No, I'm just out of university, I've been out of university the last two years.
QUEST: All right. Relatively. But 22,000, all right, here's your pitch. That's your camera, all right? Look straight down the barrel of the camera and take -- you've got about 15 seconds to tell anybody why they should employ you?
ROWE: Fifteen seconds, right.
I'm -- I think I'm highly employable. I think I've got good communication skills. I think I've got the intuition to do well in any sort of industry. I'm a fast learner. And I would really like to prove this to you, anyone who is willing to give me a job.
QUEST: David, thank you very much for coming on this program.
ROWE: Thank you.
QUEST: I appreciate it. And good luck. We will follow your exploits and.
ROWE: Do you have anything available?
QUEST: Say again?
ROWE: Anything available?
QUEST: When we come back after the break -- (INAUDIBLE). No, seriously, good -- we will follow this up.
We'll be back in just a moment. The Fed is leaving interest rates on hold, but it says economic activity is picking up. We need analysis on this when we return.
This is CNN, good evening to you.
QUEST: Good evening. I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN.
World leaders will be gathering in Pittsburgh later this week at the start of the G-20. They will be reviewing the growth in the world economy and deciding what to do next.
Our correspondent Maggie Lake is there with a preview.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: The Pittsburgh gathering is the third time the G-20 are meeting this year. The first two were about stemming the financial crisis, this one is about preventing a future one from happening.
Much of the talk is expected to center around rebalancing the global economy. That means countries like the U.S. cutting their massive deficit and boosting savings, and countries like China and Germany, that run large surpluses, reducing their reliance on exports and boosting consumer spending at home.
These are major changes we are talking about and it's going to be difficult to find broad consensus. Analysts say where there might be more concrete progress is the issue of compensation.
SEAN WEST, EURASIA GROUP: We've seen some of the harshest proposals coming from the French side being pulled back in recent days, proposals to put absolute caps on bonuses to be paid to bankers. So I think the area where we're actually going to see convergence is a general -- a general acceptance that there needs to be some sort of connection between risk- taking and compensation for bankers. I think this is the one issue from -- from a compensation perspective, that all sides agree on.
LAKE: All of the leaders at this summit agree that major changes need to happen, but it remains to be seen whether they'll be able to find common ground.
Maggie Lake, CNN, Pittsburgh, Pennsylvania.
(END VIDEO TAPE)
QUEST: And as those discussions and negotiations, whether it be on regulatory reform, continue, we'll be following that.
In the last hour, the U.S. Federal Reserve has voted to keep interest rates on hold -- zero bound, not to -- to a quarter of a percent, I should say. They say that the economy is picking up, but monetary policy condition -- accommodation will continue.
The market -- we need to factor in how that has been dealt -- Maggie - - and Susan Lisovicz, I beg your pardon.
Susan is in New York.
This has just come out from the Fed. No surprise and yet their comments are a little eye -- eye-watering.
SUSAN LISOVICZ, CNN CORRESPONDENT: Well, you know, the Fed has to walk a fine line because it doesn't want to -- it doesn't want to undo any of the progress that has occurred, that has prompted Ben Bernanke himself to say that the economy is out of a recession. So it's keeping this historic low interest rate that it put into effect at the height of the financial crisis.
On the other hand, it's basically saying it's got an exit strategy and ever so slowly, at a glacial pace, it's doing that. Basically, it's extending to the first quarter of the year its purchase of -- of mortgage- backed securities and basically, as one trader just told me, saying that it -- it's not going to rip the Band-Aid off, it's going to do it ever so gently.
So saying it has a plan, but it's not ready to do it -- to exit just yet.
QUEST: And the...
LISOVICZ: And that's why the market is rallying.
QUEST: Right. And the market -- just remind me before we leave you, Susan, where is the market standing at the moment?
LISOVICZ: Well, you know, we closed on Tuesday at the highs for the year for the three major averages and it was, as is typical on any Fed decision day with cautious trading ahead of it, we were seeing very modest gains. And those gains have gained traction in the minutes -- and we're only talking about 15 minutes -- since that Fed decision.
Very often, you will see the markets, as you well know, Richard, fluctuate by the time of the close.
But right now it seems to be very calm and it seems to be a positive response to what the Fed has done, which is nothing, but what it has said.
QUEST: All right, Susan Lisovicz joining us from the Stock Exchange.
Let's leave Susan and put some perspective into what the discussion is about with the Fed.
Peter Morici, who is always welcome on this program.
Good evening to you, Peter.
And let me just pause for a second, you know, because President Sarkozy of France is at the United Nations and is just going to the podium. He's -- he's now on the -- he's now at the podium but he hasn't started speaking.
So, Peter, if I interrupt you in the middle of your talking, please do forgive me on this.
PETER MORICI, UNIVERSITY OF MARYLAND: OK. Go ahead.
QUEST: Let's first of all begin. The Fed says economic activity is picking up but that the accommodation -- I beg your pardon, we do have to go straight away to the United Nations and President Nicolas Sarkozy.
NICOLAS SARKOZY, PRESIDENT OF FRANCE (through translator): Speaking to you today, I am well aware that under the current case of circumstances, we all have a historic responsibility. We are right in the middle of an unprecedented financial and economic crisis. We are on the threshold of a planetary ecological disaster. We must, right now, invent a new world where the follies of yesterday will no longer be possible. And this is our responsibility now.
We all know very well toward what type of catastrophe we could be led by our obstinate attempts to solve the problems of the 21st century using ideas and instruments from the 20th century. From now on, no one can say I didn't know. Everyone is now aware.
The path taken over the last few decades is a dead-end. This universal awareness is borne out of sorrow, suffering, anxiety. Ladies and gentlemen, heads of state, we are politically and morally accountable for this sorrow that is being experienced all over our planet. There are tens of millions of men and women who have lost their jobs, who have lost their homes, a billion human beings are suffering hunger. And there are hundreds of millions of our brothers and sisters who have no access to water, energy, minimal health care and it is up to us heads of state and government -- and this is not anyone else's responsibility. It is our duty as heads of state to restore hope to these millions of beings, to make up for the consequences of the crisis, because they had nothing to do with it.
To all those who are paying for errors they did not make, outraged by the behavior of those who still continue, after having led the world to the brink of disaster, continue to grow indecently rich, we have to restore hope to those who fear that if we do nothing, they will still die in absurd wars from another age at a time when humankind has so many other challenges to face.
We owe an answer to all these people and France's answer is clear -- things cannot go on as before. Things have to change. We cannot accept that tomorrow things will just start all over again and there will be another crisis.
After such a strong disavowal of our usual way of thinking, our certainties and our prejudices, the task before us is as great as the task of the men of good will who joined forces here after the Second World War to lay the foundations of a new political, economic and monetary world order. The generation that preceded us was able to discharge its responsibilities.
Now, are we going to be able to do the same?
Will we live up to our responsibilities?
Because the world has to change. It cannot be otherwise. The only question that remains is whether the world is going to change because we are going to be wise...
QUEST: President Nicolas Sarkozy addressing the U.N. General Assembly.
And appropriately for the hour that we are on with QUEST MEANS BUSINESS, the French president talking and starting his speech with the crisis. He says for the billions of people who are paying the price of disaster for problems that they did not create while other people became indecently rich, he says things have to change, the message needs to be that tomorrow that things cannot be as they were before.
Let's bring back in Peter Morici.
Before we talk Fed, Peter, you are...
QUEST: ... you were hearing President Sarkozy there, a clear clarion call, with the G20 coming up, that they've really -- that it is their job to do more than they have done already.
MORICI: Well, I think it is. You know, one of the things we have heard from Wall Street and Bay Street in Canada and in London and so forth is that these outrageous salaries bankers earn are a product of the -- all the wealth that they -- and opportunity they create in capital markets. Well, that's simply not so. They've nearly destroyed the global economy with their greed. They've basically engaged in sharp practices, which buried losses, turned them into apparent profits, but they were really losses. And now they're resisting any kind of meaningful reform. I published an article about that yesterday in "The Baltimore Sun" here in the United States.
And the Americans are very resistant to change...
MORICI: But let's be clear -- the limits to what can be accomplished, even if we reform the financial markets, it's not going to solve the problems of global poverty and the problems of war and famine in these places...
MORICI: ... because a lot of those problems are endemic to those regions, not what goes on in the United States or French.
QUEST: But when Sarkozy turns up at the United Nations General Assembly talking about people becoming indecently rich and how things need to change and they need to -- and the world leaders need to make up for this crisis, does he arrive with a sort of European socialist tinge so everybody immediately, on Wall Street and in the administration in the U.S. ignores what he says?
MORICI: Well, they're trying to paint that -- and Barack Obama is trying to dismiss it. As much of a liberal president as he is, he says, well, you know, we -- we don't cap salaries in the Silicon Valley or the NFL. In fact, we do cap salaries in the NFL. What's more, the market hasn't worked for us. And this is very much like John D. Rockefeller, when he established enormous wealth and monopoly influence. He just couldn't believe the federal government would take his toys away through anti-trust. And they did.
And we've seen that repeat itself -- the arrogance of Bill Gates. He could have been dismembered, but the judge chose not to do it.
My feeling is that Wall Street is behaving like arrogant monopolists of the past and unless their greed is harnessed and, frankly, unless a spear is put through its heart and (INAUDIBLE)...
MORICI: ... reform -- no, I'm serious. You know, I re -- I knew Walter Wriston, the president -- the vice -- the chairman of Citigroup before John Reed. He did not make the kind of money these people make. He made what an executive would in an industrial corporation and Wall Street prospered and grew.
What's going on right now in private equity and these $100 million pay days for a trader is absolutely obscene.
QUEST: So when (INAUDIBLE)...
MORICI: Sarkozy is right.
QUEST: Just a minute.
So when -- so when, for instance, today, you have those on both sides of the Atlantic -- the Treasury secretary in Washington, the E.U. Commissioner in Europe -- saying that regulation is coming, systematic risk must be dealt with, living wills, a stability board, are you saying that that stands any realistic chance of being passed?
MORICI: My feeling is what the Americans are proposing will not work. And I'm afraid that what the Americans are proposing is what will come to pass, because if you're going to have a floor under regulation, it's the least common denominator.
The Fed's saying that it's going to review contracts so that there's not un -- unnecessary risks being taken. We're going to have regulations like the income tax code. These guys will run around it. It will be like tax evasion. It won't work.
The only way to deal with this is to put a cap on the share of net revenue that is -- that executives and traders are permitted to take out of banking institutions and institutions that behave like banks and to say if you want to be a primary security dealer or engage in banking activities in the United States...
QUEST: All right...
MORICI: ... you have to abide by that and hope the others do the same.
But they are not prepared to do that.
QUEST: Peter, it's always good to have you.
And thank you for nimbly moving from the Fed to Sarkozy to banking regulations. That's why we love having you on the program.
Peter Morici joining us from the U.S.
We will be back with more QUEST MEANS BUSINESS.
Oops, there's something wrong with this bell.
QUEST: Welcome back to QUEST MEANS BUSINESS and the weather forecast.
Guillermo is at the World Weather Center to bring us up to date.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Pretty good today, Richard, for you. And I see here on the radar maybe some drizzly conditions here and there, but no observation coming from London City Airport of rain.
You see everything is going on in the north, nothing in the south. And we have a high pressure pumping all that into the north, which is good conditions. But we have problems in the south. I'll tell you in a second where exactly.
So the weather looks good, 20 degrees or so. The next days looking fine.
But problems in Australia, perhaps very soon in New Zealand. We've been reporting of a deep low pressure center that's coming from one side of Australia and moving into the east. And the result not only big winds, but this.
Let's listen in.
(BEGIN VIDEO CLIP)
SUSAN PAGET, CNN IREPORTER: It's 7:15 a.m. and obviously a little bit lighter and -- and still very, very thick with this orange -- orangey haze and -- of -- of dust.
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ARDUINO: Well, that is because we are getting a lot of winds from the desert blowing all that dust. So people with asthmas and other respiratory issues have to be extremely careful.
Now, ferries were suspended; also problems at airports. And New South Wales saw hailstones. Because of all the instability here in the area that will continue.
Now, this is going to move into the Tasman Sea and maybe we get the same into New Zealand. We'll see what happen -- what happens, because it happens all the time in other parts of the world, as well. From China and Mongolia, we get dust that goes all the way to Japan and even to the United States -- the same, same event.
Well, the winds will continue. The winds will be moving into the Tasman Sea, as I said.
Now in Europe, I told you this low is producing a lot of rain in Sicily and in Tunisia and Northern Africa. So get ready for that.
And if you're watching from Munich and its Oktoberfest, you want to know that Thursday is going to be fine. Friday and Saturday, some clouds. We have a lot going on in Europe. It's this high bringing nice conditions, this low bringing the bad weather. But we have the winds here and the instability in northern sections especially.
We'll see you on the other side of the break. Richard will be with you.
QUEST: Corrupt business practices are weakening economies around the world, prolonging the global recession. Transparency International, which campaigns against corruption, has highlighted the seriousness of this problem, saying the scale of dirty practices in the corporate world is massive. Its latest report says corruption costs economies tens of billions of dollars annually, raises the cost of doing business dramatically and much of those costs ultimately get passed onto you and me.
The report says firms must work harder to battle corruption and establish corporate integrity because corporate integrity pays.
So much so far and so good. And perhaps some, arguably, nothing that we haven't heard before.
But let's talk about the report and the danger that it -- Huguette Labelle is the chair of Transparency International.
She joins me now.
Ma'am, the -- whenever there is a major crisis like this that we're facing at the moment in -- in the economic world, it both promotes some people out of extremists to behave badly, but it also exposes other people, doesn't it?
HUGUETTE LABELLE, TRANSPARENCY INTERNATIONAL: Absolutely. You know, first of all, in terms of people, as you said, you know, it brings about, very often, unsafe products, a problem of security of roads that are built, of bridges, of buildings. You know, we have seen around the world the devastation that corruption does.
And the reason why we feel that this report this year is very timely on corruption in the private sector is that the private sector also is badly affected by corruption, in the sense that, you know, it affects their bottom line. It really affects their valuation...
QUEST: Right, but...
LABELLE: ... their staff morale...
QUEST: But temptation also becomes much greater, both in the public and the private sector. Desperation is the mother, if you like, of corruption.
LABELLE: Absolutely. You know, it is. But yet, when we look at those companies -- which we do in the report -- who have gone to strong codes of ethics, well implemented, good monitoring, what we see is that these companies are outperforming those who are more ready to bring a suitcase full of cash to pay bribes or to use intermediaries and put these monies in fiscal havens where they can be taken by corrupt leaders.
So, you know, it -- it affects positively the companies...
LABELLE: ... if they have strong integrity systems.
QUEST: Bernie Madoff -- I'm just reading Erin Arvedlund's book on Madoff and the way in which that scandal and the way in which that crime took place. There is something about all of this in us, isn't there?
We are -- you have to have a high ethical and moral value, because, for example, a lot of Madoff's investors closed their eyes to what, perhaps, they should have realized was an obviousness.
LABELLE: Right. Right. Well, actually, you know, it is very difficult for consumers, sometimes, of these very intricate products to have the knowledge to be able to know whether this is good for them or not. And this is why your point about, you know, on one hand, we need strong regulations to fill the gaps where there are gaps. We need good enforcement by governments of these regulations.
But at the same time, you need to have strong integrity in the companies, because people will find ways of going around these -- these regulations.
QUEST: And Huguette, we have in my studio here -- you can't see it, but I have a set of traffic lights which -- red, amber and green. Pretty much as you would expert.
When we talk about corruption and transparency at the moment -- red, things are getting worse; amber, you're happy but not really happy; green, things are getting better.
What's it going to be for you today?
LABELLE: Well, you know, we don't know whether today it is worse than yesterday. But one thing we know is that today, trillions of dollars each year are lost to development that should go to development around the world. So the light is very red.
QUEST: Red -- I went through all of them.
Many thanks, indeed, for joining us.
You're welcome back on the show any time to come and talk about these things.
We'll be back with more.
This is QUEST MEANS BUSINESS.
The Profitable Moment.
QUEST: Today's Profitable Moment.
We've been talking a great deal about the various financial and regulatory reforms on both sides of the Atlantic.
With the crisis slipping into history, the danger now is that reform gets derailed by special interests and partisan players. Lobbyists and the financial world are arguing already for less rather than more. Nothing would be more damaging at the moment if this financial plumbing gets boshed ).
We have been awash with the sewage of regulatory failings. When it comes to financial reform at the G20, it's time to get the drains up once and for all.
And that's QUEST MEANS BUSINESS for this evening.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I do hope it's profitable.
I'll get a new bell tomorrow.
Christiane is next, after the headlines from the I. Desk.