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Quest Means Business
Washington Proposes New Set of Financial Regulations; Battle Over the Future of British Airways
Aired March 15, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: It's Washington versus Wall Street, at last a bill for new rules on banks. The question, whether it will become law.
A battle over the future of British Airways. The airline reveals plans to beat a strike, at what cost?
And the day the dot.com was born. A quarter of a century since an Internet milestone.
I'm Richard Quest, back in London, where I still mean business.
Good evening.
Financial reform, it is now one and truly a political football; 18 months after the collapse of Lehman Brothers and American lawmakers are still kicking around proposals about how they should change the rules. In the last hour, the Democrat Senator Christopher Dodd has unveiled a new version of his reform bill, despite months of horse trading, he still hasn't got Republican support.
Now, under pressure from Republicans in the Senate, Senator Dodd has made a dramatic departure from the bill that was drafted just four months ago. At the center of the changes some new rules for the Federal Reserve; now the reason we are focusing and leading tonight to bring it to our attention is because as the U.S. goes, so of course this could be the major reform affecting the global financial architecture.
The big difference between the old and the new, it comes down to this: The Fed's role. The U.S. Fed will retain oversight over many banks, the big banks, the so-called big $50-billion asset banks, the Citigroup and all of those. The Fed, which was to be stripped of a lot of its regulatory authority, given to an independent, super-type, super bank regulator, will now keep it. And it was the Fed's role that had become controversial with some saying the Fed didn't stop the accident from taking place, others saying that it was a mistake to get rid of that expertise.
Overall, from Wall Street's point of view, 35 banks with assets of over $50 billion for the first time, of course, in U.S. history smaller banks will get their own special, separate regulator, and there will be consumer protections put in as well. Basically, preventing people from getting themselves into misery. But all firms will have to abide by rules, written by this new consumer protection authority, which of course is part of the Fed.
Now, preventing future crisis, the core of the change, no more "too big to fail." It was the "too big to fail" that was widely believed to have been the reason why banks like, or insurance companies , like AIG, had to be rescued. Citigroup, Bank of America, you name it, the money was poured in, but apparently, living wills, all sorts of things, Chris Dodd says, major regulatory reform and sooner, rather than later.
(BEGIN VIDEO CLIP)
SEN. CHRISTOPHER DODD, (D-CT) As I stand before you today, our regulatory structure, constructed in a piece-meal fashion, over many decades, remains hopelessly inadequate.
There hasn't been financial reform on the scale that I'm proposing this afternoon since the 1930s. Let me be clear. We are still vulnerable to another crisis and neither I, nor anyone else, can tell you with any degree of certainty that the American economy could survive another crisis of this magnitude. It is certainly time to act.
(END VIDEO CLIP)
QUEST: Chris Dodd gives you a taste of the proposals and, of course, the wide range of them. But we've been down this road before. The first proposed bill got nowhere. So, why should this one go any further? We are going to talk to Peter Morici in just a moment, or three, in D.C., who will put some perspective as to whether it should be passed. Maggie Lake is in New York.
Maggie, putting the Fed back into the equation, will that be something that Wall Street will approve of?
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Absolutely. In fact, that is the one thing that everyone is sort of jumping on, initially, right here, as they start to at least see the headlines. And that is pretty much all we are operating on right now, is a framework. Of course, the bills are detailed and they are not even out in full yet, but just on those headlines, Wall Street likes that idea. They were very against losing that expertise, as you pointed out earlier, that was their argument.
And, in fact, we are not seeing financial stocks react very much at all because Wall Street very much of the opinion that this is when the real negotiating starts. There are a lot of details to be worked out. The other thing that they broadly agree on, even if it is begrudgingly, or in line with this, is something that putting in a framework to deal with the systemic risk, "too big to fail", how to wind down an institution that is in trouble. Everyone acknowledges that, that needs to happen so the whole system doesn't get pulled.
So, those two things are OK. This is what they are worried about, still, though. The consumer protection agency, OK, it is going to happen. They are happy it is in within the Fed building, and not its own, additional, brand new regulator. What is the check and balance there? The president nominates the head, does the Senate have to confirm? Can another body overrule some of those rules or new framework they put into place? That is something.
And then this one is really the one to watch. The powers of the Systemic Risk Council, this is the organization that has-is the scariest to Wall Street, has the largest ability to hurt their profitability. They can pretty much tell banks what they can do, when they can do it, how they can do it. We don't have the details of how that will actually work. That is what they are going to watch.
QUEST: Right.
LAKE: And then, finally, derivatives. Something needs to be done, if it is too onerous they feel it will move-just move that business offshore. So, that is another area they are worried about.
QUEST: Will Republicans sign on to this?
LAKE: Here's the thing, it is hard for them to just flat out block it like they are doing with health care. It won't play well at home, with voters who are still so angry. You can't stand up and fight for Wall Street. So, it is in their interest to come to some sort of agreement. But it is also within the Democrats interests to work with them because they want to get something passed desperately. So, the feeling is that there will be some sort of compromise. Wall Street's betting that means a watered down version, which is going to be better for them, than something that was going to be much more stringent.
QUEST: All right. Maggie Lake is in New York. Thank you, Maggie, for telling us what's happened. Let's go to the University of Maryland and our good friend, Peter Morici, who joins us.
Peter, Maggie answered my question whether it might get passed or not. My question to you, is should this bill get passed?
PETER MORICI, UNIV. OF MARYLAND: Absolutely not, not in its present form, because it doesn't address the basic system risks. The assumption is if consumers got better information, they wouldn't have made bad loans. The reality is most consumers knew exactly what they were doing. It was explained to them, they took bets on the housing market and lost.
With regard to the Systemic Risk Council, it is the Wizard of Oz. Once you pull back the screen there is nothing there. Going into the crisis, in the years before it, Treasury Secretary Paulson knew the banks had those special structured investment vehicles, where they were keeping the mortgage backed securities. He said, I see no-no risk in those.
QUEST: Right.
MORICI: I see no threat. So, they knew about it, what makes you think that if you get them in the same room to talk to each other they'll know about it?
QUEST: Bit of credit, where credit is due, here, Peter, at least the Fed is back in the room, and back in the game.
MORICI: Well, that's true, but that is not just a Republican idea, Geithner has been lobbying for that. The only person that wanted to do that was Chris Dodd, because he was playing to the audience in Connecticut before he decided to give up the run for Senate, to retire.
When he was in trouble because of the bank-loans he had taken and so forth, he came up with this idea. Now, he's decided to abandon it. Everybody is applauding. Chris Dodd sat down on that.
QUEST: All right. So, we have an exceptionally complicated scenario; a bill where frankly, anybody can make anything out of it. When would you expect it to be marked up, passed and something actually signed into law?
MORICI: Well, it depends on what happens this week with healthcare. If the president doesn't get a deal with healthcare, there are going to be two things. An enormous distraction, and it is going to make it impossible for the Republicans to do anything like pass this bill on 51 votes. They are going to have to deal with the Republicans one way or the other.
And if healthcare doesn't pass, then that is going to go all the way to the end of the year. These negotiations will take forever.
QUEST: Right.
MORICI: If health care passes, and this president starts to get some "mo", then we can start to get something by the end of the summer.
QUEST: The point, though, it is 18 months into this crisis. It is over a year since Lehman Brothers. Frankly, we are managing OK without this bill. Is there the necessity for getting it that people seem to think?
MORICI: Oh, I agree with Dodd, we need to do something. The risk that were present three years ago are still present today. The banks are back to trading-their old tricks, they are trading in derivatives again. Goldman Sachs, we saw what they did to Greece. They basically "Enroned" their books.
No, we need to clean up Wall Street. This bill doesn't do it.
QUEST: And Peter, you have done the business for us tonight. Many thanks, Peter Morici joining us from D.C. Lovely to see you, Peter, as always.
You might have noticed, the Big Board on Wall Street, 10,607. Down 17 points, at minus just a tenth, or at 1.5 percent. We won't waste too much time, other than to mention it was a weak start. Financials and energies were lower. And of course, it is the Fed meeting on Tuesday. There was one notable merger I need to bring to your attention, Phillips-Van Heusen, it is the company that owns Calvin Klein, makes shirts. It is buying Tommy Hilfiger. The deal is around $3 billion.
We turn our attention to the markets on this side of the Atlantic. No relief in Europe, where the many markets are closed between a 0.05 and 1 percent there. Look at the numbers. Mines, basic industries, the worst performers, the reason China-is China going to put the brakes on an action that would reduce more liquidity in the market. Xstrata down 3 percent in London, banks volatile and of course, they were waiting for that news out of D.C. which we have brought to you. And the cautionary EU report, showed the number of people in work in the Euro Zone fell in the last quarter of '09.
So, you are up to date with what is happening in the financial world. QUEST MEANS BUSINESS, Fionnuala means the news from the CNN News Desk.
(NEWSBREAK)
QUEST: Now, it could be the most expensive piece of action, $20 million a day, but the boss of British Airways says he will continue to fly the flag, with cabin crews set to walk out this weekend. We've got details now of exactly what BA is going to do.
(COMMERCIAL BREAK)
QUEST: You will be a little forgiven if you are confused about the state of EU bailout and assistance to Greece. Well, tonight, yet another contingency plan is on the table. European finance ministers are working out how they will help Greece if its debts become too much to bear, and if Greece asks for help. Meetings are taking place in Brussels to hammer out what a safety net would look like. They've already made a general promise to protect the financial stability of the Euro Zone. They refused to say what concrete help they would do.
It is the first time the Euro Zone has created a financial support facility for a member. In case of Greece ministers say they are confident it won't be needed. Athens is saying all it wants is political support not a bailout.
Jim Boulden is with us. When is a bailout not a bailout?
(LAUGHTER)
When it's called political support?
JIM BOULDEN, CNN INT'L. CORRESPONDENT: Well, political support, but no financial support. They are asking-Greece isn't asking for anything more at the moment. Publicly-
QUEST: Talk is cheap. You can have as many political-
BOULDEN: Yes.
QUEST: They've got political support.
BOULDEN: No, but it has helped. It has helped the stock markets. It has helped the bonds funds between German bund and the Greek bond. So, it has made a difference now, at the moment.
QUEST: It has helped for one simple reason, Jim. Because as long as there is political support. It will be back to back financial support.
BOULDEN: Well, but we don't know the framework. And that's what they're trying to do. There is no framework within the European rules for some country inside the Euro Zone to have this problem. And so since those rules don't exist and Greece said, well maybe we'll go to the IMF and that scared everybody. They thought, well, we had better get together and come up with some kind of rule.
QUEST: Now, we know the EMF may not be a runner.
BOULDEN: No.
QUEST: And it would take years to set up anyway.
BOULDEN: Yes.
QUEST: We know the IMF is not a runner, Chancellor Merkel is still not very happy about providing money. President Sarkozy probably would if pushed. Where do we stand?
BOULDEN: As far as money?
QUEST: Well, just in terms of concrete help? What is going to come out of this meeting?
BOULDEN: This meeting, the reason why everybody seems to be watching this meeting is because of that word you used, "bailout". They think that somehow, we saw stories over the weekend, that there would be this number of $25 billion euros, would come up and be created. Well, that hasn't. And they isn't going to be that number. What they're looking for is a framework of how they get to that? Do you go loans from private banks? Do you do bonds, who buys the bonds and how-that framework doesn't exist. That is what they need to hammer out. That is what they're talking about right now in Brussels, over dinner.
QUEST: And what do Greek officials say?
BOULDEN: Well, you know we have another strike coming tomorrow and you've got the Greeks saying that the tax rises they've done, and the tax- the cuts to wages and things, is going to be enough to start this process. But Greece needs $74 billion this year, in the markets, from the bond markets. And they need to have the confidence to be able to do that.
QUEST: Now, you have been talking to Greek officials?
BOULDEN: Yes.
QUEST: And on this very point, and former officials.
BOULDEN: Yes.
QUEST: And they know they need something, the question is what.
BOULDEN: Well, a lot of them said that they would want the IMF, but last week when I was in Ger-in Brus-sorry.
QUEST: That's OK.
BOULDEN: I've been to so many place lately.
(LAUGHTER)
BOULDEN: Anyway, last week when I talked to Nikos Christodoulakis, he was the finance minister from 2002 to 2004, we talked about the IMF. We talked about the need for a bailout if there is one. And we talked about these credit default swaps and here is what he had to say.
(BEGIN VIDEO CLIP)
NIKOS CHRISTODOULAKIS, FMR. GREEK FINANCE MINISTER: I think that the crucial difference between then and now is that at the time, five years ago, Greece was able to borrow, just a little bit borrowed from Germany rates (ph). When Germany was borrowing at 4 percent, I was able to borrow at 4.1 percent.
Because I think that the Greek economy at the time had gained a lot of credibility in the international markets. And I think that the growth was very strong, which was creating a lot of positive and optimistic extra cash (ph) for the people, and for entrepreneurial activity, over the years 2008 and 2009 at unprecedented levels. That created a major problem for the ability economy of Greece.
And I'm pretty sure that the austerity package, which has been announced last week, will be in a position to cure this problem, so we regain credibility and we regain our position in Europe, and international markets.
BOULDEN: So you strong support the steps the government has taking, even though we've seen people on the streets, we have seen strikes, we have seen public sector and private sector workers very unhappy with these steps.
CHRISTODOULAKIS: I think it quite natural for public population who are direct affected all these measures to protest, and try to defend their (UNINTELLIGIBLE) interests. But I'm pretty sure that if the austerity package does not succeed, there will have a lot more to loose. Because in that case the economy of Greece will enter a prolonged recession.
BOULDEN: Certain members of the current government say that going to the International Monetary Fund should be an option, certainly something that the European Union doesn't seem to like. Do you support the idea that maybe the IMF should step in and help Greece bring down its budget deficit and give it loans to pay off some its debts.
CHRISTODOULAKIS: Well, personally, I strongly oppose the idea of inviting the IMF to intervene in Greece. Of course, the IMF is very much welcome to advise us and to participate in meetings and to provide information, but not to intervene through an additional (ph) program.
BOULDEN: You were not finance minister when the Greek government used Goldman Sachs and maybe other investment banks, with some credit default swaps and things, but what do you think was the outcome of that? And do you think that was wrong for the Greek government to do?
CHRISTODOULAKIS: Well, I think that it was at the discretion of that particular government at that time. It was absolutely within the rules that Euro states was allowing the member states to follow. And Greece did this swap without receiving any cash, in order to borrow, without recording into the deficit. It was simply an accounting method to avoid the extreme valuation of the yen, at the time, and to transform Greek debt into euros. It was very simple. So, Greece, perhaps at the time was facing very acute problems, but it did it. And it will do it again.
BOULDEN: But you are still--
(END VIDEOTAPE)
BOULDEN: So, Richard, really no indication yet from the government that they are going to back down, despite all the strikes and the sort of minor violence that we've seen on the streets. And we will be getting more strikes in the next couple of weeks as well.
QUEST: All right. Let's stay with industrial action. Jim Boulden, many thanks, indeed.
BOULDEN: Yes.
QUEST: As we talk more about this. British Airways is gearing up its timetable for a three-day strike, that starts on Saturday. Now, in the last few hours the airlines released details of a schedule that it hopes to operate when the cabin crew walk out. BA says it is aiming honor 60 percent of the bookings over the strike. Roughly 45,000 ticket holders are being told they can still make the trip as planned. Thousands more will be offered seats on alternate flights-or they will be booked with other airlines-or indeed, be on one of the planes that BA is leasing, so-called wet (ph) leases, 22 planes and drawing thousands of volunteer crew members who normally do other jobs. Some say the strike will cost BA upwards of $20 million a day, adding together the leasing costs and the lost income from all the cancelled flights.
The British Prime Minister Gordon Brown said the strike was not in Britain's national interest. He said the action, which is set to last 7 days in total, was "unjustified" and "deplorable" and should be called off. Mr. Brown's transport minister said at the weekend, the strike threatens BA future. Simon Middleton is a leading Brown strategist and a former BA consultant. Mr. Middleton joins me now via broadband.
Evening to you, Simon.
SIMON MIDDLETON, FMR. BA CONSULTANT: Hello there.
QUEST: Good of you to join us. Listen, first off, how realistic do you think this cobbled together schedule of wet leases, other airlines, (UNINTELLIGIBLE).
MIDDLETON: Well, I'm glad I'm not traveling with British Airways during that period, I have to say. But I think BA has do take some credit for trying to put a schedule together. Whether it will work or not, I don't know.
QUEST: Yes, I mean the logistics of that-well, you know, let's not be pessimistic. Only time will tell.
MIDDLETON: Yes.
QUEST: To use that age old expression. But do they get-do you think they do better trying to do this, from a brand point of view, or are they not better off just shut the airline down and tough it out?
MIDDLETON: No, no, no. I think by trying to put a schedule together they are showing willing for customers. But as long as it is combined with the option, which I believe it is, for customers to opt out if the way to. So, I think they are probably doing the only sensible thing they can do actually. And from a brand perspective, if they just sort of put up their hands and say, OK, we are going to shut down for the seven days, that would be disastrous from a brand point of view. Even more so than the strike itself, which I think is massively damaging.
QUEST: Again, from the brand point of view, you've had two senior government officials, first of all Lord Adonis, saying that the future of the airline is at stake and Gordon Brown, calling it unjustifiable. Is it- that obviously plays into the airlines' hands rather than the union's doesn't it.
MIDDLETON: It does, absolutely, and curiously, this is a brand opportunity for Gordon Brown, which he is massively jumped on, of course. It is a high risk strategy, but I mean we are talking about the British Airways brand, and not Gordon Brown's. But at least Gordon Brown is showing some real sort of steel by turning on the unions, of course, which traditionally have a very tight relationship with labor. So that is why it is interesting. I think they are both right, Lord Adonis and Gordon Brown, that it is not only damaging for British Airways, but damaging for the brand of Britain. It is after all the flag carrier.
QUEST: Well, I was tempted to say that is a rather-rather traditional view Simon, in this day.
(LAUGHTER)
QUEST: I mean, in this day and age where-I'll give you that famous line, that they say, whenever you land. We realize you had a choice of carriers and we thank you for your business.
MIDDLETON: Yes, well, you do have a choice of carriers. And no one has benefiting more than perhaps Gordon Brown, than the rival airlines. The travel agents and the tour operators and the business travel organizers will all be not wanting to take risks and they'll be reverting people to other airlines, so it is great days for Virgin, great days for EasyJet, etc cetera. But terrible for Britain.
QUEST: And, Simon, you will join-we'll talk again as this strike gets closer. Keep and eye on the brand. I'd like you to keep an eye on the brand aspects for us, so we can talk to you more about that. Many thanks. Thank you for joining us to talk about that.
MIDDLETON: Thank you. I will.
QUEST: Now, a virtual milestone, with a very real economic impact. From boom to bubble and back again, 25 years in the life of dot.com, in just a moment.
(COMMERCIAL BREAK)
QUEST: A landmark in cyberspace, it was 25 years ago, today, in fact that the first dot.com domain name was registered, giving birth to a revolution in computing and in business. So, March 15, 1985, a technology company in the U.S. was given the symbolic dot.com address. The world's first ever dot.com site. That site is now gone. Over the last quarter century over 80 million others have been created. A new study estimates that dot.coms are the platforms for something like $400 billion worth of economic activity every year. And if you can tell me how anybody comes up with that number, I'll buy a round of drinks at the bar.
Brent Hoberman is the co-founder of the site, lastminute.com and he is now mydeco.com.
Now, Brent, you started lastminute, when? In 1998?
BRENT HOBERMAN, CO-FOUNDER, LASTMINUTE.COM: I went public 10 years ago today.
QUEST: Ten years ago today?!
HOBERMAN: Yes, we should be celebrating.
QUEST: We should be. So, 10 years ago today, which was 15 years after the first dot.com.
HOBERMAN: Yes.
QUEST: You went public?
HOBERMAN: Yes.
QUEST: So, you are a perfect person to perhaps tell us what has changed over that period, in terms of the way dot.coms perform?
HOBERMAN: I think it is just-now it is so much, it has become what we thought it might do. Which is not even the Internet you talk about, it has become part of the fabric of doing business. So, it really has changed so many industries. And since that time, we have seen obviously social networking has a huge impact; Facebook, 600 million users. And then we have seen a lot of businesses, even in the last 10 years, change their industries.
QUEST: What we learned from those early days is that some things don't work. And that the rules of making money haven't changed, have they?
HOBERMAN: Yes. No, they haven't. I think what happened is getting to customers. I think the rules of marketing have changed, actually. I think getting to customers and getting direct to customers have had a dramatic impact on business.
QUEST: For instance, with mydeco.com, what are you doing differently than you did with lastminute.com. Now, I agree-one is selling furniture and knick-knackeries, the other selling holidays. So, there is a difference-and travel. But what execution did you do differently?
HOBERMAN: Well, actually what I thought-when sold lastminute I was quite jealous of all those sites that were lead generation sites. Like the Kayak.com and stuff like that in travel, or the travel supermarkets, things like that, which actually didn't have to have many people. Lastminute.com still had 2,000 people. So at mydeco.com what we are trying to say is, OK, we're going to do that lead generation business. It is too late to do it for travel, but for furniture. So, we are just pulling in lots of stuff, classifying data, using the power of the internet as a lead generator to existing retails stores, and staying in middle.
QUEST: But then how far are you entrepreneurs all thrashing around to find the next killer app, if you like? The next lastminute-or I mean, the next one that is going to revolutionize the chain.
HOBERMAN: Yes, I think what's happened as well a lot of people have gone back, I'm sorry it is not 25 years ago, but 10 years ago, to those business models that died 10 years ago, the let's-buy-its of this world. So we are also looking at a lot of group buying. That's done very well. Do you remember those sort of group buying businesses.
QUEST: B2B?
HOBERMAN: Well, no, the group-it is like if you get all your friends to buy something then the price goes down. There is a lot of-a
QUEST: I haven't got any friends.
HOBERMAN: There is a lot-or your viewers.
(LAUGHTER)
A couple of those.
QUEST: Hey, hey, hey-
(LAUGHTER)
HOBERMAN: Then the price goes down. So, I think there are new models and things that didn't work back in 2000 for example, that will work now.
QUEST: Really? So, things that have been tried? Why should they work now if they didn't work then? If it was a bad idea then, what makes it a good idea now?
HOBERMAN: Well, fashion is a good example. Back in 2000, people were, oh, people won't buy clothes online, whatever. Now we have just seen rumors in the press that Neta Polta (ph) going for 350 million pounds. We have seen Asaunce (ph) go public and doing very well. So, we've seen existing retailers, even the Nexta (ph) as well, doing good business.
QUEST: So, you are still a-you are still a convert of the whole thing.
HOBERMAN: The scale, we've got the scale, and what people say is that in a couple of years more than 50 percent of sales will be web influenced. That is huge.
QUEST: Web-influenced. Many thanks, indeed. Many, thanks.
Now, when we come back in just a moment, a runaway car or a wild goose chase? When a U.S. driver wrestles his Toyota to a halt last week, the immediate danger was over. Of course, the issues and the questions were just beginning. QUEST MEANS BUSINESS, good evening to you.
(COMMERCIAL BREAK)
QUEST: Good evening. I'm Richard Quest, QUEST MEANS BUSINESS, this is CNN.
Wall Street demands our attention and there, where stocks can't seem to get moving on this first trading day of the week. You can see the numbers on the screen. Poppy Harlow is in New York for us, this evening.
Good evening to you, Poppy. Now, a lot of happening in the sense of a lot of mish-mash, could be this, could be the other, a big of mergers, a bit of economics. But what is the thrust of the day?
POPPY HARLOW, CNN FINANCIAL CORRESPONDENT: Sure.
The stocks, looking right now at the Dow the S&P, the Nasdaq, really on the flat line. This is exactly the story we saw last week Richard. No momentum on Wall Street. And then you have a warning from Moody's, one of the key rating agencies, saying that the credit risk of triple As that many of the major nations have right now, the U.S., France, Britain, Germany, the danger here of losing that, has increased. They call it their distance to downgrade reading.
And it has substantially diminished, meaning there is a smaller margin of error for these countries to make a mistake right now, as especially the United States falls more and more into debt, Richard. That is the key right now. Looking at the numbers I'm surprised investors are not reacting more, Richard.
QUEST: OK, now that I need to talk to you about, because when I saw that, it was buried in a bit of wire copy, somewhere near the bottom.
HARLOW: Right.
QUEST: During the day, it has percolated up. And the U.K. was also mentioned. It is also with reversible somethings or others.
HARLOW: Right.
QUEST: But the-but why aren't people paying more attention, because it would be monumental if the U.S. lost its triple A.
HARLOW: I think it is two-fold. I think first of all it is the reliability of the credit agencies, let's not forget that these rating agencies missed a lot of what lead to the crisis. So, personally I think that the rating agencies aren't as reliable, some would say right now. They don't pay as much attention to what they do. They are also looking at Greece and the Euro Zone right now, still as a major, major situation of confusion and of concern. Also, look at the United States falling more and more into debt, more and more spending. This is nothing new.
Moody's is coming out with an increased warning, Richard, but I don't think that this is anything really new or out of the ordinary. Particularly, when you are looking at the debt issues here, in this country, Richard.
QUEST: All right. Poppy Harlow, many thanks indeed. We'll talk more about that, no doubt, in the weeks ahead. Poppy is in New York.
Now, in California, right now, Toyota is defending the safety of its top selling hybrid car, the Prius. That much you know already, the serious allegations that have taken place. Now, a driver is still insisting that his Prius accelerated uncontrollably a few days ago. Toyota and U.S. safety regulators have their doubts about the accusation, as Susan Candiotti explains.
(BEGIN VIDEOTAPE)
SUSAN CANDIOTTI, CNN CORRESPONDENT (voice over): A draft congressional memo seems to take some steam out of Jim Sikes self-described "wild ride" in this 2008 Prius. It even had 9/11 and the California Highway Patrol running to his rescue.
JIM SIKES, PRIUS OWNER: The gas pedal felt kind of weird and it just went all the way to-fast.
CANDIOTTI: Sykes relived it for our Ted Rowlands.
SIKES: I was in the 80s somewhere. And I kept hitting the brakes, kept hitting the brakes, and it wasn't slowing down at all. It was just accelerating.
CANDIOTTI: Yes, after two hours of trying to duplicate what happened on Sikes own car, and another, exact model, federal investigators and Toyota came up short. A draft memo says, "Every time the technician placed the gas pedal to the floor and the brake pedal to the floor the engine shut off and the care immediately started to slow down."
Experts say that is a key safety feature of the car. So, if Sikes says the accelerator was stuck and he was pressing hard on the brake, why didn't his car slow down?
PETER VALDES-DAPENA, SR. WRITER, CNNMONEY.COM: Maybe what was happening was, not that his engine was overpowering the brakes, but his brakes were incapable, at that point, of overpowering anything.
CANDIOTTI: The same memo says his brakes were worn out. It doesn't say whether they were that way before or after the incident. A Toyota investigator told congressional staff, "It does not appear to be feasibly possible, both electronically and mechanically that his gas pedal was stuck to the floor and he was slamming on the brake at the same time."
What does this mean for Jim Sikes?
VALDES-DAPENA: It is possible that he is a liar. It is also possible that he simply misunderstood what was happening with his car.
CANDIOTTI (On camera): Sikes says he is sticking to his story and adds that his lawyer will have more to say about this, later today. Susan Candiotti, CNN, New York.
(END VIDEOTAPE)
QUEST: He said, she said. Toyota officials are holding a news conference on the preliminary findings of a company investigation. It is about the reported acceleration of that particular car. Let's just join in for one second.
(BEGIN LIVE FEED, IN PROGRESS)
MIKE MICHELS, V.P. COMMUNICATIONS, TOYOTA MOTOR SALES, USA: This suggests that Toyota El Cahone (ph) did anything but act properly in its handling of the customer.
And now I'd like to introduce Mr. Gary Kaminsky, who is co-owner of Toyota of El Cahone, to give some of his comments-Gary.
GARY KAMINSKY, CO-OWNER, TOYOTA OF EL CAHONE: Thanks, Mike. On behalf of our entire team at Toyota of El Cahone, I'd like to thank you all for being here and for considering the facts that you have just heard.
First I want all of our customers and our community to know that nothing is as important to us as the safety of Toyota owners and the public. We take every possible step to assure that every car or truck that leaves our driveway is as safe as possible.
(END LIVE FEED, IN PROGRESS)
QUEST: UNINTELLIGIBLE) It gives you a flavor of what is happening at the moment, on the Toyota issue and the Toyota question. The subject, at the moment, of course is the accelerator. And the accelerator scare follows a series of acknowledged safety faults at Toyota, which of course has been largely responsible and has been so much-8 million vehicles recalled over the past six months.
The questions actually go way back. You have to go back to 2007. That is when U.S. safety officials launched the first investigation into sticky gas pedals. Now, last October, the company announced its biggest recall over the floor mats; 4 million vehicles saying in some cars floor mats could obstruct the throttle. In January, more cars gas pedal problems. And there was a recall of 4 million vehicles worldwide. It is not over let. Go to February and you start to see that half a million Prius and Nexus hybrids were recalled. That was brake problems. And by the time you get to February 18, you have a Corolla steering investigation.
Who says that it isn't a case of when one thing happens everything follows on?
When we come back, it is the hidden conflict in a country wracked by political turmoil and religious violence, Nigeria's corruption crisis is spreading way beyond its borders. We'll have a report on that, in a moment.
(COMMERCIAL BREAK)
QUEST: Two people were hurt when Nigerian militants set off bombs in the country's oil producing Delta Region. The movement for emancipation of the Niger Delta warned the bombs were the start of a new wave of attacks. And the group says it can no longer tolerate what it is calling the deceit of endless dialogue. For Nigerian politicians there is one battle that has dragged on for at least as long as the one with the militants. It is a battle against corruption and it seems to be at an impasse. As Chris Purefoy reports, the man whose job it is to clean up the country isn't even there.
(BEGIN VIDEO CLIP)
CHRISTIAN PUREFOY, CNN INT'L. CORRESPONDENT (voice over): Forced out into the cold, Nigerians ex-anti-corruption chief is in self imposed exile in the U.S., because he says he fears enemies in Nigeria, he wants prosecuted, will try to kill him if he returns.
NUHU RIBADU, FMR. ANTI-CORRUPTION CHIEF, NIGERIA: I have always said that when you fight corruption it fights back. And today I am in exile, simply because corruption fought back.
PUREFOY: Before he was removed as chairman of Nigeria's economic and financial crimes commission in 2007, and left the country a year later, Ribadu oversaw the arrests of a police commissioner, governors and politicians. Something almost unheard of in Nigeria's history.
RIBADU: I have investigated individuals, I have seen billions and billions of money. They used it very selfishly, almost primitive. Why are there leaders with two or three planes, private planes. What are you going to do with that? For God's sake.
UNIDENTIFIED MALE: (UNINTELLIGIBLE)
PUREFOY: One of the men Ribadu arrested, James Ibori, is an ex- governor and now a permanent leader in Nigeria's most powerful political party, the PDP, or People's Democratic Party. Some of his associates are now on trial in the U.K. for money laundering. After the court froze assets worth $35 million, it says it belonged to Ibori.
In an exclusive interview with CNN he accuses Ribadu and the U.K. court of playing politics.
IBORI: There is not truth to the allegations. There is no truth on the amount, that has been bandied around. And this is all pure persecution, politician and vindictiveness.
PUREFOY (on camera): Your critics say you are part of (UNINTELLIGIBLE) cabal, in politics, of the PDP party, in particular, holding onto power at all costs. What would your response to that be? IBORI: When I see the word cabal, and the PDP, it is coming really from the opposition and those in the other party, who probably don't like the conduct of the PDP party, and members of the PDP.
PUREFOY (voice over): Whatever the outcome of the U.K. trial, however, Ribadu warns Nigeria has not been looted by just one man.
RIBADU: This is money that ought to be used to help those who need it most, electricity, good schools, basic things. That money goes into the wrong hands, and wrong pockets, and it is being used negatively.
PUREFOY: But for now, Nigeria's anti-corruptions struggle remains at an impasse. Ibori fears arrest if he leaves Nigeria for America or the U.K. And Ribadu remains in the West, fearing prosecution if he returns home. Christian Purefoy, CNN, Lagos, Nigeria.
(END VIDEOTAPE)
QUEST: Now, one person who is watching a strong cyclone that is affecting Fiji, is Jenny Harrison at the world weather center. What exactly is the strength of this storm?
JENNY HARRISON, CNN METEOROLOGIST: It is a very strong storm, Richard, in fact, I think if it were on a hurricane scale it would be a Category 4, of course, Category 5 is the strongest label given to hurricanes in the Atlantic.
This one, of course, is in the South Pacific, and this is it. It has been pounding Fiji for the last few hours, reports of the waves over seven meters high, at least 10,000 people have been evacuated from their homes to hopefully some much safer shelter. There are about 90 shelters in place. And you can see that the storm system continuing to move to the east, the actual eye is to the east of the island. But it is indeed extremely powerful. The winds are sustained, still, at about 200 kilometers and hour.
We are expected to see it stay at about this strength as it continues its journey southwards. And then you'll notice what happens. It begins to move much more quickly and as it does that as well, it should begin to gradually weaken. But it is still close enough to continue to pound the islands, in fact the eye is about 300 kilometers east, northeast of Nardi, on Fiji. And you can see of course, as it moves away, this is the wind forecast. The winds will ease in about 48 hours from now. The worst really should be over.
Same thing when it comes to the rains. We will see more rain, of course, the heaviest rain pushing away quite rapidly in about the next 36 hours. But we will still see some torrential, tropical downpours, but the heaviest will always stay to the east, you can see here, though, we could easily expect about 5 centimeters, probably getting on for about eight over the next couple of days.
Is it common to see cyclones in this part of the world? Well, on average we see between eight and 10 every year. Actually directly affecting Fiji, probably one to two, so it is a busy year, already this year. And then storms causing particularly strong damage, on average, just about one every three to five years. Now, we are in an El Nino year, the trade winds are much lighter and the water is also much warmer, because of the direction and the strength of those trade winds. Now, whilst we are watching Tomas, that is the name of this particular storm, also still continuing to watch Ului, this one heading to the west, away from the Solomon Islands. It should then take a turn to the south, but again, you can see the coast of Australia there. So we are going to keep an eye on that over the next few days.
(GENERAL WEATHER FORECAST)
QUEST: Now, taking advertising to a whole new level? There is nothing new about looking at adverts, but are you ready for adverts that look at you? Good night.
(COMMERCIAL BREAK)
QUEST: The digital age just keep on evolving. In Japan there is a new form of advertising and it is pretty personal; billboards that scan faces to give tailor-made ads. Some call it intrusive, others say it is the future. Kyung Lah has the story.
(BEGIN VIDEOTAPE)
KYUNG LAH, CNN INT'L. CORRESPONDENT (voice over): In the world of advertising you look at the ads. But soon they will be watching you.
It is the future imagined in the 2002 movie, "Minority Report". Cameras capture and read, Tom Cruise's face then customized ads for his character pop up.
UNIDENTIFIED MALE: John, you could use a Guinness right about now.
LAH: That future, is now. This billboard sees you, scans your face then pulls up an ad you'll like.
(On camera): Here is how this works. When you walk into the ad, a camera captures your image. The computer figures out if you are a man or a woman, and your age. Meanwhile an age and gender specific ad rolls. This shows that I'm in my 30s and I like seasonal pasta, the computer then determines how interested you are, how long you stay. That data is then recorded for the company.
(voice over): NEC Engineer Junko Amagai (ph) says the facial recognition technology is accurate to within 10 years of your actual age. And the next gen system they are testing out is even more age accurate.
"This is a new age of advertising," says Amagai (ph), "we can learn something we never knew from marketing." The new ads give real-time reactions to street signs, so marketing can be more targeted and more effective. At this retail even in Tokyo it is capturing worldwide interest. Art Fricas (ph) is a consultant visiting form Holland.
UNIDENTIFIED MALE: I in one-on-one communication, and all your messages must be relevant, so that is why I believe in this kind of thing, technology.
LAH (On camera): Do you feel a little uneasy though, that it is?
Fricas (ph) brushes off privacy concerns or fears that this is Big Brother. NEC, which so far has only tested the digital ads in Japan, says signs warn passersby they are on camera, and images are not saved in the data base. In the post-9/11 world, security cameras are everywhere on public streets and malls, facial recognition technology used by governments, even casinos. NEC believes the use of this technology in advertising is just the next step and will soon be common.
(On camera): Within two to three years, 10 percent of the ads will be like this?
UNIDENTIFIED MALE: Well, 10 percent of digital signage.
LAH: Of digital signage will be like this?
(voice over): That is a global prediction. NEC says testing begins in the U.S. this spring. Just weeks away to the arrival of the future. Kyung Lah, CNN, Tokyo.
(END VIDEOTAPE)
QUEST: Now, proving that QUEST MEANS BUSINESS, not only with reports like that, but also with our guests, gives you the advantage. Tomorrow night, on this program, Peter Voser is the chief executive of Shell. He will be with us. Jim Flaherty, the Canadian finance minister, he is going to be coming in as well. We will be talking G20 with him. And Akbar Al Baker, the CEO of Qatar Airways, will be with us on tomorrow night's program. There will be lots to talk about, especially, AATA's report that things are getting better in the airline industry.
In just a moment, I'll be back with "A Profitable Moment".
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment": I did my first proper story on the Internet, back in 1992. I was reporting from the University of Texas at Austin, which was a hub for the Academic Web. The story was whether or not the Worldwide Web should be used for commercial purposes, something that, frankly, seems quaint by today's standards.
Now, the resounding reply we got from viewers and contributors was: Never, no, nyet! The Web was for academics, it was to be preserved for knowledge and the furtherance of values. Indeed, back then anyone who tried to use the Web, commercially, got flamed by academics and purists. As one famous lawyer in Las Vegas found out when his computer system crashed, because he offered services on the Web.
Twenty-five years on, and the Web is all about commerce. As we remember that first dot.com, well it reminds us that things change. We are usually the better for it. I sometimes wonder what I'll be reporting on in the next 25 year's time. But I know one thing, it will look painfully naive from tonight.
And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever your up to in the hours ahead, I hope it is profitable. "AMANPOUR" is after the news headlines.
END
