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QUEST MEANS BUSINESS

Obama Sparks Debate on Financial Regulations; Interview With Managing Director of the IMF

Aired April 22, 2010 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: A vote for reform is a vote to put a stop to taxpayer funded bailouts.

(END VIDEOTAPE)

RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Join us instead of fighting us. President Obama tells Wall Street now is the time for reform.

A double dose of trouble for Greece; a budget deficit that is bigger than first thought, and a downgrade by the market.

And tonight, on this program the managing director of the IMF.

I'm Richard Quest, live from Wall Street, where I mean business.

Help me to help you. That was the message from President Obama to Wall Street.

Good evening, I'm Richard Quest live in New York tonight, where we are going to be talking in great detail about the financial reform package being proposed by President Obama. He wants brokers, bankers, derivative traders, all to back his plan for financial reform. If those reforms are currently before the U.S. Congress the Senate has yet to give its approval. It is now or never, says the U.S. president. But the reform program has run into some heavy winds.

The president choose to make his appeal at Cooper Union, a college just down the road from the headquarters of America's financial industry; and a place that is steeped in American history.

Mr. Obama said the reforms are all about safeguarding the financial system and therefore the American economy and its taxpayers, never again, should the public be made liable for losses because a firm is too big to fail, according to the president. And he's calling for greater transparency in financial markets; extra protection for consumers and new power for shareholders, including a voice when it comes to that all important executive bonuses and pay.

The simple message, what's good for Wall Street is good for the United States of America.

(BEGIN VIDEO CLIP)

OBAMA: And given the importance of the financial sector, Wall Street reform is an absolutely essential part of that foundation. Without it our house will continue to sit on shifting sands. And our families, businesses and the global economy will be vulnerable to future crisis. That is why I feel so strongly that we need to enact a set of updated, common sense rules to ensure accountability on Wall Street and to protect consumers in our financial system.

(END VIDEOTAPE)

QUEST: Now the managing director of the International Monetary Fund, the IMF, Dominique Strauss-Kahn, is one of those people who has strong views on the need not only for U.S. financial reform, but putting it into the context of a global economy. There is no point, he told me, in one country going it alone.

(BEGIN VIDEO CLIP)

DOMINIQUE STRAUSS-KAHN, MANAGING DIR., IMF: Well, I have to commend the U.S. administration for going forward and the sooner the better. They only problem which remains, and it is a big problem, is that you cannot have the U.S. going their own route, and the Europeans going the other route, and Japan, another one; because even if it makes sense, from a national point of view, you will have inconsistencies.

And we need a global regulatory framework, a global system of taxation of the banking sector. And different plans, national and domestic plans, add one to another one, may create more problems than providing solutions. So, we are really arguing for a more coordinated way of doing things.

QUEST: And we know the G20 will be talking about that this weekend. Are you optimistic that there are now sufficient and satisfactory proposals on the table from, for example, the Financial Stability Board?

STRAUSS-KAHN: Well, the Financial Stability Board has done a tremendous job, and it is not over now, it still has work to be done. I think the consensus is growing, even if, as I have said before, I'll be a bit worried that it won't be big enough to do exactly the same thing in the different countries. The question is, that we need now to answer now three key questions, before-by the end of this year.

One has to do with the regulation in terms of liquidity and capital ratio for the banking sector. The second has to do with the tool kit that we need to address systemic risks. And the third one, about which we are very much concerned here at the IMF, because that is our job, is to have really a good cross-border resolution tool, because in this crisis, one of the problems we faced was to be able to address problems concerning different kinds of countries. You have large complex financial institutions operating in different kinds of countries. And that is why you need cross-border resolution tools. And from this point of view still, work has to be done.

QUEST: Your proposals for two new levies or taxes on banks. Mr. Managing Director, they have come in for round criticism in many quarters. People sort of saying they are not just taxes but they will destroy the financial industry. Do you think the criticism is a bit harsh?

STRAUSS-KAHN: Well, you know, what was a threat and my have destroyed the financial industry is the way the financial industry behaved before this crisis, and we had a crisis because of the behavior of the financial industry. So, what we try to do is to avoid the financial industry to go back to business as usual, and create a new problem in two, five, seven or 10 years from now.

So, we propose two things. We tried to address two problems. One, is to have enough resources to be able to face, uh, uh, a resolution problem as big as the one we had this time. And this time we were able to have money from the taxpayer. And it is not obvious it will be the same thing in the coming years. And the second issue is to avoid, at least to try to prevent the likelihood of crisis like this one, which means curbing the risk-taking behavior.

(END VIDEOTAPE)

QUEST: Dominique Strauss-Kahn, the managing director of the IMF, from whom we'll hear more later in the program, on the subject of Greece. Let's stay with international regulatory reform. Youssef Boutros-Ghali is the chairman of the International Monetary and Finance Committee, the steering body of the IMF. He also happens to be the finance minister of Egypt. He joins me now from Washington.

The real danger, as we just heard from the IMF, MD, is that countries do go their own way, but ultimately isn't the greater danger that the financial industry scuppers any form of real reform with loopholes and bailouts and other ways of getting out of the reforms?

YOUSSEF BOUTROS-GHALI, CHRM., INT'L. MONETARY, FINANCE CMTE., IMF: Look, the issue is not so much the country going their own way, the issue is if they want to coordinate where do they coordinate? Where do they sit? Where do they analyze together? Where do they jointly come to a conclusion, except in the IMF?

But the IMF will not be able to do that unless it is reformed in terms of its governance, in terms of its legitimacy, in terms of its representation. And therefore, all this rule-making, all this policy drafting is very nice, it is very useful, but as you heard Strauss-Kahn say, we need to coordinate. And before we can coordinate, we need a place to coordinate in. A common criteria to measure things that we are going to coordinate.

QUEST: Surely, ultimately the-I come back to the first point, though, the financial industry is experienced at getting around any new regulations. And when they say they accept that there needs to be reform, aren't they really saying, we'll see what you'll give us, but ultimately we'll find a way out?

BOUTROS-GHALI: Look, in the financial sector, in financial markets, any regulation is a constraint. And any constraint has a price, for those who are willing to pay the price, they will circumvent the restraint. It is always an issue of cat and mouse, but it is cat and mouse over decades. Now, the system has proven that it needs to be reformed. Regulations are being drafted in the U.S., in Europe, and other countries we need to makes sure that we remain coherent in all these regulations, but once these regulations are in place, there will be people trying to circumvent them. Like in any system, finding loopholes, finding weak spots.

QUEST: Right.

BOUTROS-GHALI: Finding low thresholds, etc cetera. This is natural. And it evolves it is a dynamic system.

QUEST: If we take a look at the IMF with its many bodies and it maybe the only game in town to do this, but I do question, Sir, is it the best organization to do this, so far?

BOUTROS-GHALI: In its present shape, it isn't. And the proof of that is that we have a parallel-not organization, but a parallel gathering that is trying to do, that has been successful so far. That is trying to do what the fund is unable to do in its present form. But my point is that the IMF is the closest we have to an organization that can deliver these kinds of things. And that unless we reform the IMF, in the way it is governed, in the way it takes its decisions, and the tools that it has at its disposal. Unless we do that we will be missing a major piece in the fight against a global recession, against global instability, or against anything that involves having countries coordinate their policies together.

QUEST: Youssef Boutros-Ghali, head of the International IMFC and, of course, finance minister of Egypt. Many thanks for joining us.

BOUTROS-GHALI: Thank you very much.

QUEST: Let's put this-we've heard from President Obama, we have had the international aspects of it, let's bring it back to the domestic United States. If there is one place where they have strong views about all of this, it is of course, over there, in the New York Stock Exchange. Whether rightly or wrongly it is perceived as being the epicenter of the global financial system, and in the stock exchange, on the floor of the exchange, we find Felicia Taylor to bring the analysis.

Felicia, we look at what President Obama said. We know that everybody accepts something has to change. But have they accepted the president's plan in total or just are they fighting back?

FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Well, listen, I mean, the president seemed to know his audience this morning. Wall Street is Main Street here in New York City. And let's face it, he had not pistol packing words, no finger pointing in the speech. It was a much more muted, less antagonistic kind of a speech. So, it was embraced, shall we say, by Wall Street traders and New Yorkers, in general, because there was nothing unusual, nothing that we hadn't heard before.

So, indeed, although, it is recognized that derivatives dealings must be in some way overcome and there must be more reform, that too was embraced here on Wall Street. You have to remember it was the derivatives dealings that, in the beginning, of what brought down Wall Street two years ago, that was part of the problem. They can't look that in the face and deny it. So, indeed, they are saying yes, there has to be some kind of reform. The question, though, remains will they really reach across party lines and embrace each other, talk to one another? There is a lot of stuff in this bill that is still unknown.

You know, there is no reason-there is a reason, I should say, that the called Goldman Sachs, Government Sachs, Wall Street works with Washington. Washington has to work with Wall Street, Richard.

QUEST: Felicia, the variety of taxes are now being suggested. The IMF has to bank taxes, some say in the United States there should be a VAT tax. Everybody seems to want to tax the banks in one stage or another. Does the financial world think that is more damaging than any new regulation?

TAYLOR: Absolutely. There in lies what could be the crux of this entire conversation in terms of legislation. I'm going to bring in Alan Valdes, he is with DME Securities.

And, Alan, the question is you know, if we did tax banks, what are the repercussions that we could see of that?

ALAN VALDES, DME SECURITIES: No, taxing anybody in this kind of environment is the wrong the way. I mean you are just going to see jobs go away. It is a job killer. That's not and it trickles down to the average person. I mean the banks aren't actually pay the tax out of their bag, they are going to trickle down to us, higher fees on checking accounts, higher fees on savings accounts. So taxing banks is not the right way to go at all.

TAYLOR: And they (AUDI GAP) lend less to the individual consumer, which could hurt small businesses and do away with the creation of jobs.

VALDES: No question about it. Also that heavy taxing is going to hurt the small regional banks also. There is not question about that, too.

TAYLOR: What about the proposed idea of a VAT? A VAT tax like they have in Europe?

VALDES: Oh, that is kind of scary. I mean, VAT taxes don't work. I mean, right now we have an expected $12 trillion deficit over the next 10 years. So, even a 5 percent VAT tax would only (AUDIO GAP) $250 billion. You would have to have a 20 percent VAT tax to raise $1 trillion just to keep up with the deficit. That is devastating at 20 percent VAT tax. And actually countries that have these VAT taxes, 43 percent of spending increases. So spending doesn't go down, spending increases, they would just use this money, the politicians, for their own little game.

TAYLOR: So, portions of this legislation are getting a passing grade, as far as the president's speech this morning. Overall, though, do you think it is something that everybody is comfortable with yet?

VALDES: Not yet, but I'll tell you we do want more transparency. We do know that Wall Street had problems in the past. So, we are looking for this bill. We will have to wait and see what the final bill looks like, but we're on the same page.

TAYLOR: Alan, thanks so much.

VALDES: Thank you.

TAYLOR: You know, Richard what was interesting today as you now, overall it has been a down market. We were down about 100 points when the president took to the podium. The market then came back. Some of the stocks that are actually benefiting from that speech, are stocks like CMI and ICE, that is the Chicago Mercantile Exchange, and the Intercontinental exchange. These are exchanges that will end up, clearing the derivatives deals, should this kind of legislation pass. And therefore, they will too benefit on the bottom line. So there is a benefit in terms of stocks, with regards to this reform legislation, we'll see how it all pans out I the months to come, Richard.

QUEST: Felicia Taylor on the floor of the New York Stock Exchange, just behind me, many thanks for that.

Now, a few months ago, Ryan Air, said it wanted to charge you for using the toilets onboard a plane. So, why is this airline now saying, it will pay for stranded passengers, food and even hotels. We'll talk to the chef exec of Ryan Air, after the break.

(COMMERCIAL BREAK)

QUEST: Welcome back, QUEST MEANS BUSINESS, coming to you from Wall Street on the day that financial reform is very much the number one topic in the financial world. There are other things happening in the real world. And Jon Mann is at the CNN Center to bring us up to date.

(NEWS BREAK)

QUEST: Here is an interesting turn of events, the budget airline Ryan Air, has made a surprising U turn, having first of all said it would only compensate or pay passengers back the amount they paid for their original tickets. Now Ryan Air says it will, indeed, pay for accommodation and out of pocket expenses. It is doing so because of an EU rule known as EU 261. The rule says, "Airlines must cover their customers' expenses for food, hotel accommodation, transport to hotel and phone calls, if flights are severely delayed or cancelled.

This rule has implications much greater than just Ryan Air. But the Irish airline has been vocally critical about EU261. Jim Boulden is London compiling that story-Jim.

JIM BOULDEN, CNN INT'L. CORRESPONDENT: Yes, Richard, you know, Michael O'Leary of Ryan Air says that 261 was meant for maybe a couple of hundred passengers stranded because of fog for one night. It was never intended to deal with something so sever as this ash cloud and having so many passengers stuck. And earlier I spoke with Michael O'Leary, of course, he is known for his outspoken criticism of the European Union and this rule and this is what he had to say about this entire mess.

(BEGIN VIDEO CLIP)

MICHAEL O'LEARY, CEO, RYANAIR: No, we announced yesterday we were going to try and cap the refunds at the airfare paid, which is how the provision work in the case of train, ferry and coach operators around Europe. It has been reported, widely, this morning though, that Ryan Air refusing to reimburse reasonable expenses, which was never the case. So we simply said to correct that impression we are going to meet a reasonable claims for expense reimbursement. But EU261 makes it quite clear that there will be no compensation, because these cancellations the last seven days were no the responsibility of the airlines.

BOULDEN: What do you see as the difference between reasonable expenses and compensation?

O'LEARY: Aye, the legislation tells you what it is, reasonable expenses, are they said to be hotel accommodations, meals, over the period of the delay when you were disrupted. It doesn't, for example, allow for compensation or, you know, consequential expenses. I miss three days of work so pay my salary. That kind of stuff. And then what's reasonable expenses? Well, clearly you can't expect to check into the five-star palatial hotel somewhere in downtown Madrid and send it back it to you airline for reimbursement. But I think everybody will appreciate, if it is reasonable hotel-overnight hotel accommodations, and airport and reasonable meals, then that is fine.

BOULDEN: So, reasonable is going to be the issue here, though. You are going to reject some of these claims that come in, aren't you?

O'LEARY: If they are not reasonable, they will be rejected. And that is what EU261 requires and allows.

BOULDEN: So, you might be doing this differently from some of the other more luxurious airlines, who have put people up in four and five star hotels.

O'LEARY: No, no, no, I'll tell you what, we have put people up in hotels as well, in the past number of days. We have people are being accommodated in hotels. We are all-the problem with these regulations, is they weren't designed for this kind of catastrophic seven-day closure of European airspace. In many cases all of the airlines, whether they are the high fare or the low-fair airlines, you have run out of hotel accommodations at certain airports. Particularly in the Canaries or in Spain. So, we are all coping with the same problem.

But this regulation was designed for a one-night's delay, you know, because of fog at an airport. Not a seven day closure of European airspace, where you know, in action by European governments shuts the whole system down. We think that there is a real problems with these 261 provisions. You have unlimited exposure for the airlines, where as competitors, ferries and trains at both our cultures, have their exposure limited to the ticket price paid.

BOULDEN: So, Michael, how much do you think you have lost in revenue, and then in these compensation, and how much do you think you will get from EU governments. Do you think you will get some of that money is back?

O'LEARY: Firstly, again, there is no compensation. You have to be very clear with terminology here. They will be refund a reasonable receipt of expenses. We estimate in lost revenue over the last 7 days, we probably lost something between $30 and $40 million euros, but clearly we won't have incurred the last of the cast fuel and airport fees that kind of thing.

And as for reimbursement for expenses, we don't know what that will be. It will be a not insignificant figure. But it will take a number of weeks and months to calculate and work out.

BOULDEN: Do you expect the EU to come good on that?

O'LEARY: The EU has never come good on anything. Them indeed- whatever we do, this is what is wrong with these regulations. You know, the EU, the European governments closed the airspace, prevented us from flying. But then they turn around and say, well, the airlines have to reimburse passengers expenses.. Well, hang on a second, if it is not our fault there was volcano erupting, or it is not our fault that you closed European airspace.

Why don't you reimburse passenger expenses. It is another example of bureaucrats and politicians just bobbin the cots off on the airlines, for their own mistakes and for their own incompetence.

(END VIDEOTAPE)

BOULDEN: And, Richard, a number of airlines we contacted said they are going to look at each one of these receipts coming through, case by case. It is not just Ryan Air worried about how much reimbursement they are going to give to some of their passengers Richard.

QUEST: Jim, a quick question, for those of us that might be seeking compensation from non-EU airlines, U.S. carriers that fly into the European Union. Are we covered by EU 261?

BOULDEN: Nope, not at all. You are going to have to hope that you got travel insurance, or you are going to have to hope that your airline has been very good to you.

I know, I had a hotel bill, I had a hotel booked in Boston for this weekend and they have already said they will give me a full refund because of the volcano. So, some people, are being very flexible. This is an unprecedented time and they are being flexible, most of them.

QUEST: Jim Boulden, please continue to follow the case of the compensation pay outs. There will be many more before we are finished.

When we come back in just a moment, the bailout of Greece. It is in deep trouble because now a downgrade on debt, and a deficit number that is higher. QUEST MEANS BUSINESS we are live in New York.

(COMMERCIAL BREAK)

QUEST: A hotdog in New York, depending on where in the city, it can cost anything but $2 to $4.50. I can honestly say I've never had an upset stomach from one yet. More to do with Greece now and the problems facing the country as it deals with its ballooning budget deficit.

Greece's finances are in a worst state than we first thought. For instance, the European Union, now says that the Greek budget deficit, for 2009, was equal to at least, you are ready for this, this is an eye popping number, 13. 6 percent of GDT. 13.6, that is higher than the 12.4 that we had originally thought, it puts it much deeper into the red, than previous estimates. It has prompted the credit rating agency, Moody's to cut the rates on Greek government bonds. And that, of course, will increase the cost of Greek government borrowing. Yields on Greek 10-yer bonds, are now above 9 percent. That is more than 5 percentage points than German bundes.

Officials from the EU and the IMF are in Athens at the moment. Putting the final touches to a $61 billion aid package that is yet to be activated. The problems facing Greece are very serious. There is also the risk of contagion elsewhere, within the European Union. It was a subject I also discussed with the managing director of the IMF, Dominique Strauss- Kahn. Did he now expect to have to bailout Greece?

(BEGIN VIDEO CLIP)

STRAUSS-KAHN: Well, I have to commend the U.S. administration for going forward and the sooner the better. They only problem which remains, and it is a big problem, is that you cannot have the U.S. going their own route, and the Europeans going the other route, and Japan, another one; because even if it makes sense, from a national point of view, you will have inconsistencies.

And we need a global regulatory framework, a global system of taxation of the banking sector. And different plans, national and domestic plans, add one to another one, may create more problems than providing solutions. So, we are really arguing for a more coordinated way of doing things.

(END VIDEO CLIP)

QUEST: And we know the G20 will be talking about that this weekend. Are you optimistic that there are now sufficient and satisfactory proposals on the table from, for example, the Financial Stability Board?

STRAUSS-KAHN: Well, the Financial Stability Board has done a tremendous job, and it is not over now, it still has work to be done. I think the consensus is growing, even if, as I have said before, I'll be a bit worried that it won't be big enough to do exactly the same thing in the different countries. The question is, that we need now to answer now three key questions, before-by the end of this year.

One has to do with the regulation in terms of liquidity and capital ratio for the banking sector. The second has to do with the tool kit that we need to address systemic risks. And the third one, about which we are very much concerned here in the IMF, because that's our job, is to have really a good cross border resolution tool, because in this crisis, one of the problems we faced was to be able to address problems concerning different kinds of countries. You have large complex financial institutions cooperating in different kinds of countries. And that's why you need cross border resolution tools.

And from this point of view, still the work has to be done.

QUEST: Your proposals for two new levies or taxes on banks, managed - - Mr. Managing Director, they -- they've come in for round criticism in many quarters. People are sort of saying they are not just taxes, but they would help destroy the financial industry.

Do you think the criticism is a big harsh?

STRAUSS-KAHN: Well, you know, what was a threat and may have destroyed the financial industry is the way the financial industry behaved before this crisis. And we had a crisis because of the behavior of the financial industry.

So what we tried to do is to avoid the financial industry to go back to business as usual and create a new problem in two, five, seven or 10 years from now. So we proposed two things. We tried to address two problems.

One is to have enough resources to be involved to -- to be able to face a resolution problem as big as the one we had this time. And this time, we were able to have money from the taxpayer. And it's not obvious that it will be the same thing in the coming years.

And the second issue is to avoid -- or at least to try to prevent the likelihood of crisis like this one, which means curbing the risk-taking behavior.

(END VIDEO TAPE)

QUEST: Dominique Strauss-Kahn, managing director of the IMF.

We'll take a global view in a moment with the G20, the finance minister of Australia, Wayne Swan, joins us after the break.

QUEST MEANS BUSINESS live on Wall Street.

(COMMERCIAL BREAK)

QUEST: We are live from the corner of Broad and Nassau, just by Wall Street.

Hello.

I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN on an important day for the financial world, as President Obama once again puts his political credibility on the line, going head-to- head against the financial industry, telling them be with us, not against us, it's in America's interests to have financial reform.

The president isn't the only one who's pushing a reform agenda. Finance ministers from the G20 will be meeting in Washington over the next few days, as part of the spring meetings at the IMF. The ministers will be reviewing a rast (ph) of proposals all designed to strengthen the global financial system and prevent another collapse.

I caught up Wayne Swan, the Australian treasurer, the finance minister who's been leading the charge for financial reform.

(BEGIN VIDEOTAPE)

WAYNE SWAN, AUSTRALIAN TREASURER: Well, we'll be talking about that this weekend at the G20 meeting. But look, we owe it to the millions who lost their jobs and to the tens of thousands of businesses that hit the wall to fundamentally reform financial arrangements in the global economy.

Failure to do that, failure to learn the lessons will mean that these problems will simply resurface yet again.

So there is a strong need for reform. We need to develop a commonsense set of principles which can apply globally and, of course, make sure there is a degree of flexibility nationally.

QUEST: Do you get the feeling that there is actually now a consensus?

And if there is, what's the core of the consensus?

SWAN: Well, we have to work very hard to get that consensus. And part of doing that is the G20 finance ministers meeting this weekend. Enormous amounts of work have taken place through the Basel Committee and through the Financial Stability Board. We will be reviewing that this weekend. And we'll also receive a report from the International Monetary Fund.

QUEST: But will there be -- when would you expect to see some concrete proposals that individual governments can go back and start implementing?

SWAN: Well, there are already proposals being developed by the Financial Stability Board as we speak. But those won't be signed off until toward the middle of the year.

The finance ministers and leaders will consider these matters over the next few months.

QUEST: We take a -- if we look at the totality of the situation at the moment, we've got President Obama with his plans, we've got the Financial Stability Board, we've got -- is there a risk that piecemeal reform scuttles the totality of the effect?

SWAN: We simply can't allow that to happen. We have to maintain the momentum for reform. That's why the leaders' meetings and the finance ministers' meetings over the next few months are so important.

As I said before, we owe it to all of those millions of people who lost their jobs, the millions of small businesses that hit the wall, to fundamentally reform this system. That's what we intend to do and we must maintain the momentum for that reform.

QUEST: One quick question on your own economy. Another rise in interest rates, which, of course, is -- is good news, in the sense that it shows strong growth and -- and things are moving forward much better than anybody would have thought when you and I spoke this time last year.

SWAN: Well, the Australian economy is the strongest developed economy I the global economy. And that is the result of a couple of factors.

First of all, the fiscal and monetary policy stimulus put in place by the government and the Reserve Bank; and also because we are much more resilient than many other economies. Those two things combined have produced the best global outlook -- outcome for Australia.

(END VIDEO TAPE)

QUEST: Wayne Swan, the Australian treasurer, on the G20 reaction to potential reform.

So, over the course of QUEST MEANS BUSINESS, we've heard from the president, we've heard from the IMF and you've heard from the G20.

What about the bankers and the traders on Wall Street?

What do they think about Mr. Obama's proposals?

This was the place to find out.

(BEGIN VIDEO CLIP)

My concern is that essentially capitalism has been what's made America great.

Have there been tweaks that should -- should have been done?

Have there been some modifications?

Of course.

But major financial reform takes a risk in an environment where we're -- the economy is coming back, things are getting better. And that could stop it.

Those rules are not going to be that strict. And -- and if anything, the financial firms have enough lawyers and compliance people to get around anything. There's just going to be another disclaimer line at the bottom of any products that they put out.

They could never go too far. People are basically evil. You need regulation. Look what happened two years ago.

(END VIDEO CLIP)

QUEST: We have more to come on QUEST MEANS BUSINESS tonight.

The British election as seen from different parts of the world -- a tale of four cities. Our coverage of that story continues in just a moment.

QUEST MEANS BUSINESS.

We're in New York.

(COMMERCIAL BREAK)

QUEST: I've always wondered where the J/M/Z or J/M/Zed line actually goes. But that's the subway just at the corner and at the bottom of Wall Street.

Welcome back, QUEST MEANS BUSINESS.

We're live for you tonight in New York, where the day has been one and the financial world has been looking closely at the proposals of President Obama questioning whether or not the securities and financial industry will actually fight a rearguard action against some of the proposals put forward.

There are millions of dollars in lobbying fees that are now railed against the president's plan. But even so, as I heard from Tim Ryan of the Financial Association, at the end of the day, they accept that reform is coming, it's just a question of what sort of reform.

(BEGIN VIDEOTAPE)

TIM RYAN, SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION: We're fundamentally in favor of reform. We'd like to see sensible reform. I would say at least what's happened here in the United States, you know, over half of what they've proposed we're in favor of. When you get down to the details, there are areas where we disagree. And that's what we're trying to do now is work through those issues.

QUEST: We've always known that the devil is in the details.

RYAN: It is.

QUEST: Which bit are you particularly opposed to?

RYAN: Well, I -- I would say this is not a -- a absolute opposition. What we think is we'd like to see sensible reform and we'd like to see something that works.

QUEST: But the problem is everybody says they'd like to see sensible reform. It's just that one person's definition of sensible is different from every -- from others.

RYAN: Well, let me give you a couple of examples of things on which we have disagreement.

We -- we think the idea of banning firms from proprietary trading, hedge fund activities, private equity, the so-called Volcker Rule, is not a good decision. It's certainly not made on a global basis. As you know, the E.U. is not going to do it. Canada is not going to do it. Japan is not going to do it.

QUEST: And what about, for example, derivatives exchange trading, open exchange?

RYAN: Yes, we -- you know, what we'd like to see in the derivatives market is we'd like to see things that can go through an exchange because they're standardized. That -- that's fine. They can go through an exchange. Most of it is going to end up going through a clearinghouse. And if it's non-standardized or very customized, it's going to have to be over the counter but highly transparent to regulators.

QUEST: You see, that's what "The New York Times" says this morning in its editorial, that there are too many loopholes in the current plans, too many exceptions, too many ways out.

RYAN: Well, we don't agree with that at all. And my -- my concern, quite frankly, is we're doing things in such a piecemeal approach now that when we end up here, the totality of all of the actions, both in the U.S. and in Europe, could be very damaging to a financial service industry that is the engine for growth.

(END VIDEO TAPE)

QUEST: Tim Ryan of the Financial Association.

Fifteen minutes ago, I was standing in bright sunshine. Now, I am seriously worried that I'm going to need one of these within the next 10 or 15 minutes. Very dark clouds seem to have arrived all of a sudden.

Karen Maginnis is at the CNN World Weather Center.

Am I going to need this?

KAREN MAGINNIS, CNN CORRESPONDENT: You can't rule out the possibility of a passing shower. That's a -- the coverage that we can give you right now, Richard.

Let's go ahead and show you what's happening as we look into the Gulf of Mexico. This is a Google Earth. It shows you the position of the oil rig that has sunk. We've talked about it here for about the past hour, since that oil rig did sink about 80 kilometers offshore of the coast of Louisiana.

Here's New Orleans. Here is that coast of Louisiana. This is the position of the oil rig. We wanted to show you what we think will happen over the next 48 hours. They're still looking for 11 missing persons. A frontal system is expected to move right across this region. As you can see, not a whole lot of showers here, but we're going to see a wind shift and that could kick up the winds. If we see the winds increase, then what we're looking at a -- maybe a surf there's going to be generated here.

It doesn't look like a lot in the way of precipitation, at least so far. But we'll see the bigger storms right along the Gulf Coast region.

We have some pictures of that oil rig. You've seen it here on CNN. This CNN iReport spectacular pictures from this explosion that occurred just about 24 hours ago. As I've mentioned, it does look like this is going to be a little bit more difficult as far as the search and rescue or recovery is concerned in the Gulf Coast region.

Let's move on. We've got a lot to tell you about because the weather across Europe is a little unsettled. And we haven't seen a lot of this energy across the Iberian Peninsula in a while, but the rainfall associated with this low that's moved across Morocco, Northern

Algeria and Tunisia heads across the Central and the Northern Mediterranean. And for the Adriatic, as well, toward the Balkans. We could see some thunderstorms erupt right around the core of this low with some of the energy spread out with some lighter precipitation going into Southern France, extending into the South Central Mediterranean, as well.

All right, the ash cloud -- it's something we've been talking about for more than a week now. And it looks like the core of that ash -- up to 20,000 feet in the atmosphere or just about six kilometers, that's where we see the greatest threat, at least for now.

Here, once again, is another view of that area of low pressure that we anticipate moving across the Mediterranean. And temperatures coming up for Friday look like this. Bucharest at 19. London, Richard, yes, coming up for tomorrow, too, a pretty good chance of showers because there's an area of low pressure kind of spinning in the vicinity of the United Kingdom.

And for the Middle East, right around Tehran, can't rule out some showers. And they've been unsettled for a while.

And in India, the monsoon season, Richard, is still about a month away, but those temperatures cranked up into the mid-40s in Northeastern India -- back to you.

QUEST: And many thanks, indeed.

The weather forecast there.

In just a short while, the second debate in the British general election will take place, the leaders' debate. We'll have live coverage of that.

And when we return, we're going to consider the tale of four cities -- how the rest of the world looks at the U.K. voting, in a moment.

(COMMERCIAL BREAK)

QUEST: The view of Wall Street looking west toward Trinity Church. I'm old enough to remember the days when taxis actually used to go up and down Wall Street and you could actually get out outside the members' entrance to the New York Stock Exchange.

We need to update you with how the European markets traded. And it was the Greek deficit and debt problems that really took their toll, along with some worries about Obama's financial plans for reform.

In London, the FTSE fell 1 percent. The banking industry slipped on concerns about Greece and energy stocks. British Airways, not surprisingly, suffered. There was data showing government borrowing in the U.K. rose a little less than expected in the last financial year. It was still the highest on record.

Bank stocks led the losses in Frankfurt. Deutsche Commerce Bank lower. And in -- and Deutsche Bahn has completed a take over the U.K. rail and bus company, Arriva, creating Europe's largest passenger carrier.

Finland was overshadowed by Nokia, who saw its shares down 14 percent. Quarterly earnings rose less than expected. Apple's iPhone is taking away sales at the top end of the market.

And just about 10 or 15 minutes from now, the leaders' debate -- the second debate -- takes place in the United Kingdom ahead of the general election in just a couple of weeks from now. In different cities around the world, they are watching what is happening.

Yesterday, we gave you the perspective from New York, what traders there.

Today, Eunice Yoon in Hong Kong -- how they look at events taking place in London.

(BEGIN VIDEOTAPE)

EUNICE YOON, CNN CORRESPONDENT: I'm Eunice Yoon in Hong Kong.

Many in this city, a former British colony, are keeping a close eye on the progress of the U.K. elections. Both Hong Kong and London are major financial capitals and businesspeople here hope to benefit from the political uncertainty.

It presents a perfect opportunity to grab a lot of businesses, capital market flows, etc.

(END VIDEO CLIP)

YOON: Hong Kong's beneficial tax rates and corporate policies have helped it to attract financial deals and jobs from the United Kingdom. And under the new U.K. tax rates, an individual with a salary of, say, $300,000, would have to pay 39 percent in income tax. The same person in Hong Kong would pay roughly 15 percent. And with China's economic cut on the rise, the action in Hong Kong is, too.

(BEGIN VIDEO CLIP)

Generally, there are more opportunities here than it is in London, as we speak, because of deal flows, economic flows. And, therefore, naturally, bankers would be very, very keen to explore what's out here.

(END VIDEO CLIP)

YOON: No matter the outcome of the U.K. election, many people here feel that the power is shifting East.

QUEST: Eunice Yoon in Hong Kong.

So that debate takes place in just a moment or three.

Max Foster is exercising his own constitutional right to have a drink on duty -- well, at least he's doing duty.

He's in the Red Line Pub, I think it is -- Max, where you're going to be gauging the strength of the beer and the strength of reaction to the debate.

MAX FOSTER, CNN CORRESPONDENT: Absolutely.

It's the second debate (INAUDIBLE) Richard, and it's all about foreign policy. You're going to hear about Iraq, you're going to hear about Afghanistan. And we're going to hear about the European Union -- should Britain be closer to the European Union?

And it's also about personalities, of course, Richard. Last week, Nick Clegg absolutely stormed it. He was a complete outsider going into the debate, but he came out as the star of the show.

The big question -- can Gordon Brown and David Cameron, the political heavyweights, make a comeback?

Can they siphon in on those policies of Nick Clegg that he's basically vulnerable on?

It's going to be a fascinating show, Richard. And everyone is ripped in this pub. I'm sure they are around the country.

QUEST: Max, we'll be talking to you later. And we'll be hearing the reaction from the -- the pub, the Red Line, and elsewhere.

Many thanks, Max.

Have a drink but send me the bill.

All right, that it QUEST MEANS BUSINESS for tonight.

Coming up after the break, Becky Anderson in a special edition of "CONNECT THE WORLD" with the leaders' debate.

Not a moment before time, because I have just felt the first raindrop about to drop onto my head. Not a moment before time before we will be using this particular instrument.

I'm Richard Quest.

Many thanks for your company.

Whatever you're up to in the hours ahead, stay dry.

I'll see you tomorrow.

END