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QUEST MEANS BUSINESS
U.S. President Obama and British PM Cameron Address Media in Joint Presser; Analysis and Discussion on Global Effects of BP Spill
Aired July 20, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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BARACK OBAMA, PRESIDENT OF THE UNITED STATES: -- to welcome Prime Minister Cameron on his first visit to the White House as prime minister. We have just concluded some excellent discussions, including whether the beers from our hometowns that we exchanged are best served warm or cold.
My understanding is that the prime minister enjoyed our 312 beer and we may send him some more. I thought the beer we got was excellent. But I did drink it cold.
Mr. Prime Minister, we can never say it enough. The United States and the United Kingdom enjoy a truly special relationship, celebrate a common heritage.
We cherish common values and we speak a common language most of the time. We honor the sacrifices of our brave men and women in uniform who have served together, bled together, and even lay at rest together.
Above all, our alliance thrives because it advances our common interest. Whether it's preventing the spread of nuclear weapons or securing vulnerable nuclear materials, thwarting terrorist attacks, or confronting climate change, or promoting global economic growth and development, when the United States and the United Kingdom stand together, our people and people around the world are more secure and they are more prosperous.
In short, the United States has no closer ally and no stronger partner than Great Britain. And I appreciate the opportunity to renew our relationship with my partner, Prime Minister Cameron.
In his campaign, David was known for his extensive town hall discussions with voters -- "Cameron direct." And that's the same spirit that we had here today.
I appreciate David's steady leadership and his pragmatic approach. And just as he's off to an energetic start at home, I think we've had a brilliant start as partners who see eye to eye on virtually every challenge before us. Great Britain is one of our largest trading partners, and we're committed to long-term, sustainable growth that keeps the global economy growing and puts our people to work.
I told David that my administration is working hard with the Senate to move forward as soon as possible with our defense trade treaty with the U.K., which will be good for our workers and our troops in both our countries. We reaffirmed our commitment to fiscal responsibility and reform. David's government is making some courageous decisions, and I've set a goal of cutting our deficit in half by 2013.
Tomorrow I'll sign into the law the toughest financial reforms since the aftermath of the Great Depression. And I commend David for his leadership in Europe to rebuild confidence in the financial sector. Together, we're determined to make sure the financial catastrophe that we are emerging from never happens again.
We discussed the Middle East, where both our governments are working to encourage Israelis and Palestinians to move to direct talks as soon as possible. We discussed the continuing threat posed by Iran's nuclear program. On this, we are United.
The Iranian government must fulfill its international obligations. The new sanctions imposed by the U.N. Security Council, the United States and other countries are putting unprecedented pressure on the Iranian government. And I thanked David for Great Britain's efforts to ensure strong European Union sanctions in the coming days. Along with our P5 plus 1 partners, we remain committed to a diplomatic solution, but the Iranian government must understand that the path of defiance will only bring more pressure and more isolation.
Finally, much of our discussion focused on Afghanistan. After the United States, Great Britain is the largest contributor of combat forces in Afghanistan, and British troops and civilians have served and sacrificed in some of the most dangerous parts of the country.
This is not an easy fight, but it is a necessary one. Terrorists trained in Afghanistan and the tribal regions along the Pakistani border have killed innocent civilians in both of our countries, and an even wider insurgency in Afghanistan would mean an even larger safe haven for al Qaeda and its terrorist affiliates to plan their next attack. And we are not going to let that happen.
We have the right strategy. We're going to break the Taliban's momentum. We're going to build Afghan capacity so Afghans can take responsibility for their future. And we're going to deepen regional cooperation, including with Pakistan.
Today's historic Kabul conference is another major step forward. The Afghan government presented and its international partners unanimously endorsed concrete plans to implement President Karzai's commitments to improve security, economic growth, governance, and the delivery of basic services.
The Afghan government presented its peace and reconciliation plan which the United States firmly supports. Agreement was reached on a plan in which responsibility for security in Afghan provinces will transition to Afghan security forces. In addition, Afghanistan and Pakistan reached a historic agreement to increase opportunity for people on both sides of the border.
So these are all important achievements. And they go a long way towards helping create the conditions needed for Afghans to assume greater responsibility for their country.
Indeed, over the coming year, Afghans will begin to take the lead in security. And in July of next year, we will begin to transfer some of our forces out of Afghanistan. And the Kabul conference shows that Afghanistan has the support of the international community, including the United States, which will remain a long-term partner for the security and progress of the Afghan people.
As we go forward, we want to honor our fallen warriors with the respect and gratitude that they deserve, whether it's here at Dover, or in the small British town of Wootton Bassett, where people line the streets in a solemn tribute that represents the best of the British character.
With pride in their service and determination to carry on their work for a safer world, I am confident that we can be worthy of their sacrifice. And I'm confident that with my partner and friend, David Cameron, the special relationship between our countries will only grow stronger in the years to come.
Mr. Prime Minister.
DAVID CAMERON, U.K. PRIME MINISTER: Well, first of all, can I thank you, Mr. President, for welcoming me so warmly to the White House today? Thank you for the meeting, for the lunch that we had, and also for the tour of part of your home.
I have to say, I was most impressed by how tidy your children's bedrooms were. And I think if the president of the United States can get his children to tidy their bedrooms, then the British prime minister, it's about time he did exactly the same thing.
OBAMA: You have to give us notice. That's the only thing.
CAMERON: They should be in bed by now, but if they're not, they have notice.
I think we did have a very valuable opportunity today to discuss in real depth a strong and a shared agenda on Afghanistan, on global economic recovery, and on the Middle East. And this relationship isn't just, as you put it, an extraordinary special relationship. To me, it is also an absolutely essential relationship if we are going to deliver the security and the prosperity that our people need. And I thought again today, in our discussions, just how closely aligned our interests are on all of the issues that we discussed.
First on Afghanistan, there is no clearer, no more tangible illustration of Britain and America standing shoulder to shoulder in our national interests than this mission that we are engaged in together. We have British troops working to an American commander in Helmand, and we have American troops working to a British commander in Kandahar.
Today, President Obama and I took stock of progress in this vital year. We reaffirmed our commitment to the overall strategy. A key part of that is training the Afghan national army and policy so they can provide security for their country and our troops can come home.
We also agreed on the need to reinvigorate the political strategy for Afghanistan. Insurgencies tend not to be defeated by military means alone. There must also be political settlement. And to those people currently fighting, if they give up violence, if they cut themselves off from al Qaeda, if they except the basic tenets of the Afghan constitution, they can have a future in a peaceful Afghanistan.
There is real progress. Last weekend, the first Afghan-led military operation took place successfully in Helmand, Afghans defending themselves. And today, as Barack has just said, for the first time in decades, the government of Afghanistan has hosted an international conference on its own soil.
Over 40 foreign ministers and 80 delegations assembled in Kabul to monitor progress and drive forward the international strategy. That is a real achievement, and we should congratulate President Karzai on it.
President Obama and I also discussed the economy. We're both taking action that our countries need. Our destination is a strong and stable growth, a sustained economic recovery, and a reformed financial system that will never again be open to the abuses of the past. We are confident that the right steps were taken at the Toronto G-20summit to help achieve that.
The Middle East was the third area that we focused on today. We both want a secure, peaceful and stable Middle East. And that means two things.
First, as Barack has just said, Iran must give up its pursuit of a nuclear weapon. We urge the Iranian regime to resume negotiations with the international community without delay.
It's not too late for it to do so. America and Britain, with our partners, stand ready to negotiate, and to do so in good faith. But in the absence of a willing partner, we will implement with vigor the sanctions package agreed by the United Nations Security Council, and in Europe we will be taking further steps as well.
Second, we desperately need a two-state solution between Israel and the Palestinians that provides security, justice, and hope. As we were discussing over lunch, it is time for direct talks, not least because it is time for each, Israel and Palestine, to test the seriousness of the other.
On BP, which we discussed at some length, I completely understand the anger that exists right across America. The oil spill in the Gulf of Mexico is a catastrophe for the environment, for the fishing industry, for tourism.
I've been absolutely clear about that. And like President Obama, I've also been clear that it is BP's role to cap the leak, to clean up the mess, and to pay appropriate compensation.
I'm in regular touch with senior management at BP, and the president is, too, to make sure that happens. And the progress that's been made to cap the leak is a step in the right direction.
Equally, of course, BP is an important company to both the British and the American economies. Thousands of jobs on both sides of the Atlantic depend on it. So it's in the interest of both our countries, as we agreed, that it remains a strong and company for the future. And that's something that we discussed today.
And let us not confuse the oil spill with the Libyan bomber. I've been absolutely clear about this right from the start, and in our meeting we had what we called a violent agreement, which is that releasing the Lockerbie bomber, a mass murderer of 270 people, the largest act of terrorism ever committed in the United Kingdom, was completely wrong.
He showed his victims no compassion. They were not allowed to die in their beds at home surrounded by their families. So my view, neither should that callous killer have been given that luxury.
That wasn't a decision taken by BP. It was a decision taken by the Scottish government. We have to accept that under the laws of my country, where power on certain issues is devolved to Scotland, this was a decision for the Scottish executive, a decision that they took.
I know that Senator Kerry's committee is looking into these issues. My government will engage constructively with those hearings. And indeed, my foreign secretary has already set out the government's position.
So let me thank you again, Barack, for hosting me today. While at the World Cup, our teams could only manage a score draw. I believe our relationship can be a win-win.
And yes, I did enjoy drinking the 312 beer, cold, during the World Cup. I enjoyed it so much, that when I watched Germany beat Argentina, I actually cheered for Germany. That's something that's a big admission for a British person to make. So the beer was obviously very effective.
But what you said, Barack, though, about British and American soldiers fighting together, sometimes dying together, serving together, is absolutely right, and we should never forget that. Whether it's on the beaches of Normandy, whether it's in Korea, whether in Iraq, or whether now in Afghanistan, our relationship is one that has an incredibly rich history. It is based on ties of culture and history and, yes, emotion, too.
But for all those things, I think it has also an incredibly strong future that is based on results, results of a positive partnership of working together, agreeing where we agree, when we have disagreement, working through them and coming to a fair conclusion. It's a partnership that I profoundly want to make work as well as it possibly can in the years that I'm prime minister of Britain, and with you as president of the United States.
So thank you again for welcoming me here today.
OBAMA: Thank you, David.
With that, we're going to take a few questions.
And I'm going to start with Mimi Hall of "USA Today."
MIMI HALL, "USA TODAY": Thank you, Mr. President and Mr. Prime Minister.
I wanted to ask you a little bit more about BP. You mentioned, Mr. Prime Minister, your decision to cooperate, et cetera. But you said we shouldn't confuse the two.
Have you flatly ruled out opening a government investigation into the events around the release of the bomber?
And President Obama, how do you feel about a congressional investigation into this? Would you like to see that happen, or do you think that confuses the two events?
OBAMA: Well, why don't I start off, and then I'll throw it over to David.
I think all of us here in the United States were surprised, disappointed and angry about the release of the Lockerbie bomber. And my administration expressed very clearly our objections prior to the decision being made and subsequent to the decision being made.
So we welcome any additional information that will give us insights and a better understanding of why the decision was made. But I think that the key thing to understand here is that we've got a British prime minister who shares our anger over the decision, who also objects to how it played out.
And so I'm fully supportive of Prime Minister Cameron's efforts to gain a better understanding of it, to clarify it. But the bottom line is, is that we all disagreed with it. It was a bad decision. And going forward, that has to inform how we approach our relationship with respect to counterterrorism generally.
Now, one of the things that I want to emphasize that I think may get lost in this current debate is the extraordinarily strong ties between our two countries when it comes to fighting terrorism. We probably have the best coordination and cooperation of any two countries in the world, and those relationships are vital and they keep people safe on both sides of the Atlantic. And I want to make sure that even as we may express concern about what happened with respect to the release of this particular individual, that we stay focused on the cooperation that currently exists and build on that cooperation to make sure that there is no diminution of our joint efforts to make sure that the kind of attacks that happened over Lockerbie do not happen again.
CAMERON: Well, I agree with absolutely what's been said about the importance of the security cooperation, something we discussed today.
On Megrahi, look, I'm not standing here today and saying it was a bad decision to release Megrahi because I'm here. I said this a year ago, at the time, that it was a bad decision, it shouldn't have been made. The British government as well should have been clear that it was a bad decision, rather than going along with it.
I took that very clear view. This was the biggest mass murder in British history, and there was no business in letting him out of prison.
In terms of an inquiry, there has been an inquiry by the Scottish parliament into the way the decision was made. The British government, the last British government, released a whole heap of information about this decision. But I've asked the cabinet secretary today to go back through all of the paperwork and see if more needs to be published about the background to this decision.
But in terms of an inquiry, I'm not currently minded that we need to have a U.K.-based inquiry on this, partly for this reason -- I don't need an inquiry to tell me what was a bad decision. It was a bad decision.
And if you like, the big fact that's changed over the year that makes it an even worse decision is the fact that, of course, Megrahi is still free, at liberty in Libya, rather than serving the prison sentence in Scotland, as he should be doing. So, that's what we're going to do, is go back over this information, see if more needs to be published. And, of course, in terms of the congressional hearing, make sure that proper cooperation is extended to it.
OBAMA: Somebody you want to call on?
I think James Lamdale (ph).
QUESTION: Just to stay on that subject if we may, Mr. Prime Minister, first of all, would you be prepared to talk to your predecessors, Tony Blair and Gordon Brown, to get their agreements to release any documents if they are relevant to the paper search that the cabinet secretary will undergo?
And, Mr. President, can I ask you, the prime minister says he opposes an inquiry. Hillary Clinton has demanded an inquiry.
Where do you stand?
OBAMA: Go ahead, David.
CAMERON: Well, first of all, on the documents, the proper process here is that the cabinet secretary should look back over this decision and the circumstances surrounding it, should identify those documents that should be published. It should be right that ministers in the previous government should be consulted about the publication of those documents, and of course we will consult with them over that. But in my view, there is absolutely no harm to be done in giving the fullest possible explanation of the circumstances surrounding this decision.
I think the key thing, though, to remember is that in the end, it was a decision by the Scottish executive. On the issue of an inquiry, as I said, I'm not currently minded to hold an inquiry because I think publishing this information, combined with the inquiry there's already been, will give people the certainty that they need about the circumstances surrounding this decision.
But the key thing is to get the information out there so people can see. But I don't think there's any great mystery here.
There was a decision taken by the Scottish executive. In my view, a wholly wrong and misguided decision, a bad decision, but their decision, nonetheless. That's what happened.
And I didn't think we need an extra inquiry to tell us that that's what happened. But the information, as I've said, will be gone over and published as appropriate. And, of course, I'll be consulting with previous ministers and prime ministers, as you should do in the normal way.
OBAMA: I think the simple answer is, we should have all the facts. They should be laid out there. And I have confidence that Prime Minister Cameron's government will be cooperative in making sure that the facts are there.
That will not negate the fact that, as the prime minister indicated, it was a very poor decision, and one that not only ran contrary to, I think, how we should be treating terrorists, but also didn't reflect the incredible pain that the families who are affected still suffer to this stay. And my administration is in regular contact with these families, and this was a heartbreaking decision for them that reopened a whole host of new wounds.
So my expectation is, is that the facts will be out there. And as David indicated, with all the facts out, I think we're going to be back to where we are right now, which was it was a decision that should not have been made and one that we should learn from going forward.
LAURA MECKLER, "WALL STREET JOURNAL": Thank you.
Mr. President, in your opening statement, you referred to the fact that the British government has been taking some very tough steps towards - - to get their budget in order. And you said you had committed to cut the deficit in half.
Could you talk about whether you think that those decisions are going to be -- the decisions that they're making there are going to need to be made here on a similar level beyond pledges?
And Mr. Prime Minister, specifically, could you address the matter of what role BP had in lobbying for the release of this man and whether an inquiry or the review that you're planning is going to look at that specific question?
OBAMA: When I came into office in January of 2009, I was very clear at the time, even before we knew the severity of the recession that we would experience, that we have a structural deficit that is unsustainable, and that for our long-term growth and prosperity, we are going to have to get a handle on that. I talked about that during my campaign. I talked about it in the days after I was elected. I talked about it after I had been sworn in.
We had an emergency situation on our hands, and so the entire world, working through the G-20, coordinated in making sure that we filled this huge drop-off in demand, we got the economy growing again. And we had to take a number of steps, some of which were unpopular and that, yes, added to the short-term deficit.
What I also said at the time was we are then going to make sure, number one, that we pay down whatever additional deficit had been added as a consequence of the Recovery Act and other steps that we had to take last year. But then we're still going to have to go back and deal with these long-term structural deficits.
And, in fact, in the first G-20 visit that I made in April to England, I was very clear to the rest of the world that what they cannot rely on is an economic model in which the United States borrows, consumers in the United States borrow, we take out home equity loans, we run up credit cards to purchase goods from all around the world. We cannot alone be the economic engine for the rest of the world's growth. So that rebalancing ended up being a central part of our long-term strategy working with the G- 20.
Now, what we've done is we've initiated a freeze on our domestic discretionary budget. We are on the path to cutting our deficits in half. We have put forward a fiscal commission that is then going to examine, how do we deal with these broader structural deficits?
So this isn't just an empty promise. We've already started taking steps to deal with it, and we're going to be very aggressive in how we deal with it.
Now, our two countries are in slightly different situations. Their financial situation is slightly different. Their levels of debt relative to GDP are somewhat higher. And as David and I discussed when we saw each other in Toronto, the goal here is the same, and we're all moving in the same direction.
But there's going to be differentiation based on the different circumstances of different countries in terms of how they approach it tactically and at what pace. But I can assure you this -- that my administration is squarely committed not just to dealing with the short- term deficit and debt, which in some ways is the least troubling aspect of this problem. What we're going to have to tackle are some big structural reforms that are going to be tough, and they're going to be that much tougher because we're coming out of a recession as we do it.
But I think that as we continue to see economic growth, as we continue to see the economy heal from last year, that the American people are going to want to approach this problem in a serious, realistic way. We owe it for the next generation. And my hope is, is that we're going to end up getting a bipartisan solution to this thing that is realistic.
And one concern that I have, obviously, is the policies of deficits and debt. When I announced that I was in favor of this fiscal commission, at the time I had a number of Republicans who were co-sponsors of the legislation who suddenly reversed themselves because, I suppose, I supported it.
And fortunately, what I've seen so far, all the reports from the fiscal commission is that people are serious about this. Both Republicans and Democrats on the commission are taking their task seriously. I think it's going to be a good report, but it's still going to require some tough choices, and we're committed to pursuing those tough choices after we get that report.
CAMERON: Thank you.
You asked about the role of BP. I mean, the role of BP and any lobbying they may have done is an issue for BP and an issue that they should explain themselves.
I mean, the decision to release Megrahi, though, was a decision made by the Scottish government. And I haven't seen anything to suggest that the Scottish government were in any way swayed by BP.
They were swayed by their considerations about the need to release him on compassionate grounds, grounds that I think were completely wrong. I don't think it's right to show compassion to a mass murderer like that. I think it was wrong.
But it's a matter for BP to answer what activities they undertook. But the Scottish government made its decision and has explained its decision on many occasions, and I'm sure will explain it again.
I'm very keen that we are clear here that BP should rightly be blamed for what has happened in the Gulf and have real responsibilities to cap the well, to clean up the spill, to pay compensation, all of which they are getting on with, including putting aside the $20 billion pounds (sic) in the escrow account -- $20 billion, sorry. I think they've made progress on that, and further progress needs to be made. I think it's important to separate that from the decision to release Megrahi, which, as I say, was a decision made by the Scottish government and has so far been shown in investigations by the Scottish parliament was a decision which I wholly disagree with, but nonetheless was taken in an appropriate way.
I think we have a question from Tom Bradby.
TOM BRADBY, ITV NEWS: Mr. President, Tom Bradby, ITV News.
Quite a lot of people in the U.K. feel that your determination as a country to continue to push for the extradition of computer hacker and Asperger sufferer Gary McKinnon is disproportionate and somewhat harsh. Do you think it is time to consider some leniency in this case?
And Prime Minister, you've expressed strong views on this matter, suggesting that Mr. McKinnon shouldn't be extradited. You actually, Prime Minister, have expressed even stronger views.
Did you discuss that with the president today? And if not, would now be a good moment to share your views with us once again?
CAMERON: Do I go?
OBAMA: Please, go ahead.
CAMERON: It is something that we discussed in our meeting. I mean, clearly, there's a discussion going on between the British and the Americans about this, and I don't want to prejudice those discussions.
We completely understand that Gary McKinnon stands accused of a very important and significant crime in terms of hacking into vital databases. And nobody denies that that is an important crime that has to be considered. But I have had conversations with the U.S. ambassador, as well as raising it today with the president, about this issue, and I hope a way through can be found.
OBAMA: Well, one of the things that David and I discussed was the increasing challenge that we're going to face as a consequence of the Internet and the need for us to cooperate extensively on issues of cybersecurity. We had a brief discussion about the fact that although there may still be efforts to send in spies and try to obtain state secrets through traditional Cold War methods, the truth of the matter is, these days, where we're going to see enormous amounts of vulnerability, when it comes to information, is going to be through these kind of braches in -- in our information systems.
So we take this very seriously. And I know that the British government does, as well.
Beyond that, you know, one of the traditions we have is the president doesn't get involved in decisions around prosecutions, extradition matters. So what I expect is that my team will follow the law, but they will also coordinate closely with what we've just stated as an ally that is unparalleled in terms of our cooperative relationship. And I trust that this will get resolved in a way that underscores the seriousness of the issue, but also underscores the fact that we work together and we can find a -- an appropriate solution.
Thank you very much, everybody.
UNIDENTIFIED SPEAKER: Thank you very much.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Well, that was a news conference and a half between President Barack Obama and the new -- been in office just a few months -- British Prime Minister David Cameron.
It's difficult to know where to begin, there was so much in it. Let me just very quickly recap.
David Cameron described it as a brilliant start to the relationship -- what he -- what Barack Obama called a truly special relationship between the United Kingdom and the United States. Wide-ranging, many issues.
On BP, the British prime minister said it was BP's duty role to cap the well, clean up the mess and pay appropriate damages. But, in a clear defense of BP, reminded the president and the world that a strong BP was in America's and Britain's best interests.
On the question of al-Megrahi and the release on compassionate grounds, both men were ad idem that the decision, they felt, had been wrong. Strong language was used -- "very wrong," "totally wrong." But David Cameron reminded the American president that the Scottish judiciary had had to follow the laws of that country. No investigation, or at least no formal investigation in what took place. David Cameron said that was not necessary, although there would be a review of the paperwork. And the U.S. president there jumping in, saying all the facts need to be laid out bare.
So, we'll get onto the economic things that they talked about in just a moment, the very aggressive cutting of the deficit.
Some analysis is clearly called for here.
I'm joined on the line by -- broadband by Sir Christopher Meyer, who spent more than five years as Britain's ambassador to Washington.
Chris joins me from France.
Sir Christopher, Ambassador, good evening to you.
You heard the two men. An extremely warm reception and a lot of agreement.
What did you make of it?
If you'd been advising, what would you say?
QUEST: Ah, well, we definitely appear to be having a couple of problems there.
And, Chris, I'm going to pause you for a minute. We're having some problems and we can't hear Christopher Meyer at the moment.
We will effort to see if we can get him back in just a moment. The poor man has been waiting for some time to talk to us, so we certainly want to hear Christopher Meyer's views on that.
It was somewhat of an extraordinary news conference, the sheer range and topicality of the issues between the U.K. and the U.S. And yet for two men who have so much in agreement, there was clearly much still -- much work to be done.
Now, I've got balloons to bring to you as the Q-25, because the U.S. earnings season is underway.
Goldman Sachs, J&J, PepsiCo, United Airlines, IBM -- what do you think of their results?
We'll have that in just a moment.
QUEST MEANS BUSINESS.
Good evening to you.
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
And we start, of course, with the news headlines for you tonight.
The British prime minister, David Cameron, and President Barack Obama have wrapped up their talks at the White House. Mr. Obama said the talks focused on peace efforts in the Middle East, fiscal policies, trade relations and Afghanistan.
The prime minister said he completely understood the anger that existed across the America regarding the BP oil spill.
The Afghan president, Hamid Karzai, says he will need help from the international community, but he says he's determined to see his country handle its own security in the next four years. Mr. Karzai spoke at an international conference in Kabul. The conference brought together representatives from dozens of countries who were discussing Afghanistan's plans for development.
China's massive Three Gorges Dam is holding up in its first major flood test. Engineers opened its floodgates to ease high water levels upstream while trying to limit the levels downstream. Impressive pictures. But 34 people have been killed in Central China in the latest floods and landslides and a new tropical storm is fast approaching from the south.
The actress, Lindsay Lohan, is on her way to serve time in jail for probation violations. She reported to a Los Angeles courtroom about three hours ago and she was taken into custody. Lohan was sentenced to 90 days in jail, another 90 in a rehab program for substance abuse.
So, to the markets while we continue to get -- see if we can find Sir Christopher and get him back on the line.
Wall Street's stock firms tripped up this quarter in a tricky, volatile market. The golden boys and girls at Goldman Sachs failed to meet expectations. Now, the expectations were pretty low to begin with. The results set the tone for a disappointing report from a number of America's best known firms.
We are in the middle of the earnings season and the Q-25 demands our attention. But before, let me update you on the numbers. We do that, of course, over here in the library.
Goldman Sachs, Q2 net income -- look at that number, down a massive 82 percent, at $613 million. Two factors to bear in mind even though it was a -- a dreadful performance. Revenue -- three factors, forgive me. Revenue from trading very heavily down -- $550 million in a fine for the Abacus debacle taken out of this quarter. And the $600 million that they had to pay to the U.K. government for the bonus levy taken out of this quarter.
Even allowing for all those single factors, it was misery galore.
J&J Q2 up 7 percent. They had serious problems, Johnson & Johnson, with recalls of products. Sales disappointing. You'll see flat, basically. You'll see whether we give them a green or a red in just a moment.
Here's an interesting company, PepsiCo, one of the largest in the world, Pepsi Cola and Frito Lay, a variety of products. Now, their net income was down 3 percent at $1.6 billion. But that really -- this is a fascinating one, because that number doesn't fully tell the story. Revenue and earnings -- and sales actually rose very sharply. So PepsiCo did a much better overall performance than the headline would seem to suggest.
Here's some seeing comfortably -- look at this. By jingo, an airline that actually made money -- and not just a bit of money, quite a good amount of money. It's the United Airlines. They haven't put capacity back in. Fares are holding up. Passengers are coming back. United Airlines the first of the big majors and an impressive performance from UAL, the parent company.
As we start the Q-25, Maggie Lake is in New York -- Maggie, before you kick us off with it, I'm just, very quickly, going to get rid of IBM, which had its numbers --
MAGGIE LAKE, CNN CORRESPONDENT: Yes.
QUEST: -- because we (INAUDIBLE) the old ones. It's a red balloon for those that disappoint. And IBM gets a red balloon to start us off.
So where would --
QUEST: -- would you like to start -- well, I've gone through the numbers.
What does Goldman Sachs get?
LAKE: Yes, Goldman Sachs gets a red, Richard. And this is -- this really hurt the tone very early, because Goldman is best in breed. Even if the other banks have trouble, everyone expects Goldman to outperform. And yes, there was an SEC settlement and a U.K. bank tax in there that made the numbers a little noisy. But bottom line, trading revenue down 40 percent. That is just dismal and that hurt sentiment early.
Although, interestingly, the stock has come back and is trading in positive territory. So, clearly, investors betting that this was a weak second quarter, but they're going to get their act together --
LAKE: -- in the -- in the coming quarters. We'll have to see.
QUEST: So --
LAKE: But a red balloon for now.
QUEST: Well, hold on a second. Before we happily hand over the red or I happily hand over the red, is it fair to give Goldman a red balloon for their numbers when we know the whole banking sector -- investment banking sector -- is having a but -- don't widen your eyes at me like that. We saw it with JPMorgan Chase.
QUEST: We're going to see it with everybody else. We knew it was going to be a bad quarter for them.
LAKE: That doesn't mean they get a green, just because everybody is in the same miserable boat. Of course they get a red. And remember, Goldman always does what other people can't. That's what -- that's why they have a premium in their share price. So, you know, if they're in the -- in the batch with everybody else, then, clearly, you know, they don't get a pass for that. Absolutely not.
QUEST: All right. I -- I was chancing me luck there before you decided that we might have been a bit of (INAUDIBLE).
Maggie, I am going to get back to (INAUDIBLE). I'm going to order green to UAL, United Airlines, if only because they've still got this deal with Continental, the merger coming through. It will have greater cost savings in the future and they did perform extremely well in the last quarter that we've just seen. So unless you disagree, UAL gets a green for us.
LAKE: No, you -- they do get a green. And, Richard, when you're talking about high pricing power and you have sales, demand, and your planes are full, I mean that's core business --
LAKE: -- and it's -- you're not seeing that elsewhere. So, certainly, that gets a green.
QUEST: J&J, Johnson & Johnson -- interesting, on the one hand, they've got this problem with the drugs; on the other hand, their earnings were flat. I think I know where we're going with there is.
LAKE: Yes, I think, you know, it -- it was worth digging through the details because it was OK on the top line. But, yes, we've got to give them a red, because this drug recall hurt them. They had to lower their whole full year guidance. And the thing is, it's not really resolved. There's -- they've -- the subpoena from the state of Pennsylvania --
LAKE: So this whole plant problem, manufacturing problem is still kicking around. So that doesn't bode well for the future. So I think they get a red.
QUEST: We're -- we're nearly out of time.
I liked PepsiCo. I mean the -- the headline number was bad, but the revenue is up. The reorganize is underway. I vote a green.
What do you vote?
LAKE: Absolutely. And they're even doing better in North America, which is the weakest link. They get a green.
QUEST: Very well.
All right, Maggie.
We have three reds, two greens. We have a long way to go on the Q-25.
Maggie, back with you tomorrow for more of them.
That's the way we stand at the moment.
We return now to our top story.
We -- we tried the technology for Christopher Meyer. We tried it. We put two tin cans together and we could see you but we couldn't hear you. But you are now on the line, former British ambassador to Washington.
Ambassador, we apologize for this connection difficulty.
But is the -- is the special relationship alive and well, from what you heard?
CHRISTOPHER MEYER, FORMER AMBASSADOR TO WASHINGTON: Well, I think it is more simply a new phase, which is both alive and well. Both men used the phrase. But what pleased me was that it seems to be grounded on something much more pragmatic, realistic and outcome oriented than has sometimes been the case in the past.
So special relationship with not too much sentimentality, very good thing. And I think they both hit the right note.
QUEST: It was a fairly straightforward one, though. You know, it wasn't that difficult. They agreed on most of everything.
MEYER: Well, they will -- they will agree on most of everything. I mean the British-American relationship, historically, is not one where there has always been unanimous -- unanimity of agreement. You can't expect that. But on the big issues of the day, like Iran, like Afghanistan, like the Middle East, there is very little different between the two sides, if any. And it was necessary, I think, to say that today.
QUEST: The BP -- we saw and we heard -- we heard Mr. Cameron say needs to cap the well, clean up, pay appropriately. But a warning that basically get off the back of BP, to some extent, offering support.
Would you have supported that?
MEYER: Absolutely. I mean there -- there comes a time when a line is crossed. And I think that some of the American reaction and comment has crossed a line. And it has been necessary for David Cameron to say -- and I'm extremely pleased that he said it in the presence of the U.S. president -- that it is in the interests of both the U.S. and the U.K. that this company survives and is prosperous and is stable. That was a very important marker to put down.
And important to point out, also, that it is the Scottish government who has been responsible for releasing Megrahi on compassionate grounds. It wasn't BP. It wasn't the British government. It was the Scots, who, perhaps, are now, to some extent, regretting the fact that they -- that they're always after their independence.
QUEST: There has been some thought that maybe President Obama, although it is -- you know, the special relationship and all that. But he's not been terribly warm. He wouldn't be described as an Anglophile or a great lover of the U.K. in the past, it's been said.
Whether that is fair or not, is he discovering what many U.S. presidents discover, that their only real foreign friend is in Number Ten Downing Street?
MEYER: Well, it may -- it may be that. It may be that penny has dropped, that it doesn't do to alienate the Brits. I mean David Cameron, I think, is very realistic. He's talked about the British being a junior partner. But though we are junior, we're a pretty big junior partner.
MEYER: And I think the United States would suffer significantly if the 10,000 British troops that are in Helmand Province and elsewhere in Afghanistan at the present were no longer there. So he does need us and we need him as an ally. And that's a damn good basis for a relationship.
QUEST: So, Christopher, finally, reading between the lines, there's a chap who's been charged with hacking into the Defense computers. It doesn't sound like he's going to be extradited.
Or am I reading too much into what the president said?
MEYER: I -- I mean I think the president said what he had to say, which is that constitutionally, he cannot interfere with the judicial process in the United States. And I suspect that for him, this -- this case is a red hot potato.
Cameron, on the other hand, made it perfectly plain this was something he had raised, as he needed to do. So we were feeling whether anybody in the United States in the Justice Department who is prepared -- prepared to recommend clemency. We'll see.
QUEST: Sir Christopher, as always, many thanks, indeed for your forthright analysis on that.
Christopher Meyer joining me on the line.
And apologizes again. We had a few difficulties seeing him.
Ed Henry, who was at the press conference joins me now from the White House -- good evening, Ed.
ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Hello, Richard.
QUEST: Look, we've heard -- we -- Chris there was analyzing the -- what they said. Now tell me what was the mood like between the men.
HENRY: It was very warm in that room. I mean you heard the joke being still from Toronto, which we heard back last month, as well, about how they had that bet with the -- some beer on the line over the World Cup match. And at one point, Prime Minister Cameron saying that after drinking some of President Obama's beer, he started routing for Germany in a World Cup game and said that's a hard thing for a British leader to admit.
A little bit of rye humor there. And my point in raising it is, you did not see that kind of yucking it up back in the days when President Obama stood shoulder to shoulder with Prime Minister Brown. In fact, they rarely stood shoulder to shoulder. There was not that same kind of warmth in the room when I sat in for news events with them.
I think, also, the prime minister joking about President Obama's family and saying that when he got a tour of the White House residence, he noticed that the rooms of young Sasha and Malia Obama were quite tidy; again, a back and forth. President Obama says they knew the prime minister was coming and that's why they cleaned their rooms.
You just did not see that kind of banter between Obama and Brown. You did see it between Blair and Clinton --
HENRY: -- or even Blair and Bush.
Now, there's a lot of substance and you've been talking about that. But the style is important. And we did not see that in previous -- previous years.
QUEST: A couple of points we have to go over quickly, Ed, so let's bash on.
Is the heat off BP in the sense that by all means, attack them for what they've done, but ease off now in terms of the corporate profile?
HENRY: I think, in the short-term, Prime Minister Cameron did appear to be successful in really pushing back on behalf of BP. Make no mistake that the Obama administration is still pressuring them to make sure all of this goes well in the days ahead and they clean things up. But you're not hearing the same kind of tough rhetoric you heard just a few weeks ago directed at BP.
HENRY: In fact, President Obama didn't bring up BP at all, you'll notice. It took Prime Minister Cameron to do it. And he -- I think he was pretty even-handed. He said, they're responsible. They've got to clean it up. But they also need to stay whole as a company. He made his points, as well.
QUEST: And al-Megrahi back in Libya. Both men basically pushing at an open door that they disagreed with the decision.
Will Cameron's own opposition apse the four senators and ultimately any hearings on Capitol Hill?
HENRY: Well, these four senators that Prime Minister Cameron is meeting with in Washington tonight from states like New York and New Jersey, where a lot of the victims who died in that bombing live -- and their families still live. So they're not going to be satisfied without a full British government inquiry.
However, I think that was a very significant moment when a British reporter pressed President Obama on, you know, do you support your own secretary of State, Hillary Clinton, in saying there needs to be an inquiry?
And instead, he kind of threw a lifeline to the prime minister and said I leave it up to him, I trust that if he's going to put out these documents but not actually have a new inquiry, it will be enough to satisfy everyone.
I heard President Obama there really backing Prime Minister Cameron and not really necessarily, you know, backing his own secretary of State on that. We'll see what happens in the days ahead.
But I think that shows, yet again, that on a very sticky issue there, they went out of their way to stand shoulder to shoulder -- Richard.
QUEST: Ed Henry, very, very full figured analysis. You were there and we thank you for that.
HENRY: Thank you.
QUEST: Ed Henry at the White House.
We've a shortened program -- well, we still had an hour, but half of it went to the news conference. But when we come back, there's more weather and we'll update you on how the markets have trade.
QUEST MEANS BUSINESS.
Good evening to you.
QUEST: And welcome back.
The -- the weather -- Puerto Rico, Florida -- a storm that's getting more organized in the area.
Guillermo is at the World Weather Center -- look, I'm going to just go straightforward. A storm that's getting organized.
When does it become a hurricane?
GUILLERMO ARDUINO, AMS METEOROLOGIST: When the winds reach 120 kilometers in sustained speed. That's when it becomes a hurricane. Now, this is a tropical wave. And the National Hurricane Center was saying yesterday, you know, it has 40 percent, maybe, the potential of becoming a cyclone. Now they're talking about 60 percent.
Puerto Rico, watch out. You're getting a lot of rain, but probably you're not going to get intense winds or more intense than that.
You know who may get it?
Unfortunately, the northern parts of Isla Hispaniola here, this island that Haiti and the Dominican Republic share. Then, many parts of Cuba, but especially here. According to numeric models, the Bahamas and also Florida. And by then, it may be a significant cyclone.
That's why, Richard, we have to look at it very closely. And now, because of the rain, people in Puerto Rico are not going to be able to have the tan that you have today because of the nice weather that you had in London.
Now, London, watch out, because you're getting rain, too.
Well, this is also a cyclone that is moving toward the coastal parts of China. Hong Kong is with signal one, which means careful, we're going to get bad weather. Well, Macau is apparently in the direct path of the system. It is getting more organized, as well. With still have a tropical storm -- a decent tropical storm. But it may be close to 120 kilometers per hour very soon. The conditions are perfect for development.
So, Britain is under all this rain. I think that tomorrow and then Wednesday, Thursday and Friday we may -- we may see some scattered showers. The heat will continue in the east. And Saturday, I'm promising you a nice weekend for London -- Saturday, OK?
So patience. Today it was a nice one.
Belarus, Ukraine, Russia and Ukraine, the hot weather continues. It will continue in the eastern parts. As you see, London tomorrow maybe hitting 24, but also with some rain -- Richard.
QUEST: Guillermo, many thanks, indeed.
When we come back in just a second, I will update you on the markets and how they have traded.
QUEST MEANS BUSINESS.
QUEST: No Profitable Moment, but look at the markets in just the odd little profit or two, up 22 on the Dow, 10176. That's the way the New York markets. Goldman Sachs really took the shine off the market.
The European bourses, they fell in this session. It was the fifth successive day of losses in London and Paris. Anxiety over those country earnings and housing starts in the U.S. It all gave a rough ride across Europe.
So, that's the why the markets were.
And that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I hope it's profitable.
"WORLD ONE" starts now.