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QUEST MEANS BUSINESS

Dow Sell-Off; Interview With ING Chairman

Aired August 11, 2010 - 14:00:00   ET

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


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: It's fading promise and the global recovery is weakening on the markets, traders, investors, the chill is everywhere.

ING shows its mettle in a tough market. The chairman on this program tonight says he's not satisfied.

And Disney's chief executive tells us how he's going to keep the magic alive.

I'm Richard Quest. You dare not move away, because I mean business.

Good evening.

A miserable Wednesday for investors on Wall Street. And please, don't take my word for it. Look at the numbers yourself. This is the story. The Dow Jones currently off more than 2 percent, 232. To think I thought 11,000 might be on the cards this week. What was I thinking? Down 232, 10,412.

And it is all concerns the deepening worries over the global economy. It is slowing down and it is slowing down fast. The question of course, is whether it is just a bump on the road, or how this long slow slog is going to translate for investors.

Now, it really-as Wednesday went on, I need you to look at these numbers with me, if you would be so kind. It doesn't matter where you look. From the U.K. to the U.S. and Asia, the global picture is downright murky.

Let's start in the U.K., for instance. The Bank of England Governor Mervyn King described the U.K.'s economy as choppy. He hinted that more stimulus measures might be needed to keep the British economy in check.

(BEGIN VIDEO CLIP)

MERVYN KING, GOVERNOR, BANK OF ENGLAND: The U.K. recovery is likely to continue but the overall outlook is weaker than that presented in the May report. Reflecting the softening in confidence, the persistence of tight credit conditions, and the faster fiscal consolidation. Plus the downside risks around this central projection are judged to be smaller, due in large part to the fiscal measures announced in the June budget. We shall reduce the possibility of a sharp rise in long-term interest rates.

(END VIDEO CLIP)

QUEST: Doctor King, of the United Kingdom. Spin the globe and on we move to China where government data showed growth in industrial production was slower for the fifth consecutive month. It was a similar story. Retail sales, the growth there also moderated.

Keep spinning the globe, you end up at the world's largest economy, the U.S., where the trade deficit has ballooned to $50 billion in June. The market had expected just a half percent increase to a final number showed a rise of 18.8 percent in the deficit. Imports were up, exports were down, it all comes one day after the Fed, you know, because we talked about it yesterday together, the Fed says the recovery is losing steam. The markets on Wall Street, where the Dow is tumbling, down 2 percent.

Felicia Taylor is on the floor the exchange.

Good afternoon, evening, morning to you, Felicia. Why now? Why not yesterday after the Fed announcement. The market rallied after that.

FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: It did. You are absolutely right. I mean, the words we can use, uncertainty finally settled in, a crisis of confidence, once they digested the numbers. But you are absolutely right. Why didn't we see this kind of rout of selling immediately afterwards? And here I am with Jon Corpina from Meridian Equity Partners-there we go-who can tell us exactly that.

It seems to be almost a delayed reaction. Why didn't we see this happen right after the news yesterday?

JON CORPINA, MERIDIAN EQUITY PARTNERS: I think when you look at it short-term we had that news yesterday, investors looking into, really, the language that was there and trying to digest what information you can get out of it, and what it can take.

Initially, after that we did have a little bit of a sell off. Market tried to hang in there for a little while. But overnight we got some news out of China. We got some more economic news this morning coming out of Washington. And clearly, when you couple all of that together I think the economic confidence is not there in the market.

I think investors are looking for an opportunity to take some money off the table. And clearly we have a snowball effect here. The markets, coming in this morning, S&P futures were down, the market has not been able to recovery and we continue to trade at the lows.

TAYLOR: But here we are break even for the year, basically, after this sell off. And the discussion yesterday was basically about if the Fed gave the signal that they are admitting, acknowledging that indeed, things are slower than we anticipated that that was going to cause a sell off. Is this enough to be a prolonged sell off, or is it a one-day event?

CORPINA: I think it is a little bit of a reality check. I think that by the Fed's own language they are admitting to what they think might happen in the next quarter or two. So there might be a little bit of a long-term effect on it, but what's going to happen now? So we get towards the end of the summer. We wind down towards the end of the year. Usually towards the end of the year, historically, we see a nice little uptick and trend in the market. We're going to get to fourth quarter earnings that will come through towards the end of the year, back to school season. So we have different catalysts in the market that I think will help buoy this market towards the end of the year.

TAYLOR: Let's hope you're right. And the one good news that we got today is we had some earnings out from Macy's. That is a broad-based retailer here in the United States and they were very good. That stock was trading up about 4 percent earlier in the day. And that is a precursor to the back to school selling, and that, too, is a precursor to holiday.

QUEST: Hey, Felicia, our viewers, when it comes to Macy's, they've bought the T-shirt, they've got the chocolates, and they've even bought the mug, too.

TAYLOR: The teddy bear, right?

QUEST: The teddy bear! Hey, now you can get-you know what to get me for Christmas. All right.

(LAUGHTER)

QUEST: Well, she's a big spender when it comes to Christmas, what can I tell you?

(LAUGHTER)

QUEST: Many thanks, talk to you tomorrow, Luv. We'll do more tomorrow.

Europe ended the session in the grip of a global sell off. There was read across the markets. No surprisingly after the Fed's downbeat assessment, took a blow. The Bank of England cut the growth forecast. From London to Frankfurt banks were down. Lloyds, which is mostly owned by the U.K. government, lost 7 percent. Barclays was down 6 percent. Only HSBC bucked that trend. That was just up-that was down but only by about 1.5 percent.

OK, David Blanchflower is a former member of the Bank of England Monetary Policy Committee. So far, so good, he's also professor of economics at Dartmouth College at Hanover, New Hampshire.

David, I will allow you-

DAVID BLANCHFLOWER, PROF. OF ECONOMICS, DARTMOUTH COLLEGE: Hello.

QUEST: I will allow you merely one "I told you so" tonight.

(LAUGHTER)

BLANCHFLOWER: Just one? Well, obviously this is something I've been very concerned about. Bank's balance sheets haven't been repaired. They're not lending and the world looked like it was starting to slow. And you didn't agree with me, I remember. But it certainly looks that way. And I think the big trigger was actually on Friday when the OECD came out with its composite leading indicators and said France, Italy, the United States, China, the U.K., looked like they're slowing. And the data coming out this week is just one on top of the other.

QUEST: But, David, what we don't know, I think, is whether this is a gentle slowed down, or is it going to gather pace and speed and go downhill faster? What do you think?

BLANCHFLOWER: Well, right. I mean obviously that is the worry and the question is, what are the authorities doing about it? And I certainly think, I know the markets are kind of worried today about the Fed's outlook, but they should-I mean, I was encouraged by the fact that the Fed said, well, we realize things are slowing and we're going to do something about it.

I was encouraged a month or so ago when they said we are waiting and watching and ready. So, they seem mindful, but the question is how much can the U.S. lead the world, when other countries are now going foolishly, as I have said many times, that they're going into austerity measures, which are going to make things a lot worse.

QUEST: There are two issues here though. Let's just stick with the monetary authorities. The view is that further, QE, quantitative easing, as opposed to quantitative policy, more QE would not necessarily do much good.

BLANCHFLOWER: Well, the question really is what are the choices? It looks like most governments around the world are going to struggle to do anything on the fiscal front. Interest rates can't go down any further. And the things you described, the world economy slowing, are we going to sit back and just let that happen and let that bit-that terrible thing you just talked about, or are authorities going to respond? And the obvious way to respond is through quantitative easing.

And if you take the British example it is quite clear that Osborn and Cameron have absolutely no plan B at all. They are set to cut spending. Well, if things start to turn back the only show in town, to start with, is quantitative easing, and then embarrassingly for them, if things get worse, they are going to have to reverse everything that they've been saying. Which I think is probably coming.

QUEST: A survey out, which I haven't looked at in any great detail, so I'm taking my life in my hands even quoting the thing. But a survey out says that the BRICs are extremely pessimistic, second most pessimistic group, at the moment, about the future of their economy.

BLANCHFLOWER: Right.

QUEST: You've probably seen the same survey. I mean, wherever we-

BLANCHFLOWER: Yes, I have.

QUEST: Wherever we look at the moment, David, it is a crisis of confidence, not really liquidity, isn't it?

BLANCHFLOWER: Right. Well, I think it is a big of both. And we've had a liquidity crisis for a while, but the change, if you like, what's happened over the last few days. Particularly, well, maybe the last couple of months, is confidence certainly in the U.K. has collapsed, from the time the new coalition government got in, talked down the economy, what we've seen is consumer confidence is collapsed.

A survey that I watch, and it is this thing you talked about, Richard, a week or so ago, the European Union produced a survey, which was about what consumers think is going to happen to unemployment. And have the second biggest jump ever. People are really scared about losing their jobs. They're really scared about unemployment. They are lacking confidence in the economy. And guess what? They're going to stop spending. And that is the big nightmare. And that compromises growth. And that means fiscal tightening is really not the thing that we should be doing at all.

Joe Stieglitz has talked about the need in the U.S. for another stimulus. And I suspect that is where we're going to go in a number of these countries. Fiscal austerity, talk of tightening, has scared firms off, scared consumers off. Wrong treatment for the wrong disease.

QUEST: David, you had your one freebie tonight, of "I told you so" You don't get two.

BLANCHFLOWER: Well, thank you.

QUEST: Maybe one more as a Christmas present, that we've been talking about. David, lovely to see you. Keep well.

(LAUGHTER)

QUEST: Lovely weather in New Hampshire.

BLANCHFLOWER: Good to see you, too.

QUEST: Now, you and I will come back in just a moment, when the chairman of ING says his customers and shareholders are happy, he's happy. Tonight, Jan Hommen is all smiles, and I'll tell you why. QUEST MEANS BUSINESS, good evening to you.

(DESK BELL CHIMES)

(COMMERCIAL BREAK)

QUEST: That number on the dollar, we do need to just pause for a moment and talk about that. Because the euro, well, the dollar gained ground nearly 2 percent against the euro, at $1.2878. It was a dramatic day for the U.S. currency, which did put on weight against the European currency. Fears recession, flight to quality, all the usual reasons.

Profits are up more than tenfold at the Dutch financials services giant, ING. Second quarter net income, $1.4 billion. That is a lot of money. And it beat the estimates by the bank. The banking unit swung into the black following losses last year. The retail banking is doing well, making up for the tough times in investment. But, it is the insurance business, which of course is where the focus of attention is. It is being readied for a sale, and insurances focused and made a loss because of their investment strategy. Selling off the insurer is part of ING's government bailout agreement.

I spoke to ING's Chairman Jan Hommen. He told me the lender is progressing and how it is progressing paying back the taxpayer cash.

(BEGIN VIDEOTAPE)

JAN HOMMEN, CHAIRMAN, ING GROUP: We had $10 billion funding by the government. Support by the government we have paid back last year $5 billion. We would be willing to pay back earlier but we have a very peculiar situation. And if I can get a minute to explain that. We have to pay a premium of 50 percent on the final $5 billion that we pay back. That is part of the deal with the Dutch government. But if we wait until next year, and we would offer shares, and the Dutch government would say, no, I don't want shares. Then we only pay the nominal value, only $5 billion.

Now, in the meantime the Dutch government would like that money earlier. They haven't approached us, but if we would pay early then the European Commission will charge us with restructuring. Because then the difference between the 50 percent and the actually premium that we would pay is for that state support, and then we have to do another restructuring. And we don't understand that. Neither does the Dutch government. And so we have appealed that to the European Commission.

QUEST: And as the saying used to go, a billion here and a billion there, and pretty soon, you're talking real money.

Let's just talk about bank restructurings and now the U.S. has done its financial reform act. Individually countries in Europe are working their way through. The European parliament has come up with proposals. The commission has come up with proposals. Are you comfortable that Europe is moving expeditiously to the right answer?

HOMMEN: Well, I must say, Basil 3 will be a good improvement, in our opinion. And we're happy with the adjustments that were made, the adaptations that we have seen. There are still one or two questions that need to be resolved. But I think that has gone in the right direction. I believe that both the European Central Bank has done, and the stress testing that they have done so far, I think at least made people aware what the exposures are, of the various banks, to the various type of sovereign (ph) type of positions in Southern Europe. So that has helped.

Maybe there needs to be some more work done. But I think that has been a big plus to the financial markets.

QUEST: And the decision by ING to trim your own holdings of, for want of a better word, distressed sovereign debt, Greek and Portuguese bonds. Is that a-is that because of a shift in the risk portfolio and the risk aversion, or just part of normal market readjustments?

HOMMEN: I would say both. And we have normal adjustments from time to time in the markets. But also we felt that we wanted to have a lower profile with respect to these type of exposures. And we still need to have exposures. We have operations in particular in Greece and insurance operations, so we are logically exposed to that country, both on the asset side as well as the liability side.

QUEST: Mr. Hommen, let me finish by sort of reversing, if you like, my first question. I asked you were you pleased or happy with these sets of results. Now I'll ask you, when will you be happy with a set of results?

HOMMEN: Well, I will be happy when we have really accomplished the ambitions we have. The ambitions we have for both the bank and the insurance are still higher than what we have produced today. So we still have worked that out. I will be very happy when the customers say that ING is the most preferred bank, that they would like to do business with. And the same applies when our people say, that is the nicest bank that you can work for. And at the same time our shareholders say, that is the bank I like to invest in. And that applies to the bank as well as to the insurance company.

(END VIDEOTAPE)

QUEST: The chairman of ING.

The story of devastation, it is a story of deprivation, and devotion, and it is in Pakistan. Flooding has wiped out the crops. Now, it is also had a devastating effect on people's everyday livelihoods. Those who are lucky not to have lost their lives as a result of these floods. It is a miserable way to start the Muslim holy month of Ramadan.

(COMMERCIAL BREAK)

QUEST: International aid is starting to trickle in to Pakistan nearly two weeks after floods ravaged the northwestern part of the country. It is not nearly enough. And, for now, aside from disease, starvation, and the promise of more rain, there is a new threat. If you can believe this. The Taliban is urging Islamabad to reject any aid from the enemy. Of course, by they mean, the United States. Militants say the money will only be stolen by corrupt government officials.

United Nations, meanwhile, has a warning of its own. It says unless Pakistanis get more help, and get that help fast, the death toll that we're reporting could rise dramatically. The U.N. announced a large emergency appeal on Wednesday.

(BEGIN VIDEO CLIP)

JAN HOLMES, UNITED NATIONS EMERGENCY RELIEF COORDINATOR: This plan seeks around $460 million to enable international partners, U.N. organizations and NGOs, to support the government of Pakistan, in addressing the needs of flood effected families for the duration of the immediate relief period. Under this plan U.N. agencies, NGOs and the International Organization for Migration, will supplement the government's efforts in the major priority areas of food, clean drinking water, tents and plastic sheeting, non-food items, and medical supplies, in up to seven different geographical areas.

(END VIDEO CLIP)

QUEST: So far more than 1,300 people have been confirmed dead; 15 million people, Fifteen million have been affected by the disaster. So if this all wasn't enough, the misery, the floods, it has destroyed vast stretches of crops, and that has another effect, causing food prices to skyrocket. All at the start of Ramadan, the Muslim holy month. As our correspondent Dan Rivers now tells us, with so many Pakistanis already struggling with poverty, this may be more than they can handle.

(BEGIN VIDEOTAPE)

DAN RIVERS, CNN INT'L. CORRESPONDENT (voice over): This used to be a vibrant food market. But look at it now, Kushalpor (ph) is completely choked with mud and debris. And 250 food shops have been completely consumed by the foul smelling sludge. Ton after ton needs to be cleared, including rotting produce that shopkeepers didn't have the time to take with them as they fled the sudden inundation.

It is tough backbreaking work, but with the start of Ramadan it will be even harder. These people will be fasting all day and aren't supposed to even have a sip of water during daylight hours.

Chumagul (ph) surveys the damage to his vegetable shop. This business has been in his family for 20 years and now it is in ruins. He shows me how high the water was and complains that he has lost thousands of dollars and stock and lost trade. He set up a temporary stall by the side of the road, but all the produce has increased in price. Tomatoes have doubled, so have cucumbers. The other vegetables are up by a third.

Customers like Neas Ali (ph) complain they have already lost work and money is tight. But now with the cost of food rising there simply having to eat less.

Market manager Ikram Ullah says it is really difficult, not just for the poor, but for shopkeepers as well. With the month of Ramadan coming up, he says, it is really difficult for everybody. This flood has really increased prices.

(On camera): It is not just the food in this market that has been lost, but the crops in the field, which are still soaked, are also in jeopardy. The economic impacts of this flood will be felt for months, or perhaps even years.

JEAN-MAURICE RIPERT, U.N. SPECIAL ENVOY: The crop has been lost. And it is a race against time, to be sure that the next sowing season can be met.

RIVERS (voice over): You only have to look at the banks of the mighty river Indus to see why prices have gone up. This should be fertile productive land, but it is still utterly submerged. U.N.'s World Food program has delivered supplies to 340,000 people. But many more will need help, if these waters, and therefore food prices, don't go down soon. Dan Rivers, CNN, Nashiriff (ph), Pakistan.

(END VIDEOTAPE)

QUEST: Now dozens of countries have pledged tens of millions of dollars in relief effort. The Pakistani government has faced harsh criticism for being slow and ineffective in dealing with this crisis and with the money being pledged. So, as Phil Black now tells us. He's going to explain where the money is coming from and why it is taking so long to arrive and do some good.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Please, we need your help. Support these people, 16 million people have been affected by the flood. Thank you very much. And thousands have been killed.

PHIL BLACK, CNN INT'L. CORRESPONDENT (voice over): This is King's Cross Station in Central London, where the charity group, Islamic Relief, is trying to raise money for the victims of the Pakistan flood crisis.

(On camera): This charity alone has already raised close to $2 million. And it is part of an umbrella group, an alliance of large charity organizations here in Britain, known as the Disasters Emergency Committee. They all say they still need to raise more.

Following a large earthquake in Pakistan in 2005 there were concerns about charity money being diverted elsewhere, especially terror groups. While the charity organizations admit there is a risk, but the large ones say they have systems in place and a track record of ensuring the money goes to the right places and the people who need it most. And they say that is why it is important people consider just who they give their money to.

UNIDENTIFIED FEMALE: Donate to the PEC, Pakistan Flood-

UNIDENTIFIED MALE: First and foremost our objective is to make sure that the fund we are raising, it helps those that need it most. And for that, the public have a duty upon themselves to also find out that the organizations that they are donating to is also able to deliver.

BLACK: Mosques like this one in East London are also organizing grassroots community based campaigns. This mosque insists all money raised is then passed on to reputable charities. For Muslims it is now the holy month of Ramadan, a time when charity is especially sacred. That is something aid groups hope will be reflected in the amount of money donated to help the people of Pakistan. Phil Black, CNN, London.

(END VIDEOTAPE)

QUEST: It's a story we will continue to watch and follow closely, as you would expect. We'll be back with more in just a moment. QUEST MEANS BUSINESS, this is CNN. On this network, the news comes first.

So let me tell you the death toll in Northwest China is continuing to rise. It's now topped 1,100. A single day jumped more -- of more than 400 people. Local residents say the number is actually much higher. Sudden weakened mudslides are being blamed for the increase. Parts of three villages were swept away and have now been covered by a deep layer of suffocating mud. Unrelenting heavy rains continue and were blamed for the murderous mudslides.

A spokesman for Bolivia's president says he wants a peaceful ending to a mass protest that's held an entire town hostage for two weeks. Thousands of residents in Potosi have been cut off from all road, train and air traffic. They're demanding government action on complaints ranging from shut down mines to a long-running boundary dispute.

An overwhelming victory confirmed in Rwanda. Official election results show President Paul Kagame has won another seven year term. He got 93 percent of the vote. International observers say Monday's elections were peaceful and largely fair but lacked critical opposition voices. Meanwhile, we're hearing that witnesses in Rwanda's capital, Kigali, are reporting a bomb blast near a bus station. As the details become available, we will bring them to you.

Tonight, the Walt Disney Company is telling its shareholders that's entertainment. Disney's numbers were impressive and the company says there's more to come. Join me in the library and you'll see what I mean.

Q3 net income up 40 percent for the California-based group, $1.3 billion, a 40 percent spike. That was a better number -- now, you have to put this in context, because Walt Disney, with its theme parks, its movies, its geodiscs, its internal risks in previous decades drew a fairly -- people were wondering what on earth was going on. Disney also owns the ABC, of course, television network, but now seems to be picking itself up, as would be the movie studios saw Q3 up 30 percent. And that's because of blockbusters like "Alice in Wonderland," "Toy Story 3" and "Iron Man."

Disney's chief executives' "Toy Story 3" success bodes well for the next featured film, "Cars 2." These sequels, which have become so tremendously lucrative for the studios. You'll hear Bob Iger's views on "Toy Story 3" in just a moment.

But share price, besides a little wobble today -- obviously, Disney got caught in the down draft of the market -- the share price, though, overall -- now, put -- again, remember what I was just talking about with Disney -- a laggard. People were worried. They thought, what's going on, as it lost direction back in August of '09. It was down under $25, $26 a share.

We come up now, we're over $35 a share. It's a gain of more than 33 percent.

Poppy Harlow spoke to Disney's chief, Bob Iger, and she wanted to know about the company going into social gaming.

(BEGIN VIDEOTAPE)

BOB IGER, CEO, DISNEY: We think, when you look at games overall, we see a diverse set of experiences, a diverse set of platforms. It's stunning what we've seen in the last year in the social games world. There are now over half a billion people on Facebook. About 40 percent of them play games. That's pretty interesting to us. It's become about a billion dollar business already.

We see great growth. You're looking at a diverse audience, a large audience, multi-gender. When we looked at Playdom, we felt we had a company that would put us in that space rapidly. And we wanted to be there at a very early stage. And we couldn't do that by building internally. We had to do that with an acquisition. And we saw in Playdom a -- a company, that while you consider it a startup, has already had some real success. They basically put us in that space, and then some, very quickly.

POPPY HARLOW, ANCHOR, CNNMONEY.COM: Looking at beating -- on -- on the revenue side and on the profit side, I think the question that a lot of people have is, is Disney hiring right now?

Is this the time when you bring on more people to Disney?

Have -- have we turned that corner?

IGER: Well, I think we're more the exception than the rule. You're looking at a company that obviously is very successful, that has an extraordinarily strong balance sheet, that we actually continue to strengthen. This is a good opportunity to invest in long-term growth.

We will fully expect that, while we're going to continue to manage our costs very carefully and make the -- or take the necessary steps to reduce costs in businesses that, you know, we don't see great growth in, we also are going to continue to invest in businesses that we do see compelling growth. And that's where we will actually add jobs or create new opportunities for people.

And we're excited about that.

(END VIDEO TAPE)

QUEST: The head of Disney, Bob Iger, talking to our very own Poppy Harlow.

It's a way for homeowners to spare a bit of cash and make a bit on the side, as well. And you save a fortune for hotel rooms. It's couch surfing for grownups. It's known as the crashpad. And we'll explain where you can find one.

(COMMERCIAL BREAK)

QUEST: We're all familiar with a bit of degrading in our business travel as a result of the economic crisis. But you wouldn't catch me doing this -- checking into someone's guest room rather than a comfy hotel, three star or otherwise. But tightened purse strings and perhaps a sense of adventure have got some of you looking for cheap alternatives to the deluxe experience.

It's been called crash padding and apparently it's taking off in London -- people staying in other people's guest rooms.

Ayesha Durgahee discovered this.

(BEGIN VIDEOTAPE)

AYESHA DURGAHEE, CNN INTERNATIONAL CORRESPONDENT (voice-over): The service, the atmosphere, barista -- a luxury hotel is music to anyone's ears -- that is, if you can afford it. And if you can't, there are social bed and breakfast networks that can offer affordable comfort without the pomp and ceremony.

(on camera): You'd be surprised what (INAUDIBLE) from renting just one room to a whole penthouse apartment. This two bedroom apartment is going for just over $220 a night. So for four people sharing, that works out at around $55 each.

(on camera): Crashpadders has rooms and apartments to rent in more than 1,000 cities in 64 countries. There are beach huts in Fiji, houseboats in Belgium. The man behind Crashpadders is Stephen Rappaport. He's throwing a party to meet some of the hosts and Crashpadders in London.

STEPHEN RAPPAPORT, FOUNDER, CRASHPADDER: At the moment, we've got a little over 10,000 members and -- but I mean the rate of growth is -- it's just skyrocketing. You know, we've been going to inflate '08. About 1,000 of those 10,000 members have joined in the last three weeks. We're 83 percent cheaper than budget hotels, on average. In fact, Crashpadders is one of the few companies, I think, that's -- that's really been helped by the -- the current economic climate.

DURGAHEE: Fifty percent of Crashpadders guests are business travelers, like financial recruitment director, Chris Rogers, from New York. He would happily swap luxury for local flavor.

CHRIS ROGERS, BUSINESS TRAVELLER: I find that hotels are a bit insulating. They're very restrictive. They seem to cut you off from what you're involved with, although working out here in Canary Wharf, it's a nice area and all, I just prefer to be elsewhere when I'm -- when I'm leaving the office. And every time I can show a savings, it certainly justifies my business travel a bit more, which is always beneficial for me, too.

DURGAHEE: Of course, there's something in it for the homeowner, as well -- help paying the mortgage.

CAROLYN RODGERS, CRASHPADDERS HOST: This recession has hit quite a lot of us very hard. And so a lot of people have been trying to let out their spare rooms.

DURGAHEE: From May next year, homeowners in New York won't be able to continue renting out their apartments on a short-term basis. Rentals for less than 30 days will be banned. Officials say it will make things safer for both travelers and residents alike. And this follows similar laws already in force in Paris and Maui.

Critics see it as a victory for the hotel industry.

PAULINE FROMMER, TRAVEL EXPERT: People forget how powerful the hotel industry is, in terms of its influence on local government. And sure, vacation rentals, unofficial B&Bs, these all pose a threat to the hotel industry. So we're seeing more and more regulation of these types of smaller lodgings.

DURGAHEE: For now, though, social B&B networks may provide a viable alternative to suit all budgets, if you don't mind giving up a few hotel perks.

Ayesha Durgahee, CNN, London.

(END VIDEO TAPE)

QUEST: You have got to be joking.

A few perks?

What about all those nice shampoos that we all steal and put in our bags and take home?

And how do you know the sheets are clean, that's what I want to know?

All right, tomorrow, let me tell you about what we will be doing on this program. Tomorrow, a brand new weekly segment on QUEST MEANS BUSINESS. It's called Q&A. Now, I'm the quest and Ali Velshi is the A. In Q&A, you get to send the topics that Ali and I will talk about. We've picked the first topic for you tomorrow, the crisis in the wheat market. Prices have risen more than 50 percent since June. So we are going to explain who is most affected and how.

Q&A -- Quest and Ali. Send us your questions and watch as Ali and I battle it out to see who can give the best answers in one minute flat. There's a quiz, as well. If you want to join on this, it is CNN.com/qmb. The bosses have gone berserk. They've let us ask about anything you want. CNN.com/qmb.

Jenny Harrison is at the World Weather Center -- Jenny, there's much for you to brief us on tonight.

JENNY HARRISON, CNN METEOROLOGIST: There is, Richard.

I'm going to start out in Europe, because, of course, it's all eyes still focused very much on the east of Europe, in particular, western areas of Russia. Now, in the last 24 hours, we did see a bit of a change in those conditions, because, you can see all this cloud indicating a change in the wind direction. Also, that high beginning to break down just a little bit. Head further southward and, also, we saw some much needed rain. There wasn't a great deal of it, but I'm sure any light showers are very, very welcome.

So the ridge literally began to slowly flatten out as we went through the last 24 hours. And it's still looking pretty good. But as I say, not as good as we would like. The sun came through. It brought a few showers. Nothing really more than that.

But the direction of the winds already has proven beneficial, somewhat, anyway, to the residents in Moscow. Look at all the smoke, how it is now blowing well away to the east. And you'll notice some other white areas showing up here. That is the cloud that, indeed, brought those showers.

So, for the time being, the last few hours, conditions have been a little bit better and will continue to be just recently in the wake of that front.

But it isn't really all over just yet. And look at this, the carbon monoxide level up to six times the acceptable level. That is all these red areas that you can see here. And that really is because of all of those fires that have been continuing to burn. And, of course, carbon monoxide, if you're wondering why it's so bad, it actually lingers in the air, first of all, for several weeks. It's not just a -- a current event. It can linger for a long time. And also, the carbon monoxide, it attaches itself to the red blood cells in your -- in your bloodstream. And so it actually prevents oxygen from getting to your blood.

But the conditions over the next few days, sunny skies. Temperatures still well above average. Cooler in the overnight hours. And there is a little bit more reprieve over the next couple of days. But, as I say, not great. Still warm for the next few days, Richard, but it's an improving picture gradually, as we go through the next week or so.

QUEST: All right, many thanks.

Jenny Harrison at the World Weather Center.

I'm going to leave you tonight with the flashing red light, which shows, of course, the worries over economic recovery. Choppy from the U.K., unusually uncertain from the U.S., and Alan Greenspan says it's a pause that will feel like a quasi recession.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest.

I thank you for your time and attention.

Whatever you're up to in the hours ahead, I hope it's profitable.

We'll be together tomorrow.

END