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QUEST MEANS BUSINESS
Germany Says No to Eurozone Bonds; Verdict on Concorde Crash; Bernanke Speaks on the Economy
Aired December 6, 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, CNN HOST: Germany says "no" to Eurozone bonds and "no" to another layer of a Europe safety-net.
The cause of the Concorde crash? Continental Airlines, says a French court.
And, music to the Smartphone's ears. Shazam's Chief Executive tonight on developing the app.
I am Richard Quest. We start a new week together, and I mean business.
Good evening. Tonight, as fears over the European debt crisis knock another cent off the value of the Euro, the block's finance ministers are drawing up new plans to ensure Euro's survival. Ministers from the 16 Eurozone nations are meeting in Brussels.
Luxembourg's prime minister, Jean-Claude Juncker, and the Italian finance minister, Giulio Tremonti, have two proposals to protect against the need for further bailouts. They want to increase the Eurozone's financial stability facility (inaudible) and, in future, they want to create a multinational European bond - The E-bond.
It will be a tough sell. Germany has already dismissed both ideas, calling instead for tougher budget rules. Everybody's been talking about this E-bond idea, specifically because Juncker and Tremonti, in their FT article very firmly put it on the agenda.
But let's come over here into the library and you'll see exactly what the idea -- the E-bond is standing for Euro-bonds. Now, the idea is to set up a European debt agency that would have a common European sovereign bond. Crucially, because it would issue up to 40 percent of European GDP requirements, the market for E-bonds could be as deep and as liquid as, say, for example, U.S. Treasuries. An E-bond versus a treasury -- and you start to see why this might have merit.
The object, of course, according to Tremonti and Juncker, is to integrate European countries and thus make the Euro irreversible. It would be a very strong message. It would also allow weaker countries to have access to financing through the central -- the central mode. That's so far-so good; however, Germany doesn't like this for the very simple reason that, according to Angela Merkel, the European treaties do not allow for bailouts in this manner. They would have to be adapted. And, bearing in mind, if you've got these weaker countries involved, well, that will raise borrowing costs for the stronger countries like Germany. This gives you an idea.
So, Katinka Barysch is the deputy director of the Centre for European Reform. And I asked her why the E-bond was being pushed by these men as a solution.
KATINKA BARYSCH, DEPUTY DIRECTOR, CENTRE FOR EUROPEAN REFORM: Well, it's not the first time that this proposal has been put forward. It's been bandied about for a while. It is new that two government officials, finance ministers, have taken up this idea. The idea is that -- how do you get a country that can no longer borrow in the market? How do you tide it over that mess? That is the main idea behind that.
And then, also, because the other idea is that you create a very large and liquid bond market in Europe by issuing these Euro-bonds or E-bonds, as they are now being called.
QUEST: But issuing bonds centrally by some management company based in Frankfurt, Brussels, or who knows where, and do you think that solves the problem of individual countries running unsustainable fiscal deficits and running poor management of the economy?
BARYSCH: No, it doesn't. And if you read the article carefully, there's an ideal in there that countries that can no longer service their debt - those countries, then, are not illiquid, but insolvent. They could swap their debt to this central bond-issuing agency, but at a loss. Which, perhaps -- I mean, it's very difficult because it is a very rough proposal which, perhaps is very similar to the restructuring proposal that the Germans already wanted.
QUEST: Why don't the Germans like this proposal?
BARYSCH: Well, first of all, because -- well, they didn't actually say they didn't like it. If you listen to what Finance Minister Schaeuble said -- he said "potentially". In a different world, this is a very good idea and Germany will be the first country that would be happy to pool so much sovereignty that we have a common fiscal policy. But in the current universe in which we are living, this is not the case. So you would have to change the treaty. You would have us set up a very different way of making economic policy in the European Union, and then we can start thinking about that sort of thing.
QUEST: Ultimately, are they all dancing around? "The policy that daren't speak its name". There needs to be fiscal -- or some form of fiscal union, whichever way it cuts?
BARYSCH: That could be one solution. Another solution -- I think first, before we go down the road of pooling sovereignty to the extent where we sit together and tell each other what our taxes should be and what our social policies should be -- I think we first need to get ourselves out of that current mess.
And here we need to stop muddling through and start thinking in a bit more -- in a structured sort of way -- what countries have sustainable debt? Which sovereign debt is sustainable? Which banking sector debt is sustainable? How do we get out of this mess? Is there a sustainable solution to this?
QUEST: But we're a year -- 18 months -- two years into the whole crisis and a year into the European aspect of the crisis, and still, the best they can come up with is an article in the FT, weekend meetings in Brussels, and a bailout plan that may not have enough money in it. It's a pretty poor best.
BARYSCH: I wouldn't say that. I mean, if you look at it from a German perspective, the world as we know it has already changed. You know, we already have made vast amounts of taxpayer's money available to help European neighbors.
QUEST: It's not working.
BARYSCH: The ECB is already buying government bonds. I mean, the Germans of just a few months ago would have said "over our dead body". So, already we have done things that, you know, even half a year ago, we would have considered absolutely impossible.
So don't underestimate the Europeans. They're doing what they can. Of course, they're not doing it in a big bang sort of way. This is Europe, you know. Things need to be sorted out amongst 27 sovereign countries.
Ultimately, it's Germany that has been the most proactive country. Germany is determined to have a solution. But make no mistake, the solution is going to come along German lines and not along Italian or Luxembourg lines.
QUEST: Brutal truth from Katinka Barysch, the Deputy Director of the Centre for European Reform.
In just a moment: It's been more than 10 years since the fatal Concorde crash in France. More than 100 people died. Now, a verdict from a French criminal court. We'll give you the details in a moment.
QUEST: Continental Airlines and a mechanic who worked for the company have been found guilty of manslaughter over the crash of the Concorde Air France plane 10 years ago. In that crash, 109, all passengers on board and four people on the ground died after the plane burst into flames shortly before taking off from Charles de Gaulle Airport. It was in July, 2000.
The court ruled -- if you come over here, you will see -- the ruling was that Continental, the airline, was found guilty of criminal negligence and fined $268,000 and ordered to pay $1.3 million. The company called -- Continental says that the verdict is absurd and Continental says it will appeal against it.
Interestingly, the mechanic who fixed the titanium reverse thruster piece onto the DC-10-30, was fined $2.5 thousand and was given a 15 month suspended prison sentence for involuntary manslaughter. He was the only person found guilty in the trial. All the other persons, including Taylor's supervisor and three French officials, were acquitted. Incidentally, Taylor is not in France. He has never left the United States and has long since retired as a result of all of this. But he is the only person found guilty so far.
Now, EADS, the European plane maker, was found partly responsible and ordered to pay 30 percent of the damages to victims involved in the case. 100 million Euros was paid by Air France. EADS is the successor in title to Aerospatiale, and it is EADS that actually owns the certificate, if you like -- the safety certificate -- the air-worthiness certificate for Concorde.
So, that gives you the background to the verdict. I spoke to our correspondent, Phil Black, who had been following developments. And I began by asking him -- so many years on and so much water under the bridge since, what was the significance of this verdict?
PHIL BLACK, CNN CORRESPONDENT: Well, I guess it is definitively a criminal blame in that sense. It is Continental not being able to say or argue against the fact that, yes, it has, in fact, been criminally blamed - - held responsible for that crash, if you like.
Continental has denied it all these years and says it will continue to appeal, but that brand is now tainted by that.
QUEST: Which, of course, some of our viewers will be well aware, the Continental brand as such will disappear in the next year or two, since it has merged with United Airlines. However, Continental, in its rebuttal of the decision, quite forthright. Bordering on the rude, some might say.
BLACK: Yes, it's fair to say that it believes that the verdict is politically loaded, in a sense. It certainly uses the words that says that blame is being pushed aside to try and protect the likes of Air France as well as French air safety officials as well and it believes that very strongly.
QUEST: The two people from continental who were charged -- one found not guilty, and one found guilty. Is this just academic? There's no chance that the guy found guilty is going to turn up in France.
BLACK: No, well, it's suspended sentence. This is the former mechanic, John Taylor, and he gets -- has to pay a $2,600 dollar fine. That's it. And his lawyer is really quite astounded by this because -- he is really quite dumbfounded to believe that of all the people in the world, this is the one individual anywhere that has been held criminally responsible for this. And he asked the question: "how can this possibly be just?"
QUEST: Air France's people, the air traffic control people, all the people from the French side -- they all got off, if you like. Very unfair question to you, Phil -- does it smell?
BLACK: Well, this is an independent judicial courtroom, Richard, so you can only presume that, in the matters of law and independent justice -- and given the way this legal matter has turned very slowly through the French courts for some time -- tens of thousands of pages of evidence and so forth -- it's impossible to judge that in and of itself.
But, it's -- I guess the one people here say and, perhaps the whole aviation community, or much of it around the world -- is united in the belief that these sort of things shouldn't be judged in a criminal sense. It doesn't do air safety any good in that way because it intimidates witnesses. It doesn't want to make people cooperate with investigations in the future.
QUEST: And does Air France, which has paid 100 million Euros plus, do they now go to Continental and say "here's the bill, reimburse us"?
BLACK: Well, they were, today, awarded more than a million U.S. dollars anyway, $1,300,000, which is pretty good. They wanted much more than that. They're not saying how much more they want to gouge back, but you can bet that if they think they can, they'll give it a try. And there's a hint in their statement today. They say they welcome the decision, which very clearly lays full criminal and civil responsibility with Continental.
QUEST: Phil Black on the saga of the Continental blame for the Concorde crash.
In just a moment: Our journey through future cities. And we're in Abu Dhabi.
(BEGIN VIDEO CLIP)
QUEST: Driverless, energy-efficient -- getting around the city of the future. And the future begins after the break.
(END VIDEO CLIP)
QUEST: We continue our journey through the world of future cities, looking at the places where we live and work, and how they are tackling tomorrow's problems today.
Over the months, we've been in London, Las Vegas. We've been in Hamburg and Istanbul. New Delhi, Cairo, Los Angeles, and last month, of course, we were in Brazil -- in Curitiba. Where we now move on. This time, to Abu Dhabi in the gulf and Masdar City.
Even though it is set against an arid backdrop in an oil fuel state, Abu Dhabi, this city, is about to get as green as you can.
QUEST: When big cities build their future, rarely do they get the opportunity to start from scratch. On the outskirts of Abu Dhabi, that's exactly what's happening. An ambitious plan is underway to build Masdar City, the world's first carbon-free district.
The first part of Masdar City is complete. This is the Masdar Institute -- a world class facility dedicated to the study of renewable energy. And this is the brain -- the building that's the knowledge center -- that represents everything they hope to achieve here.
UNIDENTIFIED MALE: When they decided to put a man on the moon, they formed an organization called NASA to run it and put the man on the moon, and they did it. Masdar is the same. When the leadership of the country decided to transform the economy, they gave the job to Masdar.
QUEST: The original completion date for Masdar City has been pushed back almost 10 years to 2025. Even here, in oil-rich Abu Dhabi, the financial crisis is creating problems. It's cut $3 billion from the projected $22 billion the city is expected to cost.
The plan is to build almost a perfect square mile. A home for 40 thousand residents. Large parts, for the moment, are still a construction site in the middle of the desert. Every inch of every building in this environment has been carefully planned to be energy efficient and sustainable. And the detail is in the design by Lord Norman Foster.
LORD NORMAN FOSTER: It's seeking to reduce the energy demands by working with nature. By encouraging the cool breezes at night, the warm air to flow in different direction, orientating learning from centuries of tradition, the ways in which you can modify the climate without resorting to an input of energy in a world where cheap gasoline will no longer be that kind of luxury.
QUEST: For the students who are the first "residents" of Masdar City, the here and now is exciting.
UNIDENTIFIED MALE: When you have this environment of all these different nationalities and all these different backgrounds, you get something truly spectacular.
QUEST: You've been here 18 months.
UNIDENTIFIED MALE: Correct.
QUEST: Will you stay?
UNIDENTIFIED MALE: Um, yes, you know, I think I'm going to go wherever there's, sort-of, room for me. If there's a niche here that I can fill, I'm going to stay.
QUEST: And why wouldn't you stay? Each of the 180 students from 30 different countries is here on a full scholarship. They're getting valuable experience putting into practice their research into renewable energy in a state-of-the-art facility.
UNIDENTIFIED MALE: Now it's just a research facility, but later on, in about six months, we're going to design a new receiver in order to harness the power that we are reflecting on the receiver. We can then use it either for generating electricity or either to provide cooling energy to Masdar City. In Abu Dhabi, we have all the money to do cutting edge research in solar energy, and that's what solar energy needs.
QUEST: The plan is to provide 80 percent of the electricity needed in the city through solar energy. If you're going to build a carbon-free city, you have to deal with one of the biggest carbon-emitters of all: transportation.
To get around at this level, we're only allowed to use foot and pedal- power. Down below, and this is amongst the most futuristic type of transportation I've ever seen -- the PRT. The pods that are the backbone of Masdar's transport system. This is how you get around.
The Personal Rapid Transit system, the PRT -- driverless, electric vehicles hidden underground. There's not an exhaust fume in sight.
At the moment, there's only one destination for the pods.
POD ANNOUNCEMENT: Please take your seats and press the green "go" button to start your trip.
QUEST: Thank you.
The original plan was that these pods would be used all over the city, but recent revisions to the blueprints have scaled back those plans.
POD ANNOUNCEMENT: You have now arrived at your destination. Thank you.
QUEST: Another change to the original plan: the city won't rely solely on clean energy sources from within. Instead, it will have to buy renewable energy from off-site locations.
Becoming carbon-neutral is still the goal. It's just becoming a little bit more difficult to reach it. According to the World Wildlife Fund, Emirates use more of the world's resources than in any other nation.
UNIDENTIFIED MALE: The economy, up to now, has been primarily driven by revenue from the oil. Away from oil, they are moving towards what they call "green technology".
QUEST: The vision is a noble one. And, for now, it is worth remembering it is the black gold and the petrol dollars which are paying for the green ambitions of this ultimate future city.
QUEST: That was a fascinating experience -- being on one of those RPTs or rapid transit machines. All the month of December, we are in Abu Dhabi where we will be looking at the various ways in which the city and the city-state is turning itself into a green environment.
Now, was he a bull or was he a bear? When we come back in a moment, Ben Bernanke has some sobering words on the American Economy, but he's still keeping the faith. We'll tell you what you need to know.
QUEST: Hello, I'm Richard Quest. It is a Monday. Quest Means Business. This is CNN and, always, on this network, the news comes first.
The U.S. is reassuring South Korea that it will stand by the country in the current crisis with North Korea. U.S. Secretary of State, Hillary Clinton is meeting in Washington with the South Korea's Foreign Minister and the Foreign Minister of Japan. The U.S. and Japan right now holding their largest ever joint military exercises and the top U.S. Military officer, Admiral Mike Mullen, will be heading to South Korea.
The Taliban has claimed responsibility for Monday's dual suicide bombings in Northwestern Pakistan that killed at least 50 people. More than 70 others were injured at a government compound where anti-Taliban fighters and government officials were preparing to meet. One bomber blew himself up inside the building. Another detonated his explosives outside the building's gates.
Iran's chief negotiator has returned to the first talks in more than a year over Tehran's disputed nuclear program. No official statements from the sessions in Geneva. A diplomatic source has told CNN Iranian officials are raising concerns over attacks on nuclear scientists that left one dead and another injured last week.
And, as we were talking earlier, a French court has ruled that the Concorde crash 10 years ago was caused partly by the criminal negligence of Continental Airlines and a mechanic who worked for the airline. In addition to a fine, Continental has been ordered to pay $1.3 million to Air France, which operated the plane. A lawyer for Continental has called the ruling "absurd".
The chairman of the U.S. Fed, Ben Bernanke, has put his economic plan to the American People directly through national television. At times, the chief painted a grim picture of the U.S. Economy. He was speaking to the CBS program 60 MINUTES.
Mr. Bernanke denied the U.S. was heading back into recession, but only because the economy couldn't tank much further.
(BEGIN VIDEO CLIP)
BEN BERNANKE, CHAIRMAN, UNITED STATES FEDERAL RESERVE: It doesn't seem likely that we'll have a double-dip recession, and that's because, among other things, some of the most cyclical parts of the economy, like housing, for example, are already very weak. And they can't get much weaker. And so, another decline is relatively unlikely. Now, that being said, I think a very high unemployment rate for a protracted period of time, which makes consumers' households less confident, more worried about the future -- I think that's the primary source of risk that we might have another slowdown in the economy.
(END VIDEO CLIP)
QUEST: That's a pretty sobering thought.
The Fed, of course, has engaged in a second round of quantitative easing. And it's been an important part of the Bernanke plan. The Fed chief denied that QE2 would send inflation out of control.
(BEGIN VIDEO CLIP FROM "60 MINUTES," COURTESY CBS)
BERNANKE: Well, this fear of inflation, I think, is -- is way overstated. We've looked at it very, very carefully. We've analyzed it every which way. One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way. What we're doing is lowering interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster.
So the trick is to find the appropriate moment when to begin to unwind this policy. And that's what we'll -- that's what we're going to do.
(END VIDEO CLIP)
QUEST: Now, Dr. Bernanke was perhaps most pessimistic of all when it came to discuss the issue of unemployment. Currently 9.8 percent is the rate in the United States. He said it could be a long time before levels return to something more normal.
(BEGIN VIDEO CLIP FROM "60 MINUTES," COURTESY CBS)
BERNANKE: Between the peak and the end of last year, we lost eight- and-a-half million jobs. We've only gotten about a million of them back so far. And that doesn't even count the new people coming into the labor force. At the rate we're going, it could be four or five years before we are back to a more normal unemployment rate, somewhere in the vicinity of, say, 5 or 6 percent.
(END VIDEO CLIP)
QUEST: Now, having sat through more hours of Mr. Bernanke's testimony than is perhaps honest or decent, those are the -- proving that he is, of course, an economics professor who is used to speaking in plain English, those are the most revolutionary and straightforward words that we've heard from Ben Bernanke since he's, perhaps, been head of the Fed.
So how did investors react to such straight, plain speaking?
Carter Evans is at the New York Stock Exchange -- Carter, Bernanke not quite as Delphic as Alan Greenspan was, who you could never quite understand.
But -- but certainly what we hear this time on television, very plain speaking.
CARTER EVANS, CNN CORRESPONDENT: Well, and it's nothing really new. We get this sort of information from the minutes from the Fed meeting. But it's one thing to hear it coming from the horse's mouth, so to speak. And, you know, the Fed chair did also leave a potential another round of quantitative easing on the table, as well.
So we're hearing a couple of different things today from people. On the one hand, it shows that the Fed is determined to keep stimulating the economy. But the scary thing about that is if the Fed actually needs to continue stimulating the economy, it means that things are really not going the way that -- that the Fed, that the central bankers had hoped.
We've had some big scares, though, over the past couple of weeks, though, and the market has been pretty resilient. I'm talking about the debt concerns in Europe and the ongoing tension between North and South Korea. We've seen reactions in the market.
But these days, the market seems pretty resilient. I know you're going to be talking to a psychologist in just a few minutes. And it appears that fear is definitely a factor in the market these days, but it's not the dominating factor that it was just a couple of months ago.
It seems that investors are willing to roll with it. But the Fed chief certainly didn't give any reason to buy today.
QUEST: Right. But you see, the interesting thing about what -- listening to -- to Dr. Bernanke, is those in the market and those in the know who read the economic reports knew all this already.
Will what he said, will it have been a -- a shock or a surprise or an eye-opener, even, to Main Street, to middle America?
EVANS: You know, it's really interesting, and it's good that you point out middle America, as well. Because here in New York City, it's -- it's kind of a different animal, as well. I was talking to someone last night who has a daughter in Indiana, which is truly middle America. And she has a job right now. It's a job that pays $7.25 an hour. And everyone that she knows that is employed is not making more than $10 an hour. These are low paying jobs.
So while we may be talking about the recovery now and certainly feeling it here and seeing it in New York City, in middle America, they are not seeing it.
So this kind of plain talk from Ben Bernanke certainly could have an impact. But again, I think when you look at the markets -- and what you said is -- is true, people in the know, know this already so it's no big surprise. But again, to hear it in plain English on television is a bit scary.
You know, I wanted to talk something -- about something really quickly about the myth that he mentioned, that the Fed is printing money, because a lot of people use that term to describe quantitative easing. Yes, the Fed is not actually printing more dollar bills and adding to the money supply, but the effect is very similar.
By buying back these bonds, the Fed is putting more of the current money supply into the market. And that's what lowers the interest rates. It encourages lending and spending.
But, you know, he's tinkering in very, very, very dangerous territory right now. And this is what the Fed critics are saying. Once you start this pattern of inflation, it can be very, very hard to stop. But inflation is really low right now, so the Fed chief is saying that's really not a concern.
QUEST: And I do believe, as he said, also, in the interview, we could raise interest rates in 15 minutes if we had to.
Carter Evans, who is at the New York Stock Exchange for us tonight.
There was disappointment ahead of today's Eurozone finance minister's meeting. The Sentix research institute says its European investor confidence index fell to 9.7 from a three year high of 14 in November, the worse than expected. It goes to show you how important and how fragile commodity confidence is for markets at the moment.
This is the Chicago Board's Options Exchange Volatility Index, commonly known as the VIX. Now, if you've got -- it looks more like a heart monitor. And, frankly, if you're at that end of it, well, as you can see, it does look as if the patient might be not long for this world.
So, it measures the cost of using options as an insurance against default in the S&P 500, an increase -- a suggested increase in anxiety. Just look at how the VIX spiked up during the May flash crash, when the market fell 1000 and how it moved higher at the end of last month, reflecting investors' fears about the debt crisis.
It's a fascinating way to gauge, if you like, the psychology. Market is at the mercy of many factors -- sentiment, confidence, greed and fear, for example. What drives is the hope and fears.
I spoke to market psychologist and author, Frank Murtha, about what really makes investors tick.
FRANK MURTHA, MANAGING DIRECTOR, MARKETPSYCH.COM: The herd mentality sums it up very well. If -- if you think about it, a market is really nothing more than a form of peer pressure, literally. It's the aggregate likes and dislikes, the aggregate psychology that puts pressure to move -- to move stocks and indexes up or down. And most people end up becoming, for lack of a better word, followers of that, unless they have a really strong sense of what they want to do with their money.
QUEST: So if we, then, take something like here in Europe, the European sovereign debt crisis, now, despite the Europeans governments' best attempts to say this country, Spain, or that country, Portugal, is not at risk, the market doesn't believe that.
How much of that is economics and how much is psychology?
MURTHA: Well, I -- you know, personally, I believe market psychology is redundant. To me, all of that data, all of that information, all of the things people are reacting to, they have to get filtered through their emotional lens and their cognitive lens.
But the other point of it, for me, is, you know, it -- I'll speak for how it is here in the States, but it's, you know, sometimes trusting the government isn't always the easiest thing to do.
So despite all of the attempts to calm people, you know, it's going to have limited effect, unfortunately.
QUEST: Back to dear Dr. Bernanke and his "60 Minutes" interview. He's trying -- he's trying to assuage, he's trying to calm people down, that things are not that bad. But he has an uphill task precisely because of what you're saying.
MURTHA: Well, you know, you can stand out there with a megaphone and shout, "All is fine, move along, nothing to see here." Look, there's a lot of -- there's a lot of things that need to be resolved, a lot of major issues. And people want to see those things resolved before they're going to feel the sense of security to invest with full confidence. And I apre - - I appreciate and I applaud efforts on behalf of -- of the Federal Reserve and other officials to calm people's fears. But it's understandable that they will have a limited effect.
(END VIDEO TAPE)
QUEST: Now, and we know, of course, the Fed chairman struck back at the inflation hawks who claimed that inflation will be sent soaring and that would destroy the dollar.
There's a blunt article entitled "Bernanke 1, Inflation Hawks 0" -- "Bernanke 1, Inflation Hawks 0." It says it like it is. It's history shows Bernanke is right at the moment to say inflation isn't knocking at the door.
Take a look at the numbers yourself. You can find it. I've posted the article. You can find it at CNN -- at Facebook.com/cnnquest. There's a whole load of other things there. You'll learn all sorts of interesting things about our program if you join us on there.
HSBC is facing a $9 billion -- yes, I said billion -- dollar lawsuit over accusations the company turned a blind eye to the Bernie Madoff Ponzi scheme. Now, this particular lawsuit against HSBC comes from Irving Picard, the trustee liquidating Madoff's old investment firm.
The lawsuit says that the bank was well aware that Madoff was committing a fraud on a massive scale. All the while, Picard says, HSBC set up feeder funds -- the famous feeder funds that channeled nearly $9 billion to this fraud. He claims HSBC, if it had blown the whistle, Madoff would have been caught years earlier, saving some of his billions of dollars.
The significance, of course, what's happening at the moment is that Picard has to do all these lawsuits here and now because the time and limitation is getting quite close. If he doesn't do these -- these various things, he could be time barred. That's why he's not only issued proceedings against HSBC, but a variety of other banks, in billions of dollars and seeking damages.
As you know, Madoff was running the biggest Ponzi scheme in history. And he was sentenced to 150 years in prison, where he will remain for the foreseeable future.
Now, how often have you heard that piece of music and you thought, do you know, I wish I knew what that piece of music was?
If there was only a way I could find out -- the sort of idea.
Ah, Shazam. I'll tell you about that after the break.
QUEST: It was in 2002 that the name Shazam first came to my attention and to yours, maybe, as well. It was a music recognition gadget, widget, whatever, that basically allowed you to get a text or information back about a piece of music that you played into your mobile phone.
Now, the recognition app has passed the 100 million user mark and it's looking for new ways to make money off a free product by tying up with TV shows.
To you and me, it may just be another free Smartphone app, but it's an example of how a simple idea marketed the right way does actually work.
Now, this is how it does work. People use Shazam to find out the name of a song they don't know. You hold your phone up, it will give you the song title and a link to download it and buy it. And now Shazam hopes viewers will use it while watching TV to recognize their favorite shows, unlock bonus features in the process.
Shazam had a storming six months. It says a quarter of those hundred million users have joined in the past six months.
The chief exec, Andrew Fisher, is with me now.
In late years, if you've been in Shazam, with my mobile phone, I've probably used it, I don't know, maybe half a dozen times. So you -- you didn't get rich off me.
But wasn't it, though, always an element of how you were going to grow it beyond, oh, that's a piece of music and try and find out that music.
ANDREW FISHER, CEO, SHAZAM: Well, that's -- that's a good point. And we're delighted today to be announcing 100 million users. And that's really come about because we've moved beyond just pure discovery and being able to point your phone and identify the name of the song.
Really, the recent growth over the last 18 months has been driven by connecting the buyer and seller of music. And every day, today, we identify over three million tunes and 300,000 products are sold across our network.
QUEST: Now, hang on. So you're saying there's a 10 percent follow- through from somebody identifying a tune and them purchasing it?
FISHER: That is correct. We're seeing a 10 percent conversion to purchase using Shazam. And we think that's because when people are in the moment, it's an emotive purchase and it makes it very, very convenient for people just to click and buy.
QUEST: Price point, of course, being correct, getting -- you know, it's the old thing, $2.01 and they won't -- $1.98 and they will.
FISHER: Well, I think what it's showing is technology really has a place in society. I mean, with the music industry at large, there is a change about buying recorded music today. But Shazam has actually belied that. And what we're -- what we're showing and evidencing is that when people are in the moment and if you make it really convenient for people to purchase product, they will go ahead and do that.
QUEST: Will you -- hands on heart, Andrew -- were you surprised that Shazam was successful?
FISHER: I think the -- the challenges, if you're going to change consumer behavior on a truly global scale and -- we're in 200 countries around the world -- that takes longer than all of us would like. And so what you have to do is you have to be very careful about your judgment as to when you invest and when you see those macro factors changing consumer behavior.
QUEST: Right. But you're profitable now, aren't you, on -- on all -- I mean let -- I -- I -- years of doing dot-com stories has taught me to ask this question in a very guarded fashion.
Do you make real money?
FISHER: We make real money. Yes, we do. And we have a very lean and fit organization, but we're very considered about what are the macro drivers in our business. And so for us, it's not just about Shazam, making it more convenient for people to find music. It's about the whole purchase of visual (ph) content, Smartphones and these unlimited data tariffs so people aren't inhibited that when they transact over a mobile network, they're not incurring additional charges. And those have been the factors that have really driven our success.
QUEST: I've got to ask this.
What percentage of Shazam's searches fail, do you think?
FISHER: A very small percentage. Normally, it's because people will start within -- with less than five seconds of the song so they'll start trying to Shazam at the end of the song. Or we -- there may be the case that we don't have the music on a database.
QUEST: Which is somewhat unusual. All right, I'll give you a new -- I'll give you another one. I was singing the music on one of them.
QUEST: I could remember the song and I tried singing it to Shazam and it didn't recognize it.
FISHER: Occasionally that will happen. But I mean music is great for us, but the real crux of what we're focusing on right now...
FISHER: -- is enabling people to interact with broadcast media, so to be able to Shazam -- Shazam a television show and also to Shazam a television advert. And we launched this at the Super Bowl this year with Dockers and Levis. It was very successful. And we've been doing a lot of work with NBC Universal in North America.
And this enables people with the Shazam application on their phone...
FISHER: -- do to exactly the same thing they've been doing with music, but just point it at a television set and then have an interactive experience around that.
QUEST: And provided I'm not singing it, it should all be a great success.
Many thanks, indeed.
FISHER: Thank you very much.
Now, you don't need me -- if you're traveling in Europe, you don't need me to tell you, we used to call it brass monkey weather.
Jenny Harrison is a Northerner and she knows what's happening, don't you -- Jenny?
JENNY HARRISON, CNN METEOROLOGIST: I do, indeed. And brass monkey, yes, that sums it up very well, Richard, indeed. And more on that to come, of course.
We're not just yet seeing much in the way of milder weather. What we have been seeing is still a huge amount of cloud, a lot of snowfall embedded in all that cloud, but also, to the south, a great deal of rain.
Have a look at these images coming from Albania, because it's the Drina River. And you are looking at one of the main cities. And in Albania itself, 2,500 homes actually flooded. And that left about 12,000 people homeless. And all the roads coming northwards from the capital city, Tirana, they've been washed out by the floodwaters. But it's not just here; also, Bosnia and Serbia, Montenegro, also -- all, of course, sitting along the Drina River. And that is where the fast flowing water has really flooded so many towns and cities.
So, is there some more rain in the forecast?
Well, it has been easing off over the last 24 hours. And, in fact, when we go forward, there will be some rain, generally further to the west, but certainly not as heavy as it has been. And, in fact, it's much drier as we head further to the south and, again, into Albania. So some better news there.
As for temperatures, this is what Richard means by brass monkeys, minus 17 in Oslo right now; minus three in Stockholm, nowhere near as cold there. London not reporting to us now; but Paris minus four degrees now. So you can feel that cold air filtering all the way down from Milan, one degree Celsius; and just eight in Istanbul and just -- no, nine in Istanbul and eight in Athens right now.
So, I know you're wondering what this is all about. Well, we're in a -- a negative phase of the Arctic Oscillation. So that is when high pressure at the -- at the Arctic revolves at the North Pole. The winds are much, much lighter. So if you can imagine this, when the winds are lighter, it doesn't keep them so tightly circulating around this system. So in actual fact, the cold air plunges further southward. Then you see these very cold outbreaks.
So, in the next 24 hours, that rain and snow pushing eastwards, as you can see. Still staying cold. And, in fact, if we go toward the end of the week, it's going to get colder still across Central Europe. So a little bit of a spell of milder weather. It still looks very nice, of course, if you don't have to travel anywhere. There is an image from Slovakia.
Here are the temperatures in London for the next few days. Still a good eight degrees below average. Paris, pretty much the same, more snow in the forecast. But still, expect widespread delays across Europe. Look at that snow coming in through France, Germany, Poland eastwards over the next couple of days.
The delays, you can see, through Tuesday, not particularly lengthy until you get to more ctrl areas, Zurich and Vienna. And some pretty strong winds out there, as well.
So it is cold, it is wintry -- Richard, you summed it up so well.
QUEST: Good grief.
As long as the ctrl heating is in, we'll be all right.
All right, Jenny Harrison with the forecast.
We'll speak to you as the week goes on.
Now, go east, young man. When we return, a growing number of students who are spurning U.S. and European universities and going to Asia. They want to get their MBAs.
QUEST: A graduate program in Hong Kong cracked the top 10 in that the "Financial Times" list of the world's best MBA degrees. The Hong Kong UST Business School tied for ninth, up seven spots from last year. Expert sources say mainland Chinese MBA programs are getting better all the time. Many Westerners are now going to Asia for their higher education at the MBA level.
Pauline Chiou looked at the trend.
PAULINE CHIOU, CNN CORRESPONDENT (voice-over): These three MBA students at Hong Kong University are here for one reason -- they want to work in Asia. Twenty-eight-year-old Emmanuel Poupelle, from Paris, was a sales manager for Carrefour in Beijing, 31-year-old Jen Vanderherberg of Toronto was a buyer for Canadian Tire, 28-year-old Stuart Mercier, also from Toronto, invested in real estate for a Canadian pension fund.
When it came to applying for an MBA program, they all targeted Asia.
STUART MERCIER, MBA STUDENT: We are following the opportunities. I mean I think the next decade of growth is really going to come from this region.
EMMANUEL POUPELLE, MBA STUDENT: That shift to -- to China, I had -- had already done a few years ago, in -- in mainland China. I didn't want to step out of greatest China. I wanted to stay here to expand my network.
CHIOU: It's that networking that can be a springboard.
(on camera): Are job recruiters saying, hey, we're looking for someone that's here just to work with us in Hong Kong or Shanghai?
JENNIFER VANDERHERBERG, MBA STUDENT: Absolutely.
MERCIER: Yes, absolutely.
VANDERHERBERG: On a daily basis, where we have people coming here to university that are looking here, they're multinational, local companies, companies from China.
CHIOU (voice-over): Most of the schools require GMAT test scores for admission. The U.S. company that gives the exam is seeing a spike in test scores being sent to Asian business schools. Because of China's growth, the number of MBA programs in mainland China has tripled in the last 10 years.
But how good are these programs?
DAVID WILSON: You raise a -- a question that has a lot of veneers to it. The answer is they're young. The -- the programs are very young. Another answer is that they are growing in quality very dramatically and they are becoming globally competitive.
CHIOU: CEO David Wilson says it's not just the Western applicants, but Chinese applicants are now considering schools closer to home. "The Financial Times" ranked the MBA program at Hong Kong University of Science & Technology among the top 10 business schools this year. It's affiliated with Kellogg in Chicago.
Steven Dekrey is the associate dean who helped establish the MBA program in Hong Kong 14 years ago. The class that started this September shows the shift in demographics -- 23 percent from mainland China, 15 percent from the U.S., surpassing local Hong Kong students who used to make up the class majority.
STEVEN DEKREY, HONG KONG UNIVERSITY OF SCIENCE & TECHNOLOGY: The downturn, you know, shocked people. And so the year of the downturn, say, the next applicant year, '09, our Western applications tripled in size.
CHIOU: The trend has repeated itself across many campuses in Asia.
VANDERHERBERG: The general sentiment here is that people aren't looking back, they're looking forward. And they're really propelling themselves into what's next and what's coming, what -- what the possibilities are.
CHIOU: For these three, like so many others, the best opportunities are here in greater China.
Pauline Chiou, CNN, Hong Kong.
(END VIDEO TAPE)
QUEST: Now, since it's a Monday, let's look ahead to Thursday, when we will, of course, be with you with the weekly segment, Q&A, where you get to choose the topic that Ali Velshi and myself give the answers to. We'll be battling it out. And you can see who gives the best explanation as the subject unravels. And there's even a quiz, of course.
Just go to CNN.com/qmb and send us your talking points for that.
When we come back in a moment, what do E Bonds have to do with a Profitable Moment?
We'll find out.
QUEST: Tonight's Profitable Moment.
You know the old saying, sounding like an old record. Well, just when you thought Europe might be about to get its act together, another wrinkle on the plan has developed.
We have two leading European politicians talking about trying to issue E Bonds to create stability in the Eurozone. It seems as if Europeans' sovereign debt crisis is destined to be with us right through the winter and, no doubt, well into next year.
There are so many different opinions, policies and plans that it's difficult and hard to know what it will take to calm markets down, although at this rate that we're going at the moment, it will probably be the exhaustion of all involved.
None of this negates the real issue -- the Eurozone, as constituted, does not -- and, some say -- cannot work. There needs to be root and branch reform.
And that raises the question, when will European leaders finally acknowledge the truth that they all know but won't say?
And that's 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 right now.