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Quest Means Business
New York, New Jersey Criticized for Ebola Precautions; Global Battle Against Ebola; Ebola Quarantine Debate; Brazil Stocks Fall on Reelection of President Rousseff; Brazil's Next Four Years Under Rousseff; US Markets Flat; Twitter Tumbles After Earnings; Hungarians Protest Internet Tax
Aired October 27, 2014 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: It was a chippy, choppy sort of start to the week, up and down just a little bit here and there. When the closing bell
rang an hour ago on Wall Street, the market eked out a small gain, trading came to an end. It was Monday, it's October the 27th.
Tonight, the UN criticizes the way Ebola health workers are being treated in the US. Kofi Anna tells me it's time to stop playing politics.
Dilma Rousseff wins, the market loses. Brazil's stocks sell off. The president got another term.
And thousands of Hungarians are fighting a tax on downloads. The government will be defending it live on this program.
I'm Richard Quest, we start a new week together, and I mean business.
Good evening. There are strong words tonight from the head of the United Nations and his predecessor. Both men say we should support not
stigmatize the medics who are putting their lives at risk by helping Ebola victims. There's a furious debate right now about whether to quarantine
individuals when they reenter the United States from West Africa.
Ban Ki-moon, the secretary-general of the UN, said, "Returning health workers are exceptional people and should not be subjected to the
restrictions that are not based on science." And tonight, the former secretary-general, Kofi Annan, tells me on this programs, measures which
could discourage health workers to going to West Africa are putting the entire global community at risk.
If you join me at the super screens, so far the states of New Jersey and New York, they've been roundly criticized for clamping down too hard on
those returning. There are enhanced airport screening in place, all passengers from West Africa are now being funneled through the five major
airports in the US for international travel.
Nurse Kaci Hickox in quarantine on claims she had a high temperature. The nurse denies it. She was put in a tent next to a hospital in New
Jersey in quarantine and says her human rights -- basic human rights -- have been violated. Now, after the furor, Hickox has been allowed to
continue mandatory quarantine, but doing so at home.
Put all this together, and as the epidemic gets ever worse, Kofi Annan has warned the authorities that they shouldn't impose measures which could
discourage health workers from going to countries that need their help. The former UN secretary-general said the virus must be stopped, but it will
be stopped in West Africa.
(BEGIN VIDEOTAPE)
KOFI ANNAN, FORMER SECRETARY-GENERAL, UNITED NATIONS: The only way we can get ahead of this game is to contain the epidemic in West Africa by
getting additional health workers in, getting in helicopters, medivacs, and all the equipment we need. If we discourage the health workers from
getting in, we are not going to be able to contain this, and we will all be at risk.
QUEST: So, do you see the decisions taken by the governors of New Jersey and New York, even though reversed somewhat, but the fundamental
point that they're making, you see this as a bad one?
ANNAN: I think it is a bad one, and unfortunate in the sense that it's not backed up by science. The doctors from World Health Organization
to CDC here and other countries have indicated the worst thing you want to do is to close up the borders, to come up with these sort of restrictions
and scare away potential help.
QUEST: When Governor Christie says his first responsibility is the public safety and public health of the people in New Jersey, how do you
square that circle?
ANNAN: Oh, I agree with him that are concern should be for the public safety and public health, but if that is the concern, we also have to
accept that the only way you can deal with it and protect the people in the medium-to-long-term is to stop the epidemic.
If you come up with procedures and approaches that scares off the health workers and they are not going to go to where the issue is to help
stem it, you are not in the end going to be ahead of the game.
QUEST: Do you see, though, a real risk that health workers will not want to go because there is a fear of a 21-day quarantine upon return?
ANNAN: These health workers are the everyday heroes and heroines of our time who go out and do an honorable job, and sometimes you hear the
comments. And they are being maligned, being treated in a manner that I don't think is respectful.
And if you hear some of the comments, wives and children are not going to want to see their husbands and others fly off to go and help.
QUEST: And certainly not if they're going to be put in a tent next to a hospital --
ANNAN: When they come back.
QUEST: -- when they come back.
ANNAN: When they come back.
QUEST: What did you think when you saw that?
ANNAN: I was quite shocked, because obviously I heard the interview with the woman, she was not sick and therefore not contagious.
QUEST: The message about how you catch Ebola has been out there --
ANNAN: Yes.
QUEST: -- for months.
ANNAN: Exactly.
QUEST: Why do you think people are not understanding it?
ANNAN: I think people are not understanding it because the leaders are not hammering onto the -- the leader should hammer away and explain in
schools, on television, on radio. And now that it's becoming political, also on the political stands and campaigns.
QUEST: That's a very dangerous position to be in.
ANNAN: I agree with you. That's why we are having this problem. Some are seeing the possibility being this close to elections to play the
popular card, the populist card.
QUEST: Are you basically, sir, disappointed that more people are not bashing away at how you get this thing and doing that?
ANNAN: I am disappointed, not only bashing away, but we don't have the resources that we need.
QUEST: Do you think this is because, frankly, until now, Ebola is a developing country disease, it's stuck down on West Africa, it's a long way
from, frankly, the rich man's world?
ANNAN: I agree with you that if it had happened elsewhere other than Africa, the response would have been faster. And if the disease had
emerged in a richer country, we would have today have a medication or vaccine.
We've known about Ebola for 40 years, but it's a poor man's disease, and sometimes the companies feel if you spend money and do research and
come up with medication, the poor can't afford it. So there's a tendency sometimes not to do enough research on what I call poor man's disease.
(END VIDEOTAPE)
QUEST: Strong words from the former secretary-general of the United Nations, Kofi Annan. The nurse at the center of this quarantine debate
says she's furious over her isolation. Alexandra Field joins me from Newark, New Jersey. Understandable. Stuck in a tent with a portable
toilet and no shower? I'd be furious.
The reality is, though, I'm not sure you could hear Kofi Annan, but the reality is, you've got this contradiction between what Governor
Christie says is necessary and what others say it will discourage people. So, how are they squaring that circle in New Jersey?
ALEXANDRA FIELD, CNN CORRESPONDENT: Look, there are a lot of mixed messages out here. People are going to say yes, we want to keep the public
safe. Others are going to say you can't discourage health workers from going overseas to combat this crisis, and those who also say you've got to
keep fear down here, you can't treat people like they've come back with the disease that they may not have, because that could really create a lot of
chaos for people in these communities.
But the woman who is at the center of all this, Kaci Hickox, who was being detained, as she would say, inside this hospital, was fuming,
absolutely outraged, and taking to task the governor of New Jersey himself, taking issue with the fact that he was out in public telling people that
she was obviously ill.
Kaci Hickox has maintained from the start that she never had symptoms of the Ebola virus. She says that when she was screened at the airport in
Newark, New Jersey, when she returned from her medical work overseas, that they got a false positive when they tested her for a fever, that they
weren't doing it accurately.
She was tested twice for Ebola when she was inside this hospital. Both times, the test came back negative. So she had no tolerance for the
fact that she was being kept inside this hospital.
But Governor Christie, he said look, we understand that Kaci Hickox is uncomfortable, he said he was sorry about the fact that she was
uncomfortable, but that he had to put the interests -- the public health interest of people in New Jersey first.
QUEST: How did they get it so wrong? Yes, we know that they've been preparing -- the major metropolitan states: New York, New Jersey,
California, Illinois -- they've been preparing, they say they learned the lessons of Dallas. But did they not actually think a tent in a hospital
grounds was a little bit inappropriate?
FIELD: Look, the pictures -- and we all saw where Kaci Hickox was being kept when those pictures were released, perhaps people gave a little
bit of pause to the way that she was being treated.
But really, from the start, the governor of this state said look, the CDC sets the recommendations and the guidelines, but it is within the
authority of the state to decide whether or not stricter protocols need to be enforced, and the governor here said that he believed that that was the
right thing to do, and that's what he went ahead and did.
QUEST: This is the United States, which means one thing: there's litigation on the way. I'm asking. Look, she's going to sue. She's going
to -- can you hear me? She's going to sue the hospital.
FIELD: Well, look, she got -- she had threatened over the weekend. She had lawyered up and she had said that her lawyers were going to court
and they were requesting a hearing to get her out of this hospital because they thought that she was being held here without merit.
I spoke to her lawyer today, and I said look, the objective obviously was to get Kaci out of this hospital. She's out of the hospital now, she's
been taken in a private car and headed up to Maine where she will have to quarantine in her own home. So I asked, is there a case here to pursue?
And the lawyer said to me, look, he believes that there's a legal basis to challenge the protocol that was implemented here in the state of
New Jersey. But now it's going to be a question of whether or not Kaci Hickox wants to be the woman leading the charge, the face of this fight,
and that's something that she has yet to decide.
He says that right now, she really just wanted to get out of here and get back to Maine and get back to normal, although since she'll be in
quarantine, it isn't exactly getting back to normal quite yet, Richard.
QUEST: Alexandra, thank you for bringing all that to us this evening from New Jersey. Much appreciated, thank you.
Now, Brazil reelects its controversial president. It's one of the tightest runoff votes of recent times. We need to examine what four more
years of Dilma Rousseff means for Latin America's largest economy. We'll do that when QUEST MEANS BUSINESS returns.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Now, being a good election, it's the result that half the voters and investors in Brazil were hoping not to see: Dilma Rousseff
winning a second four-year term as the country's president. It was a narrow victory, and that of course made no difference to the markets.
Brazil's main index, the Bovespa, it fell as much as 4 percent. It clawed back some of its gains towards the close, just ending the day, the
first session after the election, down 2.7 percent. In Petrobras, the shares of Petrobras, the large giant energy company, they were down some 15
percent in the markets. So, Petrobras seriously off, but the Bovespa off just 3 percent.
There are currency concerns, serious currency concerns. Just look at how the currency has traded. Now, if you go back to 11,we're up at here,
we're up at 0.645. But then it goes down, then it goes back up again. All these are the economic problems. You've got the World Cup, you've got all
these other issues that happened along the way.
And then, as we get into 14 and the election cycle, we see some very serious -- now it's a nine-year low. Factor all this together with the
victory, CNN's Shasta Darlington reports from Sao Paulo for us tonight.
(BEGIN VIDEOTAPE)
SHASTA DARLINGTON, CNN BRAZIL BUREAU CHIEF: Brazilian president Dilma Rousseff won reelection in the tightest race in decades. She beat out the
market's favorite, Aecio Neves, with just under 52 percent of the vote compared to his just over 48 percent.
But this came only after weeks of a very ugly and personal campaign with plenty of attack ads that left the country divided roughly along class
lines. On the one hand, there are those who supported Dilma Rousseff and many of the social programs that have helped the country's poorest.
And on the other hand, you have those who've supported Aecio Neves and a boost in the macro economy, trying to get the economy back on track after
a recession in the first half of the year.
Not surprisingly, markets were down on Monday, with stocks sinking below 5 percent at one point and the currency getting weaker. Basically,
worried about the direction the economy will take in the future, and that's because Dilma Rousseff now has to not only tackle those problems, but also
try and unite a very polarized nations.
We heard it in her victory speech when she called on the country to unite and to begin a dialogue. She also admitted that she knows there need
to be changes.
DILMA ROUSSEFF, PRESIDENT OF BRAZIL (through translator): A reelection vote is a vote of hope, especially for improving the actions of
those who have been governing. I know that is what people say when they reelect a leader. That is what I have heard from the voting booth. That
is why I want to be a much better president than I have been up until now.
DARLINGTON: Now, one of the first changes that Dilma Rousseff will have to implement will be a new finance minister, it was one of her
campaign pledges. And depending on who that person is, it could send a clear message about the direction her government is going to take. Will it
be somebody a bit more market friendly, or will it be more of the same?
Shasta Darlington, CNN, Sao Paulo.
(END VIDEOTAPE)
QUEST: Alberto Ramos is senior Latin America economist at Goldman Sachs. Alberto joins me now. Good evening, sir.
ALBERTO RAMOS, SENIOR LATIN AMERICA ECONOMIST, GOLDMAN SACHS: Good evening.
QUEST: Well, she says she's going to be a better president than she has been in the last four years. Well, you can say that once you've won.
What policies are you now looking for her to introduce?
RAMOS: Sure. Definitely, the president faces challenges on three main areas: socially, politically, and economically. Politically, she
needs to build a very cohesive alliance in Congress. That's going to be extremely difficult.
Keep in mind that Congress is now more fragmented and ideologically diverse than has ever been. We have 28 political parties with
representation in the lower house, 17 parties in Congress. Her relationship with Congress was already quite difficult during the first
term --
QUEST: Sure.
RAMOS: It's got to be even more difficult now.
QUEST: So, she's not going to be able to get many of her policies through of reform, but what reform policies is she now going to do? She
says she's going to be a reformist now.
RAMOS: Understood. This is not going to be the deep-cutting structural transformational type of reforms that are needed to elevate
potential GDP growth in Brazil. She was need to change, given the ugly reality of the macro economic facts on the ground. She will need to adjust
the fiscal a little bit.
In a simpler way, she needs to undo most of the things that were done over the last three years that brought us to the place where we are today
with mediocre growth and high inflation. Fiscal adjustment, a more significant commitment to the inflation target.
Stop repressing initial prices. Stop repressing the exchange rate. Recover the solidity of the fiscal accounts. Adjust external accounts. No
small order.
QUEST: But hang on -- I was busy writing down. If she's going to do all of that, with the inflation and the fiscal targets and the
readjustment, that means cutbacks. To get the economy back on track.
RAMOS: That's right.
QUEST: How does she stimulate growth if at the same time she's trying to consolidate the fiscal budget?
RAMOS: That's right. The overriding objective should not be to deliver growth in the short term. The overriding objective is to lift the
animal spirits and economy. The overriding objective should be to bring inflation under control. If we don't do that, there is no hope they're
going to see decent growth in Brazil in the near term.
QUEST: But that means that Brazil is looking at several years -- possibly half of her next term -- of very difficult -- even more difficult
economic times.
RAMOS: That's certainly a possibility. The external backdrop is going to be less supportive. We have to deal with the imbalances that were
created over the last few years. The economy has been adjusting as we speak. Shasta just reported from Sao Paulo, the motions and the gyrations
of the stock market and the financial markets in general.
Most likely, the economy will continue to adjust in 2015. Most likely, 2015 will be another year of mediocre growth and high inflation.
QUEST: And if I hear what you say correctly, we should not be looking for the sort of macro economic, systemic, big changes that would unleash
the Brazilian economy. The sort of changes we're seeing in Mexico.
RAMOS: That's right. You're not going to see reforms of that caliber, reforms of that nature. We need to rebalance the macro economy.
We need to bring inflation under control. We need to bring fiscal under control. We need to bring the external accounts under control. Once we do
that, we need reforms to elevate potential GDP.
QUEST: And you'll be coming in frequently, sir, to help us understand it all.
RAMOS: Perfect.
QUEST: Thank you. Now, US investors seemed to spend this Monday sleeping off the weekend. The markets were mostly flat.
(RINGS BELL)
QUEST: The Dow ended 12 points higher. But look at the chip-choppery of it, up and down. Investors are waiting the Fed meeting on Tuesday.
After the break, thousands of Hungarians have stepped away from their computer screens. They took to the streets. They're protesting about a
plan to tax the internet. The Hungarian government response next on QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Twitter shares are down nearly 8 to 10 percent in after-hours trading. The company's earnings -- if I show you exactly what the
company's earnings did. The company's earnings for the third quarter came in as expected, and if I go to our office swear jar, that's what the
earnings were. One cent per share.
Now, investors are reacting to Twitter's prediction. It may miss sale targets for the last three months of the year. Our business correspondent
Samuel is with me. You can have the one cent and --
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: I'll take what I can get.
QUEST: Yes, it's about all you're going to get.
(LAUGHTER)
QUEST: And I'll leave the rest here to pay for the coffees.
BURKE: You know, Richard, you finish every show by saying "I hope whatever you up to, it's profitable."
(QUEST RINGS BELL)
BURKE: And Twitter is still not profitable. And it's a quite interesting story, though, because revenue is up. They're bringing in more
and more money and even users are growing. If you look at this chart here, Richard, you see.
QUEST: Yes.
BURKE: It's going up. They're up at $284 million. Problem is is it's slowing down. If we did a chart, let's say, of the rate of growth,
it's just getting lower and lower and lower.
QUEST: Which basically questions whether this is all a bit of a bust. Twitter's been, Twitter's a bit passe, Twitter's a bit all over.
BURKE: They have 284 million users, which sounds very nice, but if you compare it to Facebook, $1.13 billion -- 1.13 billion users, I think
that's why you see the stock down nearly 10 percent right now.
QUEST: Right. In an environment where Amazon had an appalling quarter and there were questions about Amazon's profitability long-term,
all these other companies are, to some extent -- the unknown is still there. Is Twitter questionable long-term viability as an investment?
BURKE: Twitter is not going to disappear, but as an investment, I think the market's really seeing it may never catch up to Facebook.
QUEST: Right. I believe --
BURKE: Oh, no. I'm keeping it. No?
QUEST: No --
BURKE: Oh. But I get to ring the -- ?
QUEST: No! Don't touch the bell! You're not qualified. All right. Thank you very much, Samuel Burke.
The Hungarian government -- talking about pennies in the jar -- the Hungarian government is scaling back its plans to tax internet usage. It
says individuals will not be charged more than 700 forints a month -- that's about $2.87. And the tax will be paid by internet providers, not
directly by consumers.
Now, the shift comes after mass demonstrations in the Hungarian capital. Some people pelted headquarters of the ruling party with computer
parts. Protesters said the tax is an attempt to limit freedom of speech. The government says it's nothing of the kind. The government says it's
necessary to shore up the budget.
Zoltan Kovacs is the Hungarian state secretary for government communications. He joins me now via Skype. Thank you, sir, for taking
time and joining us. Look, when Neelie Kroes says "This policy is a shame, it's a shame," when you find yourself in the company of countries like
Bangladesh, arguably it's not a very wise policy to follow on taxing the most modern form of growth.
ZOLTAN KOVACS, HUNGARIAN COMMUNICATIONS MINISTER: Sure, but if I may just correct you, actually, that this is not a new tax. It is an extension
of an already-existing tax, so-called Telecommunications Tax, which has been with us for the past two years. So, it's a different matter than the
opposition and those that are arguing against anything like this are trying to introduce a new term or word for what we are doing.
QUEST: Right.
KOVACS: The cap you've mentioned has already been with us and with the political policies -- the policymaking for the past couple of days. We
never intended to have a huge burden on the providers anyhow. So, the 20 billion or so forints, which is by the Hungarian budget standards is not a
high amount, its not going to be an unbearable burden.
QUEST: But the point to be made is there are very few countries that have an elevated tax on information technology, such as the internet. The
three that I can mention: Bangladesh, Turkey, and the Congo. They're the main ones that have an elevated tax.
Yes, many countries have a tax, the US included, and large parts of the EU. But your proposing a higher tax.
KOVACS: We are just proposing the extension, again, of an already- existing tax following the philosophy that we have introduced four years ago that is evenly and fairly distributing the burdens of running a
sustainable Hungarian state, not overburdening the consumer, not overburdening labor and the personal income of the Hungarians, but also
inviting and bringing in all these providers, firms, banks, who have been exempt from this tax.
QUEST: OK --
KOVACS: As a matter of fact, the kind of tax, which is a VAT kind of tax, is known in the United States, as you probably imagine. So ten states
have already introduced something like what we are trying to introduce.
QUEST: Right. But I should rightly point out, the US also has the internet tax freedom provision as well. Finally, on this question, looking
at the people who are protesting, maybe they're not the ruling party's natural electorate.
But when you start to annoy the young, the millennials, when you start to attack what is seen as the future, in terms of growth, in terms of
technology, I basically wonder, is it wise?
KOVACS: Well, I have seen the motion even the ratio at the very end of yesterday's demonstration, and you really have to separate politics from
a technical taxation issue.
The government is investing several hundred billions of forints for the upcoming seven years, the fiscal period, actually, of the European
Union, to establish as we call it a new program, a digital state. A digital Hungary program. Which is going to take broadband internet by the
end of this term and by our purposes to each and every Hungarian household.
QUEST: Right.
KOVACS: The very income action that we are hoping from this extension of an old and already existing tax is going to be turned towards the little
villages as a percent to be able to communicate in a proper way.
So, providing these services on behalf of the state, inviting investors to participate in this investment, and then introducing a VAT
type of tax I don't think contradicts each other and certainly has nothing to do with the freedom of the internet.
QUEST: We shall leave it there. Thank you, sir, for joining us. Much appreciated.
When we return, Europe's banks have been tested, 25 have been found lacking. The chair of the ECB's supervisory board tells me why she's
confident in the result. It's QUEST MEANS BUSINESS, start of a new week.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network, the news will always
come first.
The nurse who was held in quarantine in New Jersey after returning to the United States from West Africa is to be allowed home to the state of
Maine. Kaci Hickox said her treatment over the past three days violated her basic human rights. Speaking to me on "Quest Means Business," the
former U.N. Secretary General Kofi Annan warned authorities not to implement measures that could deter health workers from going to South
Africa.
(BEGIN VIDEOCLIP)
KOFI ANNAN, FORMER SECRETARY-GENERAL, UNITED NATIONS: The only way we get ahead of this game is to contain the epidemic in West Africa by getting
additional health workers in, getting in helicopters, medivacs, and all the equipments we need. If we discourage the health workers from getting in,
we are not going to be able to contain this and we will all be at risk.
(END VIDEOCLIP)
QUEST: ISIS has released a video showing one of its hostages. He's the British journalist John Cantlie in the Syrian city of Kobani. Cantlie
has previously been forced to appear in other ISIS propaganda videos. The latest appears to have been filmed recently, which includes this footage of
Kobani supposedly taken from an airborne drone which is controlled by the jihadists.
Fierce battles over the weekend in the Lebanese city of Tripoli have cooled after the worst flare up of violence since - in Lebanon - since
early August. At least five civilians were killed in the fighting, and some reports say the Lebanese army is being challenged by Sunni Islamists
aligned with ISIS or al-Qaeda.
South Africa's government says no stone will be left unturned in finding who killed the captain of the national football team. Senzo Meyiwa
was shot by intruders who broke into a house near Johannesburg on Sunday. He was 27 years old. His team, the Orlando Pirates, have postponed this
weekend's game against Kaizer Chiefs as a mark of respect.
A fall in bank shares dragged down European markets on Monday. The fall followed the so-called stress test on 150 European banks. The Italian
stocks were the worst. The Milan FTSE ended the day down nearly 2 - or more than 2 - percent - 2 and 1/2 percent. Shares of Monte Dei Paschi Di
Siena, the banks sank more than 20 percent. European regulators say the bank needs to plug a $2.7 billion hole in the capital base. What did it
all mean, these stress tests, and how reliable, how accurate, how much confidence can we have. Join me at the Super Screen, and you'll see what
we're talking about.
Now, the banks are the weightlifters in the economy. Why? Because the banks support businesses, they support them with loans. The ECB needs
to ensure that these weightlifters are strong enough to withstand the economic shots. Now, the first part of the test was the asset review. The
asset quality review. That's where you work out what the banks have in their portfolio. They had to be written down. Too many banks had
overvalued their assets.
The second was the cash reserves. This is how much tier 1 capital - how much did the banks actually have to prevent a fall over under normal
conditions. And finally, they tested a two-year recession and turmoil. The banks that failed, they need to bulk up to raise more cash. Now, the
main points of pain - those countries, those banks that fell - the asset review, the cash reserves, the two-year - there you have them glowing.
Nine were in Italy. There were three each in Greece and in Cyprus. Many of the banks involved have already bulked up their capital. There's $24.7
billion across the whole union - E Eurozone still has to. The tests were based on finances at the end of last year. Since then, many of them have
taken steps to shore up the books.
I spoke to the president of the ECB Supervisory Council Daniele Nouy who indeed will be the new regulator once the ECB takes charge. She told
me there's work to be done but she's not losing any sleep. The test results are true.
(BEGIN VIDEOCLIP)
DANIELE NOUY, ECB SUPERVISORY BOARD CHAIR: I'm very satisfied with the quality of the exercise that we have conducted - the in-depth analyses
and the asset quality review on the quality assurance process in those testers (ph). I believe that indeed we are in a situation where banks can
sustain significant shocks if need be. But still work has to be done. That's the beginning of the SSM supervision that we start in a few days.
And our first priority will be to fully implement the outcome of those comprehensive assessment - for all the banks. Not only the banks that -
who can pick (ph) a shortfall, but for all the banks.
QUEST: Were you surprised that so many banks had assets on their books at inflated prices which the asset quality review made them end up
writing down in value? It was quite a large number to be on the book.
NOUY: Yes, it's important. It's due to the fact that we were missing anonymized (ph) definition from nunta (ph) forming exposures in Europe and
thanks to the work of HIPAA, we now have one anicast (ph) been implemented for the first time. And this is crucial. Indeed, I'll need to lose (ph)
to compare banks in a very precise and catalog (ph) fashion.
QUEST: It is breathtaking -- six years after the crisis, that the banks in the Eurozone did not have a harmonized way of valuing assets in
their portfolio.
NOUY: Well, there are always they were until the comprehensive assessment on the SSM regulation - national practices on national
legislation that we're not fully permitting the anonymization. Now that we are moving towards European supervision and we have been able to anonymize
definitions for non-performing exposures - default assets. We are well- equipped to address such problems.
QUEST: You take over as the regulator - the single supervisory mechanism - the SSM - as of next month. So, the responsibility of ensuring
the security and safety of the system rests upon your shoulders and the ECB's. Can you assure us that we'll have no too big to fail - that
there'll be no bank that can nearly bring down the system.
NOUY: We are in a transition period. For the time being, we have stated who's that to make sure that it is reduced to the minimum. But
starting as of January 2013 - 15, sorry - we will have the new directive on the recovery and resolution, and we will also have starting in 2016, this
time the single resolution mechanism. So, we will be fully-equipped to take care of the banks that have problems on that need to disappear in an
orderly fashion. We are still in a transition period of time, but we are much better equipped than we were at the beginning of the crises - even
right now.
(END VIDEOCLIP)
QUEST: That's the head of the supervisory mechanism for the ECB. Now, it used to be - it used to house prisoners in exile, now this island
is home to some of the world's most famous artwork. In a moment.
(COMMERCIAL BREAK)
QUEST: It's called the Island of Thieves. It's off the coast of Norway, and it's a hotspot for travelers who appreciate the finest modern
art. Now, back in the 1700s, the people who landed on the Isle of Thieves were not there by choice. In this week's "Business Traveller," we look at
the island, the art -- then and now.
(BEGIN VIDEOCLIP)
(MUSIC PLAYS)
QUEST: This is the Islet of Thieves or Chu (ph) Holmen as it translates. It was once an area overrun with robbers. During the 18th
century, this seedy waterfront harbored the most dangerous delinquents. It was a small prison island that was Norway's Alcatraz, the place where
criminals were hanged. Today, the only thing that hangs here is fine art as this Islet of Thieves has been transformed into an art district with
more than 1,000 apartments, galleries, sculpture parks and the Museum of Modern Art. Also nestling is Oslo's Thief Hotel. There's no stolen art
here. The only thing that's seized is your attention. Because they take their art so seriously, they've got their own in-house art curator - Sune
Nordgren.
SUNE NORDGREN, ART CURATOR, THIEF HOTEL: This famous cowboy series of Richard Prince that is - it started to call them the Marlborough series,
and it's actually called the Horse Thief so I thought it could fit in very, very good here into the Thief Hotel. I tried to come up with a concept
that has to do where the - where the hotel is, what it's called, the signal it wants to give and so on. Then I go about to buy art. I also commission
artists to do specific artworks for the hotel.
My clients here, they really wanted to have artworks in all the rooms. Andy Warhol is a very famous artist. We thought it could be a very good
signal and it's at the bottom of the restaurant so you will see from very far. What we wanted in the lifts is quote 'to meet a person.' They blink,
and the earrings are swaying a little bit and they are breathing of sorts, so it's a very intimate image.
(END VIDEOCLIP)
QUEST: The art in the hotels in the Island of Thieves in Scandinavia. Now, there are two things that nobody wants to face - their closet and
their mirror. Those are the words of Betty Halbreich as Bergdorf Goodman's top personal shopper, she helps people do both. Look into the closet and
the mirror. She's also 86 years old, she has a new book out, it's called "I'll Drink to That: A Life in Style, with a Twist." Now, Betty has
dressed some of the world's most powerful women. This of course is Dianne Feinstein who is now chairman of the United States Senate Intelligence
Committee and she's a client. The former U.S. First Lady Betty Ford. Betty Ford tried on Ms. Halbreich's selections for President Ford while she
was surrounded by the Secret Service. She's also dealt with some really difficult customers. When it comes to dealing with difficult customers,
Betty is par excellence. She doesn't pull the punches.
(BEGIN VIDEOCLIP)
QUEST: And oh this looks quite nice. And you really didn't think it was appropriate. What would you do?
BETTY HALBREICH, DIRECTOR OF SOLUTIONS, BERGDORF GOODMAN: Well, I'd say to you, 'Now look, are you really going to wear this? Is this really
warm enough for you? Don't you have one of these in your closet from last year? Do you really think this is appropriate? Do you think it'll fit
you, number one? You'll be very unhappy when you put it on - it's going to be too small.
QUEST: Right.
(END VIDEOCLIP)
QUEST: I'm pleased not only to have the book "I'll Drink to That: A Life in Style, with a Twist" by Betty, but I'm pleased to have Betty
Halbreich. And, in honor of you, ma'am, you're in the C-Suite tonight. You're joining us where the chief executives come in.
HALBREICH: And to you.
QUEST: Now -
HALBREICH: My best-dressed person.
QUEST: Well, why the book? Why the book?
HALBREICH: Well, there's more to the book than fashion.
QUEST: Yes.
HALBREICH: You'll never read it. You'll never go through it - no - I tell you, you won't. But, there's a lot of heart in this because there was
a lot of unhappiness. And from unhappiness, I got a job and I've been there 38 years.
QUEST: But you're still doing it in your mid-80s. Why?
HALBREICH: Oh, I'm only 86. 87 next - two weeks.
QUEST: Eight-seven - happy birthday.
HALBREICH: No, no, no.
QUEST: Why do you keep doing it? Is this a love or is it the need of the money?
HALBREICH: No, no, no. I beg your pardon. Did you say money?
QUEST: Money. It's a business program.
HALBREICH: No, no, no, no. That's retailing - you don't make money.
QUEST: Right.
HALBREICH: No, no, no. I do it because it's a wonderful destination every day of my life. I talk to so many people since I've written this who
look out of windows all day long and don't know what to do with themselves. Do you realize at 8:15 in the morning, I'm gone, and I'm in a store where I
can walk seven glorious floors.
QUEST: You say in the book - when you're talking about difficult customers. "I always have to retort to plug up the mouths of the ill-
mannered. In my business it's essential. Far too often I witness abrupt, irate customers treating sales people rudely." Is it - is it -
HALBREICH: Don't you know something about that?
(LAUGHTER)
QUEST: Touche! How do you put people off? I mean, how do you - if you see somebody treating a sales person badly, what you say?
HALBREICH: Somehow I in my old-age dowdage, I sort of sidle up to them and just sort of interfere. I don't like to see people treated
poorly. I don't like being treated poorly, and I really take umbrage and it bothers me. I see a lot of that. It can be straightened out
incidentally.
QUEST: As we move into this season's fashions and as we move into - are you encouraged by the colors we're seeing this year? Are you
heightened, exhilarated by the styles?
HALBREICH: I never have been.
QUEST: What?
HALBREICH: No, no. I work in a different sort of strata. I go by my first love of taste -
QUEST: Yes.
HALBREICH: -- and I unfortunately or fortunately choose what I like. Now, if they - being the client - doesn't, then we move on to something
else. I can brainwash myself every day of my life. Most people won't admit to that.
QUEST: Right. Remember when I met you this time - exactly this time - last year, -
HALBREICH: Exactly.
QUEST: -- I asked you what you thought of my ensemble. So, of course I'm just going to stand up. My ensemble today. If I - If I give a twirl--
HALBREICH: It's perfect, but you love clothes. Because I -
QUEST: Are you OK with modern linings like this (inaudible).
HALBREICH: -- I love them. I love it. They did a wonderful article about you and your clothes, and I read every word of it in "The New York
Times."
QUEST: Too kind. Betty, it's been wonderful to have you with us. Thank you
HALBREICH: Next year?
QUEST: Next year we'll have a birthday cake for you.
HALBREICH: Thank you - not.
QUEST: Not much more you can say after that. I tell you that. Credit cards and identity hackers are on the rise and so is the fear of
being hacked. Well if Betty hasn't got you, the hackers might. After the break we'll delve deep into the realm of the underground economy where
hackonomics meet profit and politics. "Quest Means Business." We'll be back in a moment.
(COMMERCIAL BREAK)
QUEST: Here's a fact for you. More Americans are worried about hackers stealing their credit card information than about any other kind of
crime according to a Gallup poll. Twenty-eight percent of people - 28 percent - said they're worried about being victims of terrorism, 45 percent
say they could be burgled. When I comes to credit card hacking - a whopping 69 percent are worried it will happen to them. It's a very common
crime. One in four say either they or a family member have been hacked. Well, there's good cause - Target, Home Depot, JPMorgan, amongst the
companies that have flagged up large scale attacks on customers. It's part of our new series "The Dark Web." Samuel Burke now reports for us tonight
on the murky world of the underground economy.
(BEGIN VIDEOCLIP)
SAMUEL BURKE, BUSINESS CORRESPONDENT: In "The Dark Web," the hackers are winning, and this is why. Hackonomics.
JD SHERRY, VP, TECHNOLOGY & SOLUTIONS, TREND MICRO: Within the cyber underground, you have this flourishing economy - the number of attackers
getting into the cybercriminal career choice, have increased significantly in the last two years.
BURKE: As that profession grows, the rules of supply and demand are coming into course.
SHERRY: In 2011, cards were going for $2.50 - these would be American-based credit cards, to now where they're less than $1.00 on the
black market.
BURKE: To attract customers, hackers are turning to advertising. This is a notice from a known Russian hacker forum. It offers different
types of e-mail accounts, lists prices and guarantees anonymity. With all this competition, skills are crucial to get ahead.
SHERRY: In establishing these professional ecosystems, Eastern European Russian cybercriminals are what we would call 'the great whites' -
the top of the food chain.
BURKE: Hacks of Target, Home Depot, J.P. Morgan - all known or suspected to have originated in the Russian-speaking world. The key to
understanding hackonomics is that hackers aren't just doing it for profit. There's also politics at work as tensions between Russia and the West have
escalated this year, so have the hacks. And the target has moved far beyond big corporations.
(BEGIN CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The United States is imposing new sanctions.
DAVID CAMERON, PRIME MINISTER OF THE UNITED KINGDOM: We said there would be consequences -
(END CLIP)
BURKE: Contact information stolen from the European Central Bank in July - a bug that apparently spied on NATO computers and Ukrainian
officials uncovered in October.
SHERRY: The conflict in Ukraine is a pure example of nation/state activity. Nation/state actors that are acting in the form of patriotism.
BURKE: Western governments are stepping in. The U.S. president recently signed an executive order mandating greater credit card security.
(BEGIN CLIP)
OBAMA: I want to thank all the business leaders who are choosing to protect their companies and their customers from the kind of hacking that
we saw too many times this past year.
(END CLIP)
BURKE: Ultimately, the problem of hackonomics may have a purely economic solution.
SHERRY: J.P. Morgan has spent $250 million - or a quarter billion dollars - on cybersecurity and ultimately fell prey and victim to a cyber
attack. Although that may seem like a lot of money, there's still a significant amount of underinvestment.
BURKE: The cost of fighting this may seem great, but the cost of doing nothing in "The Dark Web" - much greater. Samuel Burke, CNN New
York.
(END VIDEOCLIP)
QUEST: And it's only while I was sitting here listening and watching Samuel's report, that I suddenly realized in the last three months I've
received notification from not only Home Depot, but also from the bank that credit card details or bank details of which I might be involved have been
stolen. It's happening to everybody everywhere. There'll be a "Profitable Moment" (RINGS BELL) after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." They stood at nighttime with their phones in the air, a symbol of opposition as they see it to the new
Hungarian or proposed tax on internet. The amounts involved aren't that great - it's just a couple of cents, couple of dozen cents for downloading
a gigabyte or two, and the money will be capped at a certain number amount of money. But that's not the point. You heard on this program the
government spokesman for the Hungarian government defending the tax on internet, saying it was same as in other countries, it would - it's still
investment, it was not a bad thing. But the problem is this - Hungary's proposed tax is higher than other taxes in the country and higher than, say
for example, the U.S. or other E.U. Hungary risks putting itself once again in a very small collection of countries which frankly it wouldn't
necessarily want to have the company of, because the policy of taxing the internet at a higher rate can only mean one thing - holding back growth.
And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope
it's profitable. Let's get together tomorrow.
END
