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QUEST MEANS BUSINESS
Ford Replaces Its CEO; Trump Optimistic on Middle East Peace; The Church of England's Investment Outpace Wall Street Rivals; Saudi Arabia Optimistic After Trump Visit; Zuckerberg Plays Down Talk of Running for Office. Aired 4-5p ET
Aired May 22, 2017 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] ZAIN ASHER, CNN ANCHOR: And that sound marks the end of yet another trading day on Wall Street. I was kind of wondering with the Dow
and day up triple digits, and we almost made it, not quite. We saw a bit of a retreat towards the end of the day. But the green you see there
largely boosted by defense stocks because of President Trump's announcement of a massive billion dollars' worth of arms deals contract with the Saudi
government. It is Monday, the 22nd of May.
Tonight, Ford switches its CEO and sends Mark Fields out to pasture. The company's chairman tells us why.
And Donald Trump's tells Israel's Prime Minister it's time to make a deal on Middle East peace.
And the Church of England teaches Wall Street a lesson and its returns reach for the heavens. Hello, everyone, I'm Zain Asher and this is QUEST
Good evening everyone, glad to be with you. Ford's slogan is "go further." Tonight, the company said it needs to get there faster. The board has
handed the keys to Jim Hackett. He was brought in last year to oversee Ford's autonomous vehicle unit, i.e., self-driving cars. Hackett now takes
over officially as chief executive, essentially replacing Mark Fields. Who by the way, had said repeatedly that he did not want Ford to be the first
company to sell a self-driving car. Investors though weren't on board, to put it lightly, with Fields' strategy. They drove Ford's share price down
almost 40 percent. Look at that decline. That was in the course of three years as Mark Fields was at the helm. In speaking at a news conference,
the new CEO assured investors that he's certainly not satisfied with the status quo.
(BEGIN VIDEO CLIP)
JIM HACKETT, CEO, FORD MOTOR COMPANY: If we're in a rising tide market and earnings kind of enjoyed the effect of that, I want to see us differentiate
ourselves so you'll be hearing about things like that and particularly in the areas of capital deployment, that's a form of fitness today and
shareholders, the Ford family, expect that we're returning that cost of capital.
(END VIDEO CLIP)
ASHER: That was actually Jim Hackett himself speaking alongside Ford's executive chairman, Bill Ford who by the way spoke to our Poppy Harlow
earlier today. She asked him what drove the board to replace Mark Fields as CEO.
BILL FORD, JR., EXECUTIVE CHAIRMAN, FORD MOTOR COMPANY: Mark did some great things for us and he led us to record profitability which gives us
now the flexibility to move forward with our plan. But these are times of great, great change. I mean, if you just look at the technology that's
coming into our industry, the competitors that are coming into our industry, not just from the automotive side but from the tech side, we
really need transformational leadership, and in Jim Hackett, he's done it before several times.
POPPY HARLOW, CNN ANCHOR: He's also from outside of the company. He ran Steelcase. He saw Al Mulally was from outside of the company, Dan Ackerson
was from outside of the company. So, there's a trend there, whereas Mark Fields has been with Ford for 28 years. When you look at the way that Ford
is working to try to compete against Tesla, against Google, against all of these competitors in the tech space, you've got Tesla now worth more than
Ford, but Tesla sells 5 percent the number of cars that Ford sells. What is the market responding to right now and how do you catch up, at least in
the eyes of the market?
FORD: I think a lot of it is clarity of communication and being able to articulate the vision and then deliver against it. So that's what we have
to do going forward. We've been working on autonomy for ten years. We've -- I gave a Ted Talk in 2011 about how our industry was going to change and
how it had to change. It's all happening now. I very much like where we're positioned. I think we've been investing in exactly the right
things. We just need to get quicker and more agile and be able to tell our story with a little more clarity.
HARLOW: You know, I'm drawn to something, one of the first things that Mark Fields said to me and reiterated in subsequent interviews shortly
after he took over as CEO three years ago, talking about autonomous vehicles, driverless cars. He said, "We won't be the first with a
driverless car, and we don't want to be the first." Looking back, was that a mistake, Bill?
FORD: It's interesting, Poppy, we feel like today we are among the first. I don't know who's going to be all l actually, one, two, three, four when
it gets out there. We'll be in the leadership group. What's important though is how are those vehicles used, what are the business models around
those vehicles. What's the software developed around those that will enable the customers' lives to be better. I think that, you know, we need
to take a human centric look at this. Technology for its own sake doesn't do anything. It's how does this make people's lives easier or better.
[16:05:00] HARLOW: Was that part of it? Was that part of it, Bill? I interviewed Mark and you a number of times and he was all about a mobility
company, not just a car company, but he did talk about going slow and not emphasizing being first to market with driverless cars. He said we want to
do it when the timing is right and more for the masses.
FORD: First of all, I don't want to be slow. We need to be quick in everything we do. But at a certain level it's not a race to who can get
out there with the very first vehicle, it's who can do it in a thoughtful way and really add the business models around those vehicles in a way that
makes sense. But I will leave you with this thought. Decision-making throughout our company, not just in the mobility space, needs to be quick.
It needs to be agile and we need to make tough decisions.
HARLOW: There's a lot of enthusiasm and optimism in the market right now but you're seeing some of that tampered a little bit because of the cloud
around this administration when it comes to Russia but also NAFTA. The clock has started ticking for this administration to renegotiate NAFTA with
Mexico and Canada. Obviously, that would impact your business greatly if there were a border adjustment tax added from all that you import and all
the business that you do with Mexico. How worried are you that NAFTA may disappear or that it may be significantly changed?
FORD: One of the things that I think is really important is that we have a voice in the administration, and in that regard, in this new construct I'm
having our government relations report to me because that's how important I think it is. But I will say this. Particularly relative to virtually
every other auto maker, we're pretty balanced in terms of our imports and exports coming into this country and going out of this country in general.
But look, there's no question that if this is done wrong, yes, it could hurt not just the auto makers but really the entire economy, and nobody
wants to see that.
HARLOW: Your one message to the administration on that front is, Bill Ford?
FORD: Just listen to all your constituents and recognize that there are a lot of unintended consequences. But I think they're starting to understand
the nuances involved here.
ASHER: Jim Hackett is tasked with changing Ford's direction. He served as chairman of Ford Smart Mobility, focused on autonomous vehicles. And
that's an area where Ford, as you just heard there, basically really lags behind its competitors. Before joining Ford, Hackett actually served as
the CEO of office furniture maker Steelcase. So, he has a very sort of vast resume. He's credited with turning around the company and predicting
the trend towards open planned offices. In 2014, he served as interim athletics director at the University of Michigan and led the search for a
new head football coach. That coach now led the football team to winning two seasons. And on Monday, Hackett told reporters that companies just
like athletes must stay fit. Paul La Monica is following this story. In terms of Hackett's sort of priority, what will be -- obviously, I don't
believe given his background, make the same sort of mistakes that Mark Fields made, but what's going to be his focus? What's going to be his
number one priority going forward?
PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: It sounds like autonomous cars, driverless cars is the wave of the future and you mentioned we've heard
Google and Apple are working on those initiatives. There are concerns that Ford is not just behind them but also behind Tesla, behind GM And what is
Ford going to do? This is a challenge for the whole industry. With so many people now opting to use services like Uber and Lyft, do these
companies need to transform their business model and sell more to the, quote unquote, fleet drivers, what used to be considered just taxi cab
drivers but are now individual businessmen, entrepreneurs that work for Uber and Lyft and all these ride-sharing companies.
ASHER: Paul, you bring up such a great point because obviously, there's the self-driving cars, there's Tesla, there's Uber. Is the future of the
car manufacturing business, is the future of it in Silicon Valley as opposed to in Detroit?
LA MONICA: I think it's going to be a mix of both. You need clearly the engineering know-how that we've had for more than a century in Detroit
selling America, cars that people want to drive. But they are also going to have to rely more on technology. Focus on what the trends are in
driving right now, and that's something that I think Ford got behind the game a little bit with Fields as CEO. He had a couple things working at
[16:10:00] Following the tough act, Al Mulally, who was worshipped by Wall Street, that was very difficult. And ironically enough, Ford was the only
major auto maker that didn't get a clean start because of the financial crisis. GM and Fiat Chrysler had their slate wiped clean. They went
through bankruptcy. The arguably has been easier for them to become more successful not having all that baggage because they went through a Chapter
ASHER: Also, just the environment of sort of slowing U.S. car sales as well. Although Ford had been doing relatively well in Europe.
LA MONICA: Yes, they had been doing well in Europe. There is a question mark about how Ford and many other American car companies are going to do
in China which is of course now a big market along with India. There are just so many challenges for the big auto companies, not just the American
ones but European and Japanese as well, and really it is a race to see who's going to get an autonomous car that people will want. That's going
to be, I think, what makes the next auto maker going to be potentially worth more than Tesla again. Right now, Tesla, as you pointed out, valued
ASHER: Actually, it's amazing because Tesla hasn't turned a profit but yet so popular with investors. All right, Paul La Monica, live for us, you
have to leave it there. Thank you so much.
In terms of the general excitement today, Ford shares actually rose on the back of the news that they were replacing the CEO, Mark Fields. Investors
suddenly optimistic that this would mean that the company is moving in a new direction, although they are up 2 percent for today, they are still
down nearly 9 percent so far, this year. But I want to reiterate that it's not just Ford that is feeling the pressure as I was just saying to Paul La
Monica. In Detroit, all three of the big sort of major car companies are feeling the strain because of slowing U.S. sales.
Ford obviously just replaced their CEO. GM, activist investors really wants to restructure company shares. At Fiat Chrysler, they're also
dealing with issues as well. The CEO's attempt to find a merger partner have failed. And it's also placing a lawsuit over emissions testing as
well. In Silicon Valley, Tesla is bidding a lot. They really have the crown when it comes to market capitalization, even though Tesla makes far
fewer cars and actually doesn't make a profit, actually loses money.
Finally, let's turn now to Europe. Finally, in Europe, growing ambitions. You see here Chancellor Angela Merkel basically laid the foundation stone
for a new battery percent-factory. She warned European auto makers they certainly cannot be left behind when it comes to the shift in terms of
Joining me now is Jack Nerad from Kelly Blue Book. Jack, thank you so much for being with us. I just want you to set the scene for us in terms of the
landscape and the difficulties facing American car companies, because obviously, GM., they've pulled out of Europe. They've also pulled out of
India and South Africa as well. You've got Ford replacing the CEO and also, you've got Fiat Chrysler with this emission scandal hovering over
their heads. Explain the landscape of American car companies right now.
JACK NERAD, EXECUTIVE EDITORIAL DIRECTOR, KELLY BLUE BOOK: Well, it's a challenging landscape for all the car companies, for global car companies.
Number one, there's so many of them and so much production capacity. But I think what's overlooked often is the advantages that traditional car
companies have going forward. I think a lot of that is under sung. We see that in the share price of Tesla versus Ford Motor Company or General
Motors or pick a car company. It's almost ludicrous the share prices, the share price differential, or the market cap differential, given the sales
that Tesla has for example, and I think really the advantages of the car companies are undersold out there.
ASHER: Clearly investors sort of look at Tesla, they look at Silicon Valley and they see the future. So, if you are a traditional car
manufacturer, how do you even begin to play catchup?
NERAD: Well, I think you see the future in technology, and technology is part of personal transportation, but certainly manufacturing, marketing,
distribution, none of which is the strong suit really of the Silicon Valley firms versus the traditional car companies in terms of marketing cars
certainly. Just the manufacturing expertise to make a product as complex as a car or truck just doesn't exist within the tech companies. So, I
think a lot of that is highly sung, well talked about in the marketplace, certainly high tech seems like the future, but at the same time, if we are
talking about personal transportation as I think we still are, and will for the next decades, the traditional car companies have a lot going for them.
ASHER: But one problem that all of them are facing is this idea of sort of slowing car sales in the United States. I mean, how do they begin to sort
of navigate that? I mean, is the era of peak car sales, is that era completely over?
[16:15:00] NERAD: No, I don't think so. I think the car business is a cyclical business. We've seen it before. We're actually in a major up and
we've been up for almost 8 years in a row. It's unprecedented. At some time, a bit of slowing is to be expected. This is still a very rich market
out there. I mean, between 16 and 17 million new car sales is a very strong market in the United States, and I think we're going to see
something like that going forward. Heaven knows if we have tax reform and we see more prosperity, quicker growth, that will be good for the car
companies, that will be good for personal transportation.
ASHER: All right, Jack Nerad, live for us, thank you so much for being with us. Appreciate that.
NERAD: Thank you.
ASHER: Shares of Detroit's big three car companies all rose on Monday. The Dow ended the day up 90 points. The S&P and NASDAQ closed higher as
Air Force One made history when it took what's believed is the very first direct flight from Riyadh in Saudi Arabia to Tel Aviv in Israel. The
commander-in-chief is hopeful he will soon strike a deal for Middle East peace. That story next.
ASHER: Welcome back. Donald Trump is making history in Israel where he says peace is one of the toughest deals of all. In Jerusalem on the second
leg of his foreign trip, Mr. Trump became the very first sitting U.S. president to visit the Western Wall. There he is placing his hand on the
Western Wall. This is one of the holiest sites in Judaism. After that he met with Prime Minister Benjamin Netanyahu. That's when things kind of
took an unexpected and unscripted turn. In a photo op, Mr. Trump essentially addressed reports that he shared Israeli intelligence with the
Russians in the Oval Office. Take a listen.
(BEGIN VIDEO CLIP)
DONALD TRUMP, U.S. PRESIDENT: Just so you understand, I never mentioned or the word or the name Israel. Never mentioned it during that conversation.
So, you had another story wrong, never mentioned the word Israel.
(END VIDEO CLIP)
ASHER: Jim Acosta joining us live now in Jerusalem. Jim, you just heard the president there basically saying, I never mentioned the word Israel,
essentially sort of unwittingly confirming that he did end up sharing intelligence. I'm just curious, have we seen any kind of impact on that
fact, of that fact, in terms of the U.S. relationship with the Israelis?
JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, he was also justifying the cautiousness of White House officials who have carefully
stage crafted this entire trip to avoid as many of those moments as possible where he would not get a question from reporters. We don't even
have a press conference on the schedule at this point.
But to get to your question, a couple of things. First, you notice the president said there during that comment, I never mentioned the word Israel
during that meeting, that doesn't exactly explain whether or not he conveyed Israeli intelligence to the Russians. So, he appears to be
confirming that story there, but at the same time I think the answer to whether or not this is going to damage or impact relations with the
Israelis, that's probably a stretch at this point. Zain, keep in mind that Prime Minister Netanyahu was positively giddy to have President Trump here
on the ground in Israel.
He made the point of saying that President Trump selected Israel as one of the stops on his very first foreign trip as president, that that means a
lot to the Israeli people. Then you have the president going to the Western Wall, the first sitting U.S. president to do that.
[16:20:00] That takes away the visual component in all of this, but there's a substantive point to make and that is that the President and Prime
Minister Netanyahu who are very much on the same page, have a lot of common ground when it comes to the threat posed by Israel. You heard the
President and the Prime Minister throughout the day condemning that Iran nuclear deal, although we should point out the president has not gone as
far as to fulfill that campaign promise that we heard time and again out on the campaign trail that he would tear up that nuclear agreement between the
Obama administration and those other world powers.
So, I think there's a lot more to agree on between President Trump and Prime Minister Netanyahu that would overcome any frostiness that may occur
because the president apparently shared the Israeli classified intelligence with the Russians, something that the president appeared to confirm today,
although he did offer that misleading explanation as to why perhaps it did not happen. But make no mistake, President Trump and Prime Minister
Netanyahu are on terms that the U.S. and Israel haven't seen between two heads of state in some time.
ASHER: And also, you know, during this trip and also during president Trump's campaign he expressed a lot of giddy optimism about the fact that
he's a deal maker and he can sort of somehow manipulate a deal between the Israelis and the Palestinians. In terms of, A, the realism of that but
also in terms of his vision and his strategy as to how he's going to do that, does he have a clear vision?
ACOSTA: I think the president is finding that bringing the art of the deal to the holy land is more difficult than perhaps what he had in mind. Just
a few weeks ago he said that brokering a Middle East peace deal between the Israelis and Palestinians might not be so difficult and today he said
something very different, he said it may be the toughest deal of them all. I think that's an indication that he knows that he's heading into waters
that he's not familiar with. He's used to real estate deals, land deals, hotel deals, golf course deals. This is something on a very different
Now, he does have his son-in-law, Jared Kushner, who's going to be involved in all this and they'll presumably both be meeting with the Palestinian
President, Mahmoud Abbas, tomorrow, put the Palestinian President is obviously, going to show that he has a Barry different relationship with
President Trump than Prime Minister Netanyahu and that is where the difficulties are going to begin for this president as he hopes to craft
some sort of peace deal between the Israelis and the Palestinians. But what you heard today from the president was an acknowledgment, really of
the reality that he's going to be dealing with that this is something that his predecessors have known for decades that this is far from easy stuff,
ASHER: You can say that again. Jim Acosta, live for us there, thank you very much, appreciate that.
Peace in the Middle East has alluded every American leader for half a century as Jim was just touching on. Today President Trump said that with
Benjamin Netanyahu as a partner, the two men have the deal-making skills and a rare opportunity to finally achieve it.
(BEGIN VIDEO CLIP)
TRUMP: I thank the Prime Minister for his commitment to pursuing the peace process. He's working very hard at it. It's not easy. I've heard it's
one of the toughest deals of all, but I have a feeling that we're going to get there eventually.
BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: It won't be simple, but for the first time in many years, and Mr. President, for the first time in my
lifetime, I see a real hope for change. The Arab leaders who you met yesterday could help change the atmosphere, and they could help create the
conditions for a realistic peace.
(END VIDEO CLIP)
ASHER: Earlier I spoke to CNN's Fareed Zakaria. He told me that Mr. Trump and Mr. Netanyahu have two very different visions when they talk about
peace in the Middle East. Take a listen.
FAREED ZAKARIA, CNN HOST, "FAREED ZAKARIA GPS": I suspect that Bibi Netanyahu is choosing his words carefully and means something a little
different than Trump imagines. Bibi Netanyahu thinks that there's a historic opportunity for Israel to make some kind of peace with its Arab
neighbors. It may not be a formal peace treaty but de facto peace, because Israel and the moderate Arab states, the Gulf states Saudi Arabia, the
Emirates, Egypt, have now a common enemy and this has been developing for some years now. And Bibi has been talking about this for a while. He
talked about it on my program. That's what Bibi Netanyahu means by peace, I think.
Trump, I think, still thinks of the historic Palestinian/Israeli issue, and has talked about it, but you never get much positive response on that from
the Israelis. So, I think in a way they're talking about two different kinds of peace.
ASHER: So, when Donald Trump meets with Netanyahu, has dinner with him today, what are going to be some of the key issues that are brought up? Is
he going to outline his sort of strategic big grand vision for peace between the Israelis and Palestinians and is he going to bring up
settlements? Obviously, that's a major sticking point as well.
[16:25:00] ZAKARIA: My sense is that every country has figured out one of the most important things that will take place will that they will flatter
Donald Trump. President Trump loves that. These leaders have all figured it out. If you listen to what leaks we've gotten, whether it's the Saudi's
they all flattered him and of course, Bibi has been doing that publicly, Bibi Netanyahu. The question about whether Trump will raise the settlement
issue is key because if there is going to be some kind of deal between the Israelis and the Palestinians, in order for the negotiations to take place
in any serious way, the Israelis have to agree to some kind of settlement freeze. President Trump has actually understood that in Washington and has
expressed his displeasure with settlement activity in a way that surprised some people.
ASHER: Right, it certainly, surprised Netanyahu when he brought it up.
ZAKARIA: But the only way he's going to get that Middle East peace that he talks about, he is being Trump, is if he pushes that hard. Because the
Israeli political spectrum has moved quite far right. Netanyahu himself is under pressure from people like net Naftali Bennett. So, Trump is going to
have to expend political capital and ask the Israelis, you have to do this, you have to agree to free settlements, and then have a serious negotiation.
I don't get any indication that Trump is willing to do that. He's spoken rhetorically about the need for peace but there are political realities on
the ground that he needs to address to actually make it happen.
ASHER: It's a lot more complicated than money might be realizing. One key theme throughout this trip is the harsh words that president Trump has had
for Iran. Obviously, Iran just re-elected President Rouhani who is a moderate. Is it possible given all this sort of tough rhetoric on Iran
over the past few days, is it possible to have regional stability without extending some kind of olive branch to Iran, without reaching out to them?
ZAKARIA: That's a great question. I think that's been at the heart of the instability in the Middle East over the last 15 years really. There's a
kind of a proxy war, cold war, in some cases very hot war between Iran and its allies and let's put it simply, Saudi Arabia and its allies. The
leading Shia country and the leading Sunni country and it plays itself out in Syria, in Iraq, in Yemen, in Bahrain and all kinds of places.
The Trump administration's approach seems to be, we'll just side entirely with the Sunni states. We'll in a sense almost subcontract our policy on
this issue to Saudi Arabia, and there's an upside to it. You get all these arms contracts, you get this lavish welcome in Saudi Arabia, but it's very
unlikely to work on the ground because in Yemen, in Syria, in Iraq, Iran is a very powerful actor. It's not just going to disappear.
It remains -- it is a real country with very real foreign policy, capacity and interests. A lot of these other countries, let's face it, they're
tribes with flags as somebody once said. Iran is one of the oldest countries in the world. It has deep interests in Iraq, in Syria, in
Lebanon. It's very difficult to imagine a stable Middle East in which you completely ignore and isolate Iran and simply try to play out a containment
strategy. The Arab states are not strong enough to contain Iran entirely. Even the United States -- you can't make Iran disappear from the map. You
have to find some ways -- maybe not an olive branch, but some kind of negotiations, some conversations in which Iran is included because it also
has interests for regional stability. Your best bet is to try to find some workable, modus operandi, which includes both Iran and the Sunni Arab
ASHER: That was Fareed Zakaria speaking with me earlier.
While Donald Trump is on the other side of the world, the White House is hard at work preparing his first budget. We're on Capitol Hill next, where
the social safety net looks to be on the chopping block. That story next.
[16:30:00] (COMMERCIAL BREAK)
ASHER: Hello. Everyone, I'm Zain Asher. Coming up in the next half-hour of QUEST MEANS BUSINESS, Saudi Arabia's energy minister tells us how ties
with the United States have strengthened since Donald Trump's business, and a new update status from Mark Zuckerberg who insists he's not running for
office. Before that though, these are the top headlines we're following at this hour.
Donald Trump became the first sitting U.S. president to visit the Western Wall in Jerusalem. He was accompanied by senior adviser and son-in-law
Jared Kushner. Mr. Trump visited the Western Wall without any Israeli government officials. He also sat down with Israeli Prime Minister,
Benjamin Netanyahu, who thanked the U.S. for its commitment to Israel and he also told Mr. Trump for the first time in his life, he sees a, quote,
real hope for change.
(BEGIN VIDEO CLIP)
BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: I want you to know how much we appreciate the change in American policy on Iran which you enunciated so
clearly just an hour ago. I want you to know how much we appreciate your bold decision to act against the use of chemical weapons in Syria. And I
want to tell you also how much we appreciate the reassertion of American leadership in the Middle East.
(END VIDEO CLIP)
ASHER: Turkey has summoned UN ambassador John Bass in the wake of last week's brawl. President Erdogan had just met with Mr. Trump and Mr.
Erdogan briefly looked on as Turkish security officials beat up protesters. They're now accusing the U.S. of security lapses that led to the brawl.
That's what they're saying.
The Philippine foreign secretary is downplaying a spat when President Duterte met his Chinese counterpart last week in Beijing. He apparently
accused President Xi of threatening war if the Philippines drilled for oil in the disputed South China Sea. A Chinese minister brushed off any
problems saying the two nations will work to strengthen relations.
Jim Hackett is now the new CEO at Ford. The giant U.S. auto maker announced Monday he is replacing Mark Fields who struggled with Ford's
declining stock price and fears it is falling behind new technologies. Ford is hoping Hackett will help accelerate the company's ventures into
such technologies like self-driving cars and electric vehicles.
Former world champion motorcycle racer, Nicky Hayden, has died after a cycling crash in Italy. He had been in an Italian hospital since he
collided with a car last week while training. Hayden's family was by his side when he died. He was 35 years old.
The fun and fanfare of Donald Trump's first trip abroad was cut short for two of the president's top advisers. Chief of Staff, Reince Priebus and
chief strategist Steve Bannon headed back to Washington to prepare for the rollout of the White House's first budget. We're joined live now from
Capitol Hill. In terms of what we're expecting from this budget, we could be seeing $800 billion worth of cuts for Medicaid but the fact remains that
senate Republicans are unlikely to support something that actually hurts their poorer constituents. Walk us through that.
[16:35:00] PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: You have to look at it this way. This tracks closely with the house health care bill,
the repeal and replace of the affordable care act that was passed a few weeks ago. This is now in the senate's hands. As you noted, there are
several senators from states that expanded Medicaid that are very uncomfortable with some of the cuts that the house bill has in it. That is
essentially what the White House is using for its baseline here. That is something that's not going to fly. It's really interesting, as you know,
the administration really going full board, at least those that are here in the United States on this budget release tomorrow and there are dramatic
cuts beyond Medicaid that are in there.
$1.7 trillion over ten years in mandatory programs alone, but as you note, it's not just senators or senators from Medicaid expansion states that will
have problems with this but Republicans and Democrats. This is a statement of principles of sorts, priorities of the administration. As with any
president, lawmakers are going to go their own way on this, even when they share the party that the White House currently holds. They're going to do
their own budget in the senate. The house is going to do its own budget. You're going to get a sense tomorrow and we've gotten a sense from some of
the numbers we've seen already that have leaked out in what the Trump administration wants to focus on. As you know, cuts to mandatory programs
but also a big boost in defense funding, a big boost in border security. Those are their principles. Now they have to fight with even some of the
members of their own party to get those put into law.
ASHER: You mentioned a big boost in terms of border security. Could we see President Trump's wall turn up in this budget?
MATTINGLY: Based on a document sent to capitol hill that I obtained earlier today, there will be about $1.7 billion in funding for that wall,
specifically earmarked for that wall. Look, there's no question about it, Republicans on Capitol Hill are supportive, if not sometimes dismissive in
terms of border security but they know that it is a focus of the administration. They know it's a priority of the president. Obviously,
it's the one thing you remember from any one of his campaign rallies last year. This budget will contain that and my understanding, when you talk
about Senate and House Republican sources, is any funding bill they consider going forward is also likely to contain money in that. The big
question now is will Democrats ever accept that being included in any type of funding bill? That remains an open question. They made very clear
during the last funding fight last month that that was a poison pill. We'll see if that changes or moderates at any point in the future.
ASHER: President Trump is thousands of miles away but no doubt as we've seen, the political headache out of Washington continues to follow him. In
terms of some news you got today, Michael Flynn planning to plead the fifth. What can you tell us?
MATTINGLY: It's a story that's not going to go away. When you talk to Republicans and Democrats in both chambers, they acknowledge that fact.
Michael Flynn, the former national security adviser, formed via letter of the senate intelligence committee that he would not turn over documents
that were subpoenaed by the committee and he would also be taking the fifth if he were asked to testify or sit down for a private interview. The other
issue is while obviously last week the big news was that a special council was appointed, Bob Mueller, the former FBI director, this makes clear that
the House and Senate committees that are working on their own investigations aren't easing up. In fact, former FBI director, Jim Comey,
is scheduled to testify not next week but the week after publicly for everybody to see. As you know, while the president may be out of the
country, focused on foreign policy, certainly back here at home, the Russia story, the Russia investigations aren't going anywhere.
ASHER: Certainly, all eyes will be focused on that. Thank you so much. Appreciate that.
Shares in Blackstone spiked today after it received a $20 billion pledge from Saudi Arabia to invest in U.S. infrastructure. Blackstone closed up
6.7 percent. The announcement coincided with President Trump's trip to Saudi Arabia. Steve Schwartzman run's the council. Mr. Trump also left
Saudi Arabia with a $110 billion arms deal. It caused some concern in Israel where officials see any military gain by an Arab nation as a
security threat. Secretary of state Rex Tillerson insists it won't jeopardize America's relationship with Israel.
(BEGIN VIDEO CLIP)
REX TILLERSON, SECRETARY OF STATE: There's been nothing entered into in the arms sales with the kingdom of Saudi Arabia or any of the other
countries in the region that do not fully allow us to fulfill our commitments to Israel in the long-standing security arrangements we have
with Israel. I'm sure we can answer those questions to address any concerns they have.
(END VIDEO CLIP)
[16:40:00] ASHER: Saudi Arabia's energy minister tells CNN the kingdom ties with the United States are stronger now than it was a year ago. CNN
emerging markets editor sat down with the energy minister and sig discussed the agreement signed over the weekend.
KHALID A. AL-FALIH, SAUDI ENERGY MINISTER: The investments are on the order of magnitude of $100 billion and they cover everything from oil and
gas to health care to technology. So, a very wide spectrum of investments that are going to be taking place as a result of the deals that have been
worked on for some time but are being announced by the visit of president Trump.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Are you worried that the probes that we see in the United States would derail this revival of the
partnership between Saudi Arabia and the United States, particularly when it comes to Russia?
AL-FALIH: On the bilateral side, we enjoy a very strong relationship. It is stronger than it was last year, thanks to President Trump's
announcements on combatting terrorism, doing other important things that are in complete alignment with Saudi Arabia. Internal American politics I
don't comment on. We have confidence that the U.S. political system ultimately will do the right thing, but the country, the nation and the
leadership of the U.S. we're confident will work with us and will achieve a very important agenda that is in front of both of us.
DEFTERIOS: In fact, you have better than ten of them. We're looking at nearly $50 billion, mainly MOUs. What do you say to the naysayer who
believes this is window dressing, that won't translate into real investment?
AL-FALIH: These are real transactions that are taking place on the back of commitments by entities within the kingdom. Our credibility is our most
important asset. We will not compromise it by announcing something that we're not certain is going to take place.
DEFTERIOS: The public investment fund has been showcasing its prowess in the United States with the investment in Uber, another $45 billion fund for
Softbank. Is it necessary?
AL-FALIH: Some of these for the industrial revolution, the future of technology, digitalization, artificial intelligence, is what's going to
make the future. Saud Saudi Arabia doesn't want to be a late-comer. We want to be part of the innovation as well as making the innovations
DEFTERIOS: I see people embracing the 2030 plan but it's a lot of pain. Are Saudis in for the long haul, candidly?
AL-FALIH: Absolutely. I think that we realize that the transition will set you back initially a little bit. That old adage, no pain no gain is
very much at play here, so we're ready for it. The Saudi population has embraced the division 2030 plan wholeheartedly.
DEFTERIOS: It was pretty clogged up for a bit but you think it reached the bottom and can go up?
AL-FALIH: Anybody who thought this was a switch that we can throw open was misled and the Saudi population is ready for the long haul.
ASHER: Still to come here, every company has a rule book, and Facebook is certainly no exception. Leaked documents reveal how the social media giant
decides what can and cannot be posted on its platform. That story next.
[16:45:00] (COMMERCIAL BREAK)
ASHER: A report from "The Guardian" newspaper in the U.K. has uncovered how Facebook censors disturbing content. CNN's Samuel Burke joins us live
from London. Facebook has really taken a lot of heat over some of the Facebook live
videos we see that are disturbing and sometimes extremely violent. Walk us through what this report actually says.
SAMUEL BURKE, CNN INTERNATIONAL CORRESPONDENT: Sometimes you're left thinking how could Facebook leave up that video, and other times you're
thinking how in the heck did Facebook come to the conclusion to take down that photo. Facebook won't confirm the contents of this document and the
guardian says that they hand it out to their moderators around the world, Facebook, but they're also not disputing it. We're seeing how much more
nuance the situations that Facebook is in than we think. I want to put on the screen the three basic categories that we're seeing in this document
purported to be from Facebook. Number one, violet threats. If it's against a state, that's a no-go. If someone says on the average Facebook
page, I hope someone kills you, it turns out Facebook doesn't view that as credible and it might stay up. The other surprising thing in this
category, videos, even death, sometimes they will stay up if it's for someone trying to make a point --
ASHER: Wait a second. Do you mean to tell me a video of death is allowed to stay up on Facebook?
BURKE: That is what this document shows. But only if it's trying to make a point about mental illness or let's say a war crime. Think of all the
videos that we show on CNN coming from Syria, people also sharing those similar videos. So again, on the surface it's hard to imagine but then
when you go and see the situations, you can see the gray zones that Facebook is in. Now the other one that you alluded to that we had on that
list, number two, is the live streaming of videos. Interesting here, self- harm or suicide, if someone looks like they're in the process of doing that, this is going to surprise you, Facebook's policy is to not take that
down as it's happening because they say the experts have told them that, look, if somebody's doing something like this, you have to hope that people
will see it and call the authorities. You also don't want to send somebody a message saying, what you're doing is against the rules or negative when
they're in a time of extreme danger.
But if that act is completed, god forbid that somebody hurts themselves or even takes their own life, then Facebook immediately brings down that
video. And the last category -- and this is one that's gotten a lot of headlines because we had that famous Vietnam photo that was taken down,
nudity. Now Facebook says, according to this memo, if it's newsworthy, something that you might see on CNN or in a history book, they'll keep it
up. If it's photographs of children in the holocaust, they say children, no-go. That will come down. If it's art, somebody drawing somebody who's
nude, they'll keep it up. You see a lot of nuance here and Facebook just announcing last month that they're going to hire 3,000 more moderators.
Keep in mind, you and I are talking about this right now. We have hindsight but they have to do this in real time.
ASHER: I think out of what you said, the most surprising, I think, is just this idea that somebody who might be about to commit suicide, if somebody
is in the process, you don't know whether they're going to complete it but they might be in the process of committing suicide, that video could be
allowed to stay up, which is unbelievable.
BURKE: I spoke to experts about it today and they said actually, this is exactly what we would want from Facebook. If somebody's in the middle of
something, you don't want to appear that you're punishing them and that to be the breaking line. Imagine a using seeing that but the experts saying
that would be the right step to take. Very nuanced, these situations.
ASHER: Samuel, I appreciate you bringing that story to us. Thank you so much.
Still to come, divine returns, how the Church of England beat investors at Harvard and on Wall Street. That story next.
[16:50:00] (COMMERCIAL BREAK)
ASHER: It's not a matter of faith. The numbers show the church of England has better money managers than on Wall Street. The church's endowment
generated returns of 17 percent last year. That's better than similar funds and the major U.S. indices. More than a third of the church's
endowment is in stocks. Another 30 percent is actually in real estate. 10 percent is in cash. The church avoids investing in vice stocks, so things
like tobacco, weapons, alcohol and gambling. Joining me now to discuss the church's investment and their stellar sort of record returns is Jim Awad.
Thank you for being with us.
JIM AWAD, MANAGING DIRECTOR, PLIMSOLL MARK CAPITAL: Pleasure.
ASHER: Explain to us, how is it possible? People hear that the Church of England actually outsmarts, out beats the market. How is that possible?
AWAD: Let's start with the fact that if you read their reports, about half of their return was from the fact that the British found depreciated as a
result of Brexit.
ASHER: They mentioned that.
AWAD: Yes, did two things. It moved up stocks in London, and secondly, when you're translating back your gains from worldwide investments in other
currencies, they become worth more British pounds which pops up your return. That notwithstanding, they did an excellent job through their
world class asset allocation, they're invested just like Yale and the most respected funds in a wide variety of assets. And last year they all did
well, as you mentioned. Their equities did well, emerging markets, U.S. small cap, all of which did well. Their private credit did well. Their
buyout investments did well, timber land did well, real estate did well.
ASHER: Divine blessing.
AWAD: God was with them.
ASHER: Exactly. So, in terms of their strategy, one thing that a lot of people know about, some people might know about the church, is that they
avoid investing in what they call vice stocks, so they avoid investing in tobacco, pornography, that type of thing, anything that goes against their
ethics, so how did that help them?
AWAD: Again, if you study the return and I've historically run funds that invest similarly. You invest that way not because it's going to affect
your investment concern because it reflects your conscience and some years it will help you and some years it will hurt you.
ASHER: So, we can't look to that?
AWAD: No. That was not in effect last year and they, in fact, don't look at that as a long-term phenomenon in affecting their results, the way they
think and believe.
ASHER: A lot of their money goes towards real estate, so commercial real estate, agricultural real estate, that sort of thing. How did that help
AWAD: It helped them just fine last year. Their real estate in general was up around 12 percent. Their timber land alone was up more than that,
about 17 percent. It was a year where risk on worked and they certainly had a risk on portfolio. I will tell you that's also the type of portfolio
if you went into a 2008 financial crises that might get hurt. It's an aggressive portfolio in aggressive asset classes around the world and they
got paid for taking risk last year and in the long term it shows them doing very well, better than most funds, better than the averages and better even
[16:55:00] ASHER: So, Jim. what can the average investor watching at home learn from this? Anything they can take away?
AWAD: Asset diversification pays off. You don't want to be in one asset class. You want to be widely diversified, get a consultant to help you do
that. You should invest in emerging market equity, invest in credit, private equity, real estate, put together a diversified portfolio and think
ASHER: But they were helped, as you were saying, by Brexit.
AWAD: Absolutely. It was an abnormally good year.
ASHER: Right. Jim Awad, thank you so much for being with us.
By the way, guys, if you missed part of the program or you want to listen to it again or you're on the road, listen to us in your car, that kind of
thing, you can always download our show as a podcast. It is available from all the main providers or you can listen to it by going to CNN.com/podcast.
It was a pleasure to be with you. That was QUEST MEANS BUSINESS, the news continues right here on CNN.