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Quest Means Business
The United States Is Reportedly Readying Tariffs On A Further $200 Billion Worth Of Chinese Goods And You've Seen The Reaction In The Markets; Amazon Says It's Investigating Claims That Its Employees Are Leaking Internal Data To Help Sellers Get Higher Rankings On Its Web Site; The Chief Executive Of Salesforce Says He Is Now The Caretaker Of One Of The World's Most Important Media Titles; Marc Benioff Has Just Bought "Time" Magazine For $190 Million; Saudi Arabia Is Investing In A Tesla Rival Called Lucid Motors; Trump Defends Kavanaugh Amid Sexual Assault Allegations; Russia, Turkey Agree to Demilitarized Zone In Idlib; Rescue Diver Sues Elon Musk For Defamation; Australia Investigates Strawberry Scare; IMF Christine Lagarde: I See A Lot Of Negatives From Brexit; Investors And Bankers Reflect On Market Crash 10 Years Ago And The Lessons Learned; Dow Sinks In Final Minutes Of Trading; President Trump To Make Announcement On New Tariffs On China; TripAdvisor Aims To Evolve Into A Social Network; Italian Man Jailed For Writing Fake TripAdvisor Reviews. Aired 3-4p ET
Aired September 17, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: We are an hour to the closing bell of Wall Street. Now is the time to do the deal, but look at the market.
It is starting to fall quite sharply within that last hour. It's been down all day. I don't think the Dow truly shows the magnitude of the day. look
at FANG and you'll see all up high, 2.5 percent for Amazon, which is really being hit hard. The Netflix down three percent. And these are the reasons
why. The drivers of the day: The talk of new tariffs on China. The White House says an announcement is coming soon.
The biggest loss is in tech, I will speak to the head of the IT Industry Council about why it's being hit so hard and we need to get into Amazon
which is among the worst of the lot. An investigation now into Amazon over data leaks.
Live from the world's financial capital, New York City, it's Monday, it's September the 17th. I'm Richard Quest. I mean business.
Good evening. Tonight, there is a massive escalation in the trade war looming and it could hit as early as tonight. The United States is
reportedly readying tariffs on a further $200 billion worth of Chinese goods and you've seen the reaction in the markets. The Trump
administration's top economic adviser says the President isn't satisfied with the progress so far in the Chinese trade talks.
(BEGIN VIDEO CLIP)
LARRY KUDROW, DIRECTOR, WHITE HOUSE NATIONAL ECONOMIC COUNCIL: It is a grand strategy of negotiating. It is President Trump's brand and style.
He's tough. He's laid out his goals. I think they're very sensible. As I say, it is a free trade strategy. But it's hard to make the reforms. So
whether they're long term or not, I think they're necessary. and we'll see.
(END VIDEO CLIP)
QUEST: Let's cut through the war of words and let's look at exactly what's been imposed. What is the situation? Now the year started with the US
imposing tariffs on Chinese steel and aluminum, washing machines and solar panels. China responded with its own tariffs on $3 billion worth of US
goods. It was pretty much even Stevens in terms of valued tariff. But then as it escalated, each move was matched by the other.
The US was targeting China's tech industry, $34 billion. China targeted American farming. And then by the end of the summer phase two kicked in.
Phase two was $16 billion worth targeted against each other.
Now this is the situation so far. These are the tariffs that are in place at the moment. But look, it pales in significance compared to what could
be at stake. $200 billion worth of Chinese goods and, remember, the President has - the US President, that is - has also asked his trade
representative to look at increasing the rate of tariff that would be on that much higher levels.
Dean Garfield is the President and Chief Executive of the Information Technology Industry Council. Good to see you, sir.
DEAN GARFIELD, PRESIDENT AND CHIEF EXECUTIVE, INFORMATION TECHNOLOGY INDUSTRY COUNCIL: Good to see you as well.
QUEST: The $200 billion that we're told in an announcement is on its way, that's extremely worrying for your members.
GARFIELD: Yes, absolutely. When you get to a number as high as $200 billion, it's hard to think of any product or service, for that matter,
that wouldn't be impacted. It would actually undermine America's leadership in technology and counterproductively end up helping Chinese
companies.
QUEST: The administration, you heard Larry Kudlow, the economic adviser, the administration believes that this is the only way to get China to a
level playing field, and if they won't come, then the tariffs themselves will level it out. Why are they wrong?
GARFIELD: They're both wrong and right. They're right that China has abused the privilege of belonging to the World Trade Organization. The
Chinese market is neither reciprocal o fair. Where there is that tariffs will be the tool and the broader strategy for getting China to change.
I was in China last week, they are not moved by these tariffs, they are ready for a long-term fight. and so what would actually work and what's
needed here is for both parties to get back to the negotiating table with a defined set of achievable objectives and metrics for measuring whether
those objectives are being advanced.
[15:05:04]
QUEST: Okay, you say it, but of course, the administration says, "Look, we've been talking to China for years." They talk and talk and don't
actually make any significant reforms. And you know, it's carrot and the stick and at the moment, it seems like the whip will be imposed as well.
Where do you fear this will end?
GARFIELD: Where I fear it will end is actually just an escalation in the tariffs themselves and undermining the bilateral relationship for the long
term and more importantly, undermining America's leadership around innovation. The tariffs, and a lot of people are now writing about this,
are actually creating incentives and motivating the Chinese to have greater access to other markets because ultimately, the tariffs are a tax which
end up being a tax on American products.
And so it is true that we've been talking - the United States has been talking for years, but the administration has the opportunity to not only
talk but to create metrics for measuring whether that talk and conversation is resulting in anything meaningful, they should do that.
QUEST: Well, while we've been talking, it is confirmed, apparently, the President has said this, there will be an announcement, we're expecting the
announcement after the market closes. So, we can see the reaction ...
GARFIELD: That's unfortunate.
QUEST: Yes, it is, well, you say it's unfortunate. We can see the reaction as the market is now - I mean, it has lost some ground. That's
what explains the sharp fall just before 3:00. What can you do, though? I mean, I don't want to sound disrespectful and I put it in the same terms to
other lobbyists or those who are - who have vested interests, but the administration is not listening to you.
GARFIELD: Yes, well, the thing that we're doing is speaking in terms that the administration understands which is twofold - one, American leadership,
which I have been talking about, but, also, second in politics, really. And so that's why we're a part of a broader campaign aimed at persuading
the President through getting people in the states that made the difference for the President to share with the President why this is, in fact quite
harmful.
QUEST: Good to see you, sir. Thank you. Please come back as we - as this develops over the next few weeks and few months because I think you and I
could probably both agree that it's not going anywhere quickly. Actually, do you think it is going to get worse before it gets better?
GARFIELD: Yes. Having been in China last week, I think it will absolutely gets worse before it gets better.
QUEST: Good to see you, sir, thank you. US stocks seesawing throughout the course of the day. You saw on the big board. I mean, that bit of
smidgen of green that looks a long time ago just before 11:00. And we have these two sharp falls. One never wants to forecast what the market will do
at any given moment or any given second, but it does suggest that there is a selling purge coming in to the market on the back of what we've heard.
If you look at this sharp fall at half past one, then a minor recovery and then a sharp fall again towards - just before 3:00. We'll watch it
closely. One of the advantages of "Quest Means Business" now being at this hour earlier allows us to follow these final moments of trade in much more
detail.
One of the things we've been watching, of course, and suffering is the growing global debt which continues to rise at an alarming rate. And it's
a worry for the billionaire investor, Ray Dalio. He uses algorithms to work out economic cycles and says it's a matter of when not if but the next
financial crisis is coming, which is very appropriate as we remember ten years since Lehman, AIG and the great financial crisis.
Dalio has published a template - I've got a copy of it and I will show you in a moment, spelling it out and says when it comes to trade, the world is
inextricably linked.
(BEGIN VIDEO TAPE)
RAY DALIO, AMERICAN INVESTOR: The world trade linkages where something is produced here and exported there and all of those other things is very,
very complicated, right? and so we could do our - we try to do calculations. So we could try to - we know who exports what to where and
we do this on computers and so on, but still when you think of the knock on effects, it's very difficult.
QUEST: Are you concerned at the level of debt that's now being generated within the United States and particularly by the US government where
treasury receipts are very sharply down while government spending is up?
DALIO: Yes, if you look at the various segments of the economy, the corporate sector, the household sector and so on, the sector that stands
out is the US Federal debt. And we're going to have to sell a lot of bonds, probably more bonds to the rest of the world than we can absorb in
those bonds, and so that becomes an issue.
We are in a wonderful position of having the world's leading reserve currency. So we don't have to borrow in our currency, and as a result - I
mean, we don't have to borrow on foreign currency, and as a result of being in that privileged position, sometimes we abuse that privilege.
[15:10:07]
DALIO: And that abuse of that privilege in terms of the debt can, and I think and one day will, put us in a situation where they have too much
debt, debt much dollar denominated debt, a debt in dollars means a promise to deliver a lot of dollars that we will then have to produce in service.
And one day, that's going to cause, I believe, a significant appreciation in the value of the dollar and at its worst, it can threaten our reserve
currency status. So it's something that if I was to look out two years, roughly in two years, we'll see some of the fiscal stimulation that we're
seeing now fade and we're going to see more needs to sell that which is going to be problematic ...
QUEST: Are you - nothing like 2009, I am trying not to be apocalyptic in all of this, but are you being a canary in the mind at the moment and
saying, "Hang on, I am seeing things in the Federal debt that I don't like.
DALIO: Yes, but my job is to be very practical. I'm in the market and I have got to do these calculations. And that's basically all it is. And so
when I do those calculations, let's say out five years and so on, I see that in something like, I don't know, two or three years, we will be in a
different part of the cycle, we're nine years into the expansion, I think we're like in the seventh inning. We have a little bit more to go and then
- and I do those pro forma financials and if I am looking something like two years forward, I have concern about the things that we're talking
about.
(END VIDEO TAPE)
QUEST: Ray Dalio and this is the book "A Template for Understanding Big Debt Crises." It's a lot easier perhaps to read than it looks. And
interestingly, it's being given away free. You can get a PDF copy of it. You can also pay and buy the actual book, but they are making it available
as a sort of a - as a public good. It's available as a PDF copy.
Now, Amazon says it's investigating claims that its employees are leaking internal data to help sellers get higher rankings on its Web site, that's
what undermined share price, it's down two percent at the moment, nearly 3 percent. It all follows a report that claims Amazon staff took bribes to
delete negative product reviews and sold confidential customer information to merchants. It's particularly bad in China, apparently.
Samuel Burke is with me. Samuel?
SAMUEL BURKE, CNN BUSINESS AND TECHNOLOGY CORRESPONDENT: Richard, data for bribes - this is quite a simple story to understand, which I think is why
investors are nervous because any Amazon user could understand if vendors are getting confidential data to try and improve their position in the
Amazon search results, which is so crucial to them and its negative reviews are being deleted, I mean, this is part of the fundamental trust that users
have in the Amazon platform.
Now Amazon says they're investigating and I just want to put up on the screen what a spokeswoman is telling us about the investigation, quote, "We
hold our employees to a high ethical standard," she tells us, "And anyone in violation of our codes faces discipline including termination and
potential legal and criminal penalties."
I think, Richard what this really highlights for us, two things. Number one, we always think about Amazon and its relationship with the united
state and western countries, but there is this whole part of the business that is China facing. So this gives us some insight into that and
secondly, it shows just how important Amazon is to so many vendors. Some of these companies, Richard, only exist because of Amazon. So it shows
that they may go to these incredible links to try and get every last advantage they can because literally, their whole business might be on this
platform.
QUEST: So does Amazon look like it's got a handle on this?
BURKE: It looks like they have a handle on this, but I'm thinking of stocks like Yelp which I've followed for years. This is the restaurant
review app. This is a stock that once traded at $100.00 and is now below $50.00 for various reasons, but one of the main reasons is people could
never trust it after it was revealed that the reviews were being manipulated by a whole host of factors and players.
So this is really, really key to the Amazon platform. If people can't trust what they're seeing, they're not going to use the platform.
QUEST: Samuel, thank you. Keep watching that one. That's got legs. Thank you. Now, let me just show you where the FANG stocks are as we are
in the last hour of trading. We showed you Amazon is off nearly 3 percent, but Facebook is also down 1 percent. Netflix is being very hard hit today,
it's down 3.25 percent; whilst Google is off just 1 percent, I say just. But those are reasons.
The NASDAQ is down more than 1 percent and bringing the broader market down with it. When we return, forget Hearst And Pulitzer, now Bezos and Benioff
are taking control of America's front pages. They are the Silicon Valley newspaper tycoons. And last week, they had the IPO of the potential Tesla
rival, Neo. Today, Saudi Arabia is pumping a billion dollars into another electric car contender. I shall be as lucid as possible, after the break,
Lucid is the name of the company.
[15:15:16]
QUEST: Read all about it. Read all about it. Latest news. The Chief Executive of Salesforce says he is now the caretaker of one of the world's
most important media titles. Marc Benioff has just bought "Time" magazine for $190 million. It's become a familiar headline as one Silicon Valley
billionaire after another snaps up major media titles. A new age of newspaper barons and baronesses is under way.
It hearkens back actually to a really golden age of the media. The 19 Century when wingers like William Randolph Hearst and Joseph Pulitzer
became the first to rule the front pages. In the 20th Century, you had the big barons of Fleet Street, Lord Beaverbrook who dominated newsstands with
his "Daily Express" and Rothermere with "The Daily Mail." And now in the 21st Century is the Silicon Valley billionaires like Jeff Bezos and Marc
Benioff who are using their vast fortunes to take ownership of media companies. But why do these men want to be part of this? Brian Stelter is
with me. Good to see you.
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: Hello.
QUEST: Why do they want - what is in it to buy "The Atlantic" for Steve Jobs' widow, the "Time" for Benioff and "The Washington Post."
STELTER: Maybe they've run out of things to buy; no more yachts or anything else. No, I think besides ego which is obviously a factor here,
there's also a desire to feel like they're contributing to something more, contributing to American democracy. I've heard from several tech
executives who say, "We're worried about our institutions, we're worried about checks and balances," we're worried obviously about what's happening
in Washington. Owning a piece of the news is a way to contribute to this American experiment.
QUEST: But what's fascinating is that they are buying traditional outlets rather than putting their money into newfangled web, multimedia and social
media. They've gone for the old stuff.
STELTER: They've gone back to print, that prestigious print magazines and newspapers that they grew up reading with. And I do think that has a part
to do with this. Folks who are now at the top of their class, now at the top of the heap, they grew up reading the "Time" magazines and "The
Washington Post" and so they feel they're going back to those roots in some ways.
[15:20:11]
STELTER: And wanting those publications to remain vibrant. Bezos has done a great job of investing in the "The Washington Post," and making it a more
important, a more successful newspaper, a powerhouse and maybe Benioff maybe can do the same thing.
QUEST: You talk about that, Bezos at "The Post," now he's had a hands off, by and large, from the newsroom.
STELTER: Right.
QUEST: And over the weekend, I was looking - I mean, they got the interview with the woman who has made ...
STELTER: Kavanaugh accuser, yes.
QUEST: The Kavanaugh accuser. Am I right? You're the expert. There seems to be a new energy at "The Post. "
STELTER: There definitely is. In fact, Bezos was just there the other day, cutting the ribbon to expand the newsroom even more and to make the
building even bigger. He has invested carefully and he is focused on digital subscriptions, to gain more subscribers. But look, I think, the
difference between those barons back then and today us that media had dissipated into a thousand pieces.
There is no one big newspaper, there is no one big outlet. So we'll see if these guys actually benefit from their investments.
QUEST: Are they prepared to lose money now? Look, $190 million Benioff paid for "Time."
STELTER: Yes.
QUEST: That is a small amount for a man who is worth billions.
STELTER: Right.
QUEST: So it's the rounding error in some cases, but even so, you still won't want to waste money.
STELTER: No, and he says right now ,"Time" magazine is very profitable. But every year, it gets a little less profitable. This is a declining
business. It's getting harder and harder to print magazines.
QUEST: It's profitable.
STELTER: It's profitable within a publicly traded company. It's not growing fast enough. So maybe by having a family investment here, by
taking it private essentially, he'll be accepting of those daily and weekly returns.
QUEST: This weekend, I was at the beach reading newspapers.
STELTER: Back to the future?
QUEST: It was positively quaint.
STELTER: There really is something nice when we're stuck on these all day long just to read in print.
QUEST: You're right. Leaps out of the page. We love it on this program. Tesla shares dipped as much 2 percent in early trading. Saudi Arabia is
investing in a Tesla rival, it's called Lucid Motors.
The Saudi Public Investment Fund is putting in a billion dollars to help Lucid Air get on the road properly. Lucid promises a range of 400 miles,
zero to 60 in under three seconds and autonomous driving that will upgrade itself whilst the technology improves. All of that sounds a bit Tesla like
or light, this is why Lucid's Chief Technology Officer, designed the Tesla Model S. He is Peter Rawlinson. He served as Chief Engineer at Lotus and
Jaguar and now, works for Lucid. Tell me, sir, a billion dollars from the Saudis. What are you going to do with it?
PETER RAWLINSON, CHIEF TECHNOLOGY OFFICER, LUCID MOTORS: Indeed, we are delighted today to announce the investment of over a billion dollars from
the public investment fund from Saudi Arabia and we're going to use that for three things. First of all, we are going to continue the development
of the Lucid Air. We're going to homologate it, complete the testing and commission all the tooling to put it into mass production. The second
thing we're going to do is construct our state-of-the-art factory in Arizona; and the third thing we're going to do is commence the rollout of
our global sales and marketing strategy, commencing with the US market, which is very important for us.
QUEST: So that is all crystal clear, but the competition is arguably ahead of you. Certainly, Tesla is already on the road. Neo is on the road. All
the major US manufacturers are well advanced and we've started - we've seen announcements from the Germans. So, I beg to question but as the saying
goes, a billion dollars and a few days late.
RAWLINSON: Well, I would agree to differ. I believe that no one has truly yet exploited the full benefits of electrification. When we see how an
electric power train can be miniaturized and the impact that can have upon a vehicle and the layout, it gives so much space for more comfort and
luxury on the interior, the benefit for drivers and passengers alike. No one has actually done that. Lucid will be the first.
And if you look at some of the products that are out there, Tesla is a great product. It's well engineered. It's high tech and it's certainly
premium. But I question whether it's true luxury. Lucid will offer the first full luxury EV and that luxury market is huge worldwide. There are
many, many customers out there waiting for Lucid Air to arrive in 2020.
QUEST: But Neo is a luxury product. I saw some of their prototypes at the New York Stock Exchange last week, one of them has a seat that reclines.
Look, I'm not suggesting that you won't find a market, but I am saying that you're going to find it very difficult without a traditional - without
a traditional car making infrastructure that you have to build back from scratch.
[15:25:08]
RAWLINSON: Well, I think this. A company is as capable as the people it employs. We may be a new company, but we have a wealth of experience and
talent within engineering ranks and we're going to attract the very best world-class talents to manufacture the car in volume. And I'm very
confident that we'll put a world-class product into production, a US product and make the best car in the world in Arizona.
QUEST: Thank you. Good to see you . well, I'm looking forward to 202, I'm told is the ...
RAWLINSON: Indeed.
QUEST: ... date. I am looking forward to you taking me for a spin in it.
RAWLINSON: I look forward to it.
QUEST: In 2020. I'll let you do the driving. Right, thank you, sir. As we continue on QUEST MEANS BUSINESS tonight, Christine Lagarde of the IMF
is issuing a stern warning about the consequences of Brexit.
Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment when I'll be joined by the Chief Executive of TripAdvisor who wants
his site to get more social and they're redesigning it to make that so. Ten years on from the darkest days of the financial crisis, I'll speak to
the man who ran the TARP bailout fund. This is CNN and on this network, the facts always come first.
More than two million people have been moved to safety in Southern China as typhoon Mangkhut continues to wreak havoc across Asia. The storm has now
gone through Hong Kong on Sunday after a direct hit of more than 50 people dead in the Philippines.
Donald Trump is defending the Supreme Court nominee Brett Kavanaugh while also saying America must go through the process of investigating sexual
assault accusations against him. Christine Blasey Ford claims Kavanaugh held her down and tried to rip off her clothes when they were in high
school in the 1980s. Ford has passed a lie detector test. Democrats and some Republicans say Ford should be allowed to testify before the Senate
votes on Kavanaugh's nomination.
[15:30:16] Russia and Turkey have agreed to create a buffer zone between the Syrian government troops and rebel positions in Idlib in Syria. The
deal would also involve the removal of heavy weaponry from the area. According to Russian state media Moscow's defense ministry has rolled out
new military operations in the region.
Vernon Unsworth, the caver that Elon Musk called a pedophile has now filed a defamation lawsuit against the Tesla chief executive. Musk lost his
temper with Unsworth after he criticized Musk's attempt to help save the 12 boys and their coach trapped in a Thai cave in July.
Representatives of both Musk and Tesla have not responded to requests for comment. The Australian government has launched a federal investigation
into the contamination of strawberries with needles and pins. Concerns spread after residents of several states found the hazardous objects in
their fruits.
Six brands of strawberries have been affected, three of them have been recalled. The danger looms for the U.K. economy with a warning from the
IMF Managing Director Christine Lagarde. She says Britain will suffer substantial costs if it leaves the EU without a Brexit deal.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: I'm a desperate optimist, and I very much hope and pray that there will be a deal between the European
Union and the U.K. Because as I said, geography speaks, history speaks. We've been side-by-side, we've been together in so many ways, so I hope
that thanks to the strong efforts of all parties involved, we will reach a deal.
(END VIDEO CLIP)
QUEST: Peter Westmacott is the former British ambassador to the EU, and of course joins me now from London. Peter, today has had all sorts of Brexit
strings to them, not least, this warning of economics and dire economics. But at the same time Theresa May saying it's backed me on the Chequers plan
or nothing at all.
PETER WESTMACOTT, FORMER BRITISH AMBASSADOR TO TURKEY & U.K.: Well, yes, Richard, good to be with you. It has been one of those days, Christine
Lagarde of the IMF was in town for her regular consultations and examinations of the British economy.
But both she and the chancellor of the Chequers were issuing some pretty firm warnings about the risks of British economy if we end up leaving the
European Union with no deal. The Prime Minister's position is back me, my deal or no deal.
And of course, there are plenty of other people now here in the U.K., oh, who are saying if not that deal, then why not no Brexit? Why not members of
parliament assume their responsibility there, saying, and consult the British people again before we jump over the cliff.
And that sentiment, that mood is beginning to increase of it.
QUEST: Is that wishful thinking?
WESTMACOTT: I think it's not likely that there will be a second vote. But if the Prime Minister cannot get her members of parliament and a majority
in parliament to endorse whatever the packages that she puts together, we still don't yet know what it is, then it's not impossible.
The members of parliament, and they've done it before back in 1940 when they brought Churchill to power would vote against the whips, against their
own party leadership and say, you know what? This is such an important moment for the future of our country that we think the people should be
consulted.
QUEST: OK, so --
WESTMACOTT: I think it's not likely, but it's not impossible.
QUEST: All right, but the -- we're now entering that point of the negotiations where you know, really is what are the Europeans prepared to
allow? How much room are they prepared to give? What's your understanding about how far Barnier and the others will go to get a deal and a
compromise?
WESTMACOTT: Well, it's not a great question, Richard. Barnier of course is a representative of the member states of the European Union, the other
27. So he gets his brief from the heads of government.
There have been some signs in the last few days that Angela Merkel was prepared to show some sort of flexibility because she has concluded that
anyone but Theresa May in charge of the British government would be much more difficult to deal with and probably make even more of a harsh of the
negotiations on Brexit.
On the other hand, the European Union is a legal construct, and there were a number of things where heads of government can't just set aside the basic
parameters of membership. So I think those in the U.K. who think that it's all down to the member states showing a bit of -- a bit of ankle, a bit of
flexibility.
They may be indulging in a bit of wishful thinking too.
QUEST: How bad is the situation tonight? I mean, one commentary I read today suggested, though the real problem is not getting a deal with the EU
partners.
[15:35:00] Something can always be hashed together and put together. It's getting it through her own parliament and getting the support. If that is
the case, then things are pretty grim.
WESTMACOTT: I think that's exactly right. If the British government knew after two years of scratching its head and scrabbling among itself, what it
wanted, there would be the scope for getting a deal put together. And at the moment, I'm afraid the government is not sufficiently united to be
clear what it wants.
That is the real negotiation. But if I had to guess, I would say that some things on the lines of a withdrawal treaty based on some elements which
Mrs. May was able to agree with Barnier nine months ago last December, plus a rather vague political direction -- political declaration which leaves
the detail negotiation for after the 29th of March is probably the most likely outcome.
Not a billion-dollar outcome in my view for the country, because it means that there's no going back. But something like that is probably the most
likely fudge. But we're not there yet because there's still powerful disagreement within the conservative government as to what the package is
that they want to extract or they want to negotiate with the people in Brussels.
QUEST: Peter, good to see you, sir, as always, thank you, I appreciate it.
WESTMACOTT: You're welcome.
QUEST: Adopted in the age of an austerity and possibly the age of humility, the global financial crisis, 10 years on. And we talk to the man
who oversaw TARP, the Trouble Asset Relief Program, now, there's an open of that. That complacency, what it was like when you were literally bailing
out companies to the tune of tens of billions.
(COMMERCIAL BREAK)
QUEST: OK, anybody who is involved in investing or the markets, well, we all remember 10 years ago today, and already catastrophic global financial
crisis is now spinning out of control. And with it was the Dow Jones, and you can see there, that's the way they used to do their big board in those
days.
It's all out of 48 hours from the collapse of Lehman brothers. Now, a decade on, and Clare Sebastian talks to some of those who were there and
about the legacy of those dark days and the lessons that we may or may not want.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: What I remember is a continual vigilance with trips up and down the hall with Chairman Bernanke.
UNIDENTIFIED MALE: But I think a lot of us on Wall Street we're in- stunned, disbelief.
UNIDENTIFIED MALE: We were all in shock, so we really -- honestly, we were not thinking.
[15:40:00] CLARE SEBASTIAN, CNN CORRESPONDENT (voice-over): For those who lived through it, the failure of an American investment bank has shaped the
decade.
UNIDENTIFIED MALE: Until that evening, none of us really believed that backup is an option.
SEBASTIAN: The night before the news broke, Mohammed Grimeh; then head of the Emerging Markets at Lehman went back to pick up his things.
MOHAMMED GRIMEH, FORMER HEAD OF EMERGING MARKETS, LEHMAN BROTHERS: That sign was always on my desk and I loved it so I just took it with me.
SEBASTIAN: Ten years on, that building is owned by Barclays and Grimeh is running his own investment firm.
GRIMEH: Are we going to have another Lehman to point out crisis? Highly unlikely. Because the banks are safer, they have more capital now, less
leverage, more stable funding.
SEBASTIAN: Donald Kohn, then vice chair of the Federal Reserve says that because the regulators stepped in with lasting reforms.
DONALD KOHN, FORMER VICE CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE: I think one of the really positive innovations of the crisis were
the stress tests of the banks. The better the economy, the tougher the stress tests should be.
SEBASTIAN: His message to today's regulators --
KOHN: Don't get complacent.
SEBASTIAN: Long time Wall Street strategist, Sam Stovall says investors should have taken heat of that 10 years ago.
SAM STOVALL, WALL STREET STRATEGIST: I think that one of the reasons that we fell as far as we did is because people just went through far out on the
risk curve. They felt that we were in a new economy that we were not going to see the kinds of declines that we had before.
SEBASTIAN: He believes the trauma of 2008 has actually made today's traders more careful even in this record-breaking bull market.
STOVALL: It's still a very unloved bull market. I think because people do remember what happened 10 years ago. They have to wait 20, 25 years for
all those memories to be washed away.
SEBASTIAN: These veterans of one crisis are all on the look-out for signs of the next.
KOHN: Corporate debt, particularly debt of riskier corporations which are being made increasingly and packaged.
STOVALL: Every recession since 1960 was preceded by a double digit decline in housing starts. We're not there yet, but we are seeing declines --
UNIDENTIFIED MALE: Pressure markets, high-end, some parts of frontier markets. For me, that's the next subprime.
SEBASTIAN: Well, much is now being rebuilt since 2008, for Mohammed Grimeh, one thing may be permanently lost.
GRIMEH: Banking is about trust, and if you don't have trust, everything evaporates.
SEBASTIAN (on camera): Do you think the trust in the banking system has been rebuilt since then?
GRIMEH: No, I think so.
SEBASTIAN (voice-over): Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
QUEST: And now the question we are asking you today, we need your input on this. Has Wall Street being held accountable for the financial crisis?
Now, some are calling for more prosecutions and even jail time. Let's face it, at the end of the day who really did it? I mean, what actually
happened?
Who paid the price? Well, a couple of them did and run a few years earlier. But the rest of them, did anybody really pay the price? On the other hand,
the banks paid back their loans with interest. Go to cnn.com-slash-join, cnn.com-slash-join and put in your vote, you'll see them reflected here and
we will discuss them in just a moment.
And Tim Massad faced the financial crisis head on. He was overseeing TARP, the government risk program that was buying toxic assets to keep the
financial sector on its feet. The one thing I remember Tim, during that time was late in the week, we would log on to the Treasury website and look
at the top, basically balance sheet.
And you just see billions and billions of dollars of what you had bought over the previous several days. We'd never seen anything like it.
TIMOTHY MASSAD, FORMER CHAIRMAN, COMMODITY, FUTURES TRADING COMMISSION: Well, that's right, because you know, we were all trying very hard to get
ahead of this crisis to stop the crisis, to stop the contagion.
That's a very different thing and what often happens in financial crisis where government action doesn't happen until things have gotten much worse.
Here, the government both under President Bush and under President Obama took very aggressive action which I think helped minimized the damage even
though still the damage was very bad.
QUEST: If we look at what TARP did and it was highly controversial, it was initially rejected or the bailout was rejected --
MASSAD: Yes --
QUEST: By the house, and that caused another calamity in the market. But if we look over the longer term, I was looking on the Treasury website that
basically you made money. I mean --
MASSAD: That's right --
QUEST: I mean, some areas did, one or two areas didn't, but the big ones all made money, the banks, the others, they made cash.
MASSAD: That's correct. We invested over $400 billion and we made a significant profit on that. Obviously, that's not the measure of success,
but it does show, we were very conscious of protecting the taxpayer as best we could here, and we tried to manage things very --
QUEST: Right --
MASSAD: Carefully as well as how we exited.
QUEST: So to those who say this was an entirely improper use of the government, you should have stood back and let the market do its business.
That was the nature, you've heard this argument before --
MASSAD: Sure --
QUEST: That --
MASSAD: Yes --
QUEST: TARP was government largesse bailing out bankers, and if you look at --
[15:45:00] MASSAD: Right --
QUEST: CNN.com-join, how is Wall Street being held accountable? A good 91 percent of viewers are saying no --
MASSAD: Right --
QUEST: If you were voting at cnn.com-slash-join, how would you vote now?
MASSAD: Well, I guess I would say this, what you have to do in a crisis is inherently unfair. We had to do what we did to prevent it from being
worst. But obviously, it's very unjust to have to use taxpayer money, and that is the fault line I think that runs in our society today.
You know, I've been to a number of conferences lately where people talk about should Lehman have fallen and so forth? But I think the question on
most Americans mind is well, why didn't more people go to jail? The fact is most of this stuff was not a crime.
It was excessive, it was greedy, it was stupid, and we didn't have the regulatory system to catch it.
QUEST: Was there a moment during the whole crisis when you feared -- I've read Bernanke's book, and he never quite says, yes, I thought we were going
to lose it all completely. But was there a moment when you feared, that this is getting away from us.
MASSAD: Well, you know, I think right after Lehman fell, I wasn't yet in the government, I was still in private law practice. But right after
Lehman fell and then we had to run on the money markets, that week, I found extremely scary. And even talking with high officials in a lot of the big
banks, they were not sure where it would end at that point. That was a very scary time.
Fortunately, again, the government took quick action, we continued to take quick action when the Obama administration came in, and I think again, that
helped contain the damage even though the damage was very bad.
QUEST: Good to see you, sir, thank you, we must talk more of that in the future on exactly how the strengths of the market is now. Thank you very
much.
MASSAD: Thank you.
QUEST: Now, we did ask you and you answered. Last one, you've got a last -- if you've got cnn.com-slash-join -- or no, too late, 89 percent of you
said that Wall Street hasn't been punished enough for the crisis. But you, I'm not sure what you mean by punished, if you mean that no one is going to
jail.
Now, you may be right, but anyway, we'll talk about that. Paul la Monica, if you were voting now, has Wall Street being punished? What would you say?
PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: I think Wall Street has been punished. You've had a couple of people who were in high profile jobs
who no longer have them, yes, it's true, they didn't go to jail, but --
QUEST: Right, the markets, let's look at this. The markets are sinking in the final hour of trade. The Dow was off -- the Dow has extended not
hugely, were down 60, but we are now at the low point of the session. The Nasdaq is off by over 1 percent, the FANG stocks, Netflix is down 3.5
percent.
LA MONICA: Yes, I think that a lot of the concerns right now are, you know, stemming from the announcement that President Trump is going to say
something after the market closes with regards to China and trade, and I think that's the reason why Apple for example is down almost 2.5 percent.
Not really sure why Netflix is getting caught up in this for, you know, because they aren't really tied to the whole China trade issues all that
much. But the broader Nasdaq, obviously, a lot of semi-conductor stocks could be heard by whatever it is announced.
I think a lot of people are, you know, gearing up for just more trade tensions between the U.S. and China --
QUEST: I mean, that nevertheless speaks volumes. Yes, you've got the narrow markets, you've got the Dow just off of a third of a percent, the
Nasdaq is off one and a third and falling.
LA MONICA: Yes, I think a lot of the bigger stocks in the Dow, Boeing and Caterpillar for example, they had already taken their lump --
QUEST: Right, but that was actually earlier on, that was actually up.
LA MONICA: Right --
QUEST: Today, I mean, Boeing was due -- it's -- I mean, the concern is with what the president is going to announce at 4 O'clock or there about.
LA MONICA: Yes, I think the concern is what is he going to announce, and also I think there's always been on Wall Street this hope that people had
held out, that this is all bluster, it's all the art of the deal, his negotiation, maybe it's not, maybe he is really trying to cater to the
base.
And that may mean that Wall Street and Silicon Valley lose out.
QUEST: Still out, thank you, good to see you, sir. When we return, TripAdvisor wants to get personal, it's turning its community of anonymous
reviews into a social network. The chief executive of TripAdvisor is with me after the break.
[15:50:00] (COMMERCIAL BREAK)
QUEST: All right, I shall admit I never book a hotel without looking on TripAdvisor to get a good feel for what other people say. The same with
many of the restaurants or everywhere else, and I always go there first. And if that makes me bias in this interview, so be it.
Because the world's biggest travel site is looking to chart a new course. TripAdvisor says it wants to turn its community of online reviewers into a
fully-fledged social network, so your friends can tell you where to go next, so to speak.
Stephen Kaufer is the chief exec of TripAdvisor, he joins me now in the C- Suite. Good to have you, sir.
STEPHEN KAUFER, CHIEF EXECUTIVE OFFICER, TRIPADVISOR: Great to be here.
QUEST: What are you doing? I mean, it's already essentially a social network because you're reading the reviews of ordinary people.
KAUFER: Exactly, so 600 million reviews and opinions to be precise, that provide everything you could possibly want to know about where to go, where
to stay, what to do. It's a fabulous ecosystem, got it. Can we make it better?
Can we give you something that is a little bit hard to find on TripAdvisor right now, which is that knowledge that you were getting the review, the
recommendation from your friend, from your distant cousin, from most travel brands that you really care about.
Those top five lists that you may have seen published in an article, wow, I want to go there. It's helping to guide your part of the decision which is
great. That's how so many of us make some part of our decision today.
QUEST: The crude when you've seen it describes -- that sort of it. You want to become the Facebook of travel.
KAUFER: So look, we are not aiming at all to be a replacement for any social network out there. You're on Facebook to share with your friends
and family, and that's great. You're on Twitter to keep up with news and everything else that Twitter provides.
We look at it as how are we addressing the next needs of our traveler community on TripAdvisor already on TripAdvisor today. Answer, give them
something else that they're looking for. The insight, the inspiration from travel brands that they respect, and the advice that, that they're getting
right now by talking to their friends or business colleagues offline.
QUEST: So what does this mean in terms of the experience?
KAUFER: Great question, so you pop to TripAdvisor --
QUEST: Right --
KAUFER: And instead of just seeing a list of top things to do, top hotels, you get inspirational content video. GoPro is going to tell me a great way
to spend the day in Bailey. And that video is inspiring and it's tagged with the set of things that, that individual did.
QUEST: Do need to ask you about the Italian experience.
KAUFER: Sure.
QUEST: The guy who -- the person who was locked up, gone to jail for posting fake reviews on TripAdvisor. And isn't that a bit drastic?
KAUFER: Well, that the Italian authorities did that, we helped them find the bugger, and yes, he's in jail because he did something that is illegal.
[15:55:00] QUEST: A bit drastic to be locked up for doing a fake review, well, maybe not.
KAUFER: It wasn't a fake review, let's be clear, he was running a company that offered to do fake reviews for hoteliers and restaurants and other
businesses. We've -- I mean, he was just the latest one that we've caught. We've caught dozens, we've shut them down as soon as we find them because
the authenticity, what's on TripAdvisor, that's our -- that's our existence.
QUEST: Right, I'm just finished with that, because that authenticity is your -- is your gold standard.
KAUFER: Yes.
QUEST: If you start opening it up to more social media and you gave an example of GoPro offers you this or suggests that, is this fine balancing
opportunity commercializing it and still keeping it as a community?
KAUFER: It's still a community, everyone is welcome, they post for free. But who is available to offer some of these amazing videos, some of these
inspirational pieces, that's not a review, it's a well crafted -- I mean, I look at national geographic and what they're able to produce, how inspiring
that is, how much eyes an individual wants that is part of my travel experience to inspire me to go to that place.
And then I still use the wisdom of crowds, all these reviews, they help me pick the details.
QUEST: Good to have you, sir, and congratulations, you are -- you and your site are one of the very few, not that many. It's truly revolutionized an
industry.
KAUFER: Well, thank you, we aim to do it again.
QUEST: We'll be watching. We'll have our profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, within the next, five, ten, twenty minutes, whatever it might be, we're going to get more details from the
administration -- from President Trump about the tariffs, it's all new tariffs on China.
It's already pushed the market lower and we are expecting that another clobbering if $200 billion worth of tariffs are introduced. Trade and the
importance of trade is now well and truly on the agenda. NAFTA is on the agenda, Brexit is on the agenda, and now China tariffs also firmly fought
forward.
Whether or not, the global trading system could withstand this assault is going to be the crucial test. You'll get one little example of it in the
next couple of hours. How much can we stand as the U.S. once again increases its tariffs on China.
And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.
(BELL RINGING)
The closing bell is ringing, the day is done.
(COMMERCIAL BREAK)
END
