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Quest Means Business
Spain Under Stress; Reports of Run on Bankia; Moody's Downgrades Four Spanish Regions; New French Finance Minister Calls for Growth Strategy in Fiscal Compact; British Prime Minister Says His Task is to Keep Britain Safe; Euro Crisis: Make or Break; Facebook's Timeline; Younger Users May Be Logging Off Facebook; How Millennials Use Facebook; Monetizing Mobile; Euro Slide Continues; US Stocks Decline; Congressman Shares More on Economic Recovery Plan; Court Halts Proceedings on Mladic's Case; Spanish Government Debunks Allegations of Massive Withdrawals; Greece Installs Interim Until June's Elections; Queen of Disco Dies at Age 63; Quest Meets Ericson's Boss; And a Greek Company Finds Opportunity Inspite of Economic Downturn
Aired May 17, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: The Spain drain. A downgrade and rumors of a bank run kick the market.
Europe could learn a thing or two from the US. Lessons from US Congressman Barney Frank.
And Facebook is trending with investors. It's trending on social media. Have the younger generation moved on?
I'm Richard Quest, and I mean business.
Good evening. Downgrades, denials, and a banking sector dangerously close to disarray, all if reports are to be believed. The focus of Europe's debt crisis has shifted to Spain, and in the last few hours, the rating agencies have turned once again on Spain's debt-ridden regional banks.
If you join me in the library, you will see just how the day has unfolded and how serious the situation in Europe has developed in the last 48 hours.
Let's start with Bankia, the Spanish bank, which is down a further 14 percent today after a run -- or reports of a run on the bank. Look, this is just from the last few days. "El Mundo" newspaper says that a billion euros was withdrawn since it was part nationalized by the Spanish government. Now, that's less than 1 percent of the total balance sheet.
The bank is denying it and says that everything is within normal parameters, but the share price is still being absolutely clobbered, 45 percent down over the last month.
The Spanish government is denying reports, Bankia's president says customers should be calm, but look at the banking stocks. Banco Popular Espanol, wiped. Bankinter, CaixaBank, BBVA, all of them down very, very sharply, indeed.
What it means, of course, as it comes into the bond market and how things have moved into that, Spanish ten-year bonds are now trading at 6.3 percent, a six-month high. So, when you take this and that and the cost of borrowing, Moody's is downgrading four Spanish regional banks and says negative outlook.
All in all, you have to wonder about the pallor state now of the banking sector in Spain. In Madrid, our bureau chief is Al Goodman. He joins me from the Spanish capital. Al, let's just start and take this slowly and carefully. How -- how worried or how much credence is being given to the possibility of runs on banks?
AL GOODMAN, CNN MADRID BUREAU CHIEF: Obviously a lot, Richard. And if you take a look, you just showed some numbers. Let's look at the -- since Bankia started trading last July, it has lost 70 percent of its share value.
And as you say, that decline has been very steep just since last week, when the government basically took control of it, and Rodrigo Rato, the former IMF director who was running Bankia, exited.
So, a lot of concerns, here, and that's why the deputy economy minister -- as things were plummeting this day and on that media report here that said that there was a bank run, he rushed out to say everything is fine.
That didn't calm things down enough, so then the bank itself, which has been very quiet, issued a statement itself to try to further calm things down. Let's just take a look at this statement here just a second and read what it says for us.
"Bankia deposit holders," it said, "can be absolutely calm about the safety of their savings which they have trusted to the bank. In recent weeks, Bankia operations have occurred within the normal parameters. The indications are that the balance of deposits will not have substantial changes in the coming days," the statement said.
But I can tell you, Richard, Spaniards in the bars and in the offices are now talking for the first time in memory about what to do with their deposits, not just at Bankia --
QUEST: All right, but --
GOODMAN: -- but in all the Spanish banks. There's a lot of nervousness here.
QUEST: OK, Al. Al, just quickly, just to clarify those, Spain, like all the major EU countries, has a deposit insurance scheme, doesn't it? So to all intents and purposes, normal ordinary citizens are well-secured by - - backed and guaranteed by the government.
GOODMAN: That is true, but the word that has come down through Spain throughout this whole European crisis is that months and more than a year ago, the word was Spain has one of the most solid banking sectors, it's got all these provisions.
That whole real estate crisis that went bust and left all these bad loans, and Bankia is one of the worst holding of those bad loans, that really didn't affect the fundamentals of the section -- of the banking sector.
And here, Richard, you have day after day, more and more evidence coming out to not just international investors, but to Spaniards themselves who are now beginning to seriously worry that something is not being fully transparent, not being fully told here, Richard.
QUEST: Al Goodman, who will have his work cut out for him in the days and weeks ahead, but is in Madrid for us tonight. Many thanks.
And to clarify one thing I said, of course the rating agencies today downgraded four Spanish regions, not four Spanish regional banks. It was the whole regions that were downgraded.
To France, where the new finance minister says he won't sign off on the fiscal compact for Europe unless there are plans to boost growth. Pierre Moscovici on the right in the picture that you're looking at says Europe must have, in his words, "ambitious growth strategy" as well as a plan to solve Greece's debt crisis.
The new French cabinet has austerity measures of its own to deal with, a 30 percent pay cut, that's exactly what President Hollande promised during the election. The new finance minister admitted France would need to work closely with European neighbors, particularly those across the Rhine in Germany.
(BEGIN VIDEO CLIP)
PIERRE MOSCOVICI, FRENCH FINANCE MINISTER (through translator): We are aware that France can do nothing alone, that we need to work with our partners, all our partners, and first of all with Germany.
And I will take the advice that you have given me to take up the task very, very quickly with the German minister, Wolfgang Schauble, and that we must do this, too, respecting the European institutions fully.
Because Europe, of course, it is this Franco-German motor, but it also entails 27 countries that are members, and it is also the institutions which must play their role fully, giving impetus, proposing, and consulting.
(END VIDEO CLIP)
QUEST: First Spain, then France, now the UK. David Cameron joined Francois Hollande, Angela Merkel, and other leaders on a conference call a few hours ago. The British prime minister told Parliament on Wednesday it was a case or make up or break up in Europe.
And in a speech in Manchester, he said once again, it's vital to cut deficit to secure growth. His number one priority is getting Britain through the crisis unscathed.
(BEGIN VIDEO CLIP)
DAVID CAMERON, PRIME MINISTER OF BRITAIN: We are living in perilous economic times. Turn on the TV news, and you see the return of a crisis that never really went away. Greece on the brink, the survival of the euro in question.
And faced with this, I have a clear task, to keep Britain safe. Not to take the easy course, but to take the right course.
(END VIDEO CLIP)
QUEST: Robert Shapiro is a former advisor to the IMF and the former US Undersecretary of Commerce for Economic Affairs. Mr. Shapiro joins me now from Washington.
From your perspective, does it now seem as if the wheels are well and truly coming off the wagon, and it might just be impossible to put them back on again?
ROBERT SHAPRIO, FORMER US UNDERSECRETARY OF COMMERCE FOR ECONOMIC AFFAIRS: Well, yes. Yes, in a word. But that doesn't mean that you can't -- the -- in your analogy, the wagon can't proceed on three wheels.
The eurozone can survive this. I think it's -- most economists would agree that the -- Greece is really unsustainable inside the eurozone because the eurozone 18 months ago, 12 months ago, made a fundamental decision that the primary vehicle that Greece could use to restore some kind of competitiveness and the stability of its government debt market was going to be austerity.
And the fact is --
QUEST: OK --
SHAPIRO: -- in democratic regimes, people will not accept austerity without limit.
QUEST: OK. So --
SHAPIRO: And the Greeks reached their limit.
QUEST: So, it seems likely, though, that the other EU leaders are not going to kick Greece out. They will wait for Greece to come to its own decision, from which consequences will flow.
SHAPIRO: Right. Although, legally, that's mandated. There is no provision within the eurozone for ejecting a member. A member would have to withdraw.
The way this is most likely to happen is that first, both sides have got to prepare for the exit of Greece. That will take several months. It'll take months just to print up a new currency for Greece.
QUEST: Right. But let me -- let me just --
SHAPRIO: But the fact is, the danger would be a chaotic withdrawal of Greece from the eurozone. That's the kind of scenario --
QUEST: Hang on.
SHAPIRO: -- that leads to contagion, to countries like Spain, and Italy, and Portugal.
QUEST: Sorry to interrupt you, but -- the moment it becomes clear that Greece is going to leave and those plans start getting drawn up, you de facto have a collapses of the Greek banking system unless you introduce capital controls or all the other things that are completely contrary to the EU single market.
SHAPIRO: Well, this will -- this will require a great deal of creativity. And I think the eurozone, Germany has got to offer some gesture that can give markets the possibility that they can work their way around this.
But ultimately, the only way to work around this would be for Germany to accept the basic principle of any monetary union, which is that the full faith and credit of the whole stands behind the full faith and credit of the parts. So long as the eurozone resists this basic principle of monetary union, it will continue to be unstable.
QUEST: Finally, Mr. Shapiro, do you -- would you be surprised or not surprised if, in the next week to ten days, we see a full-blown banking crisis in either Greece or Spain or one of the EU members?
SHAPIRO: I -- well, we already have one in Greece. It would not surprise me. The danger here is a contagion to Spain suggests a potential banking crisis not only for Spain, but for Germany and France, as well.
German and French banks are holding $600 billion in Spanish debt. A chaos in the Spanish debt market would hit the largest banks in Europe very, very hard.
QUEST: All right.
SHAPIRO: So, this is not something that you can simply contain to Greece or even to Greece and Spain.
QUEST: Robert Shapiro in Washington. Please -- come back again as we try and make sense of this in the weeks and months ahead. We appreciate you giving us time today and joining us. Many thanks for that.
One footnote to our coverage on Europe at the moment. Fitch has downgraded Greece to Triple-C today, so just about the lowest level without default.
Now, in a moment, not everyone is getting caught up in the Facebook mania.
(BEGIN VIDEO CLIP)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Which company do you think is more valuable in the business world, would you say? Would it be BlackBerry, or would you say, would it be Facebook?
UNIDENTIFIED GROUP: BlackBerry.
BOULDEN: If I told you you're completely wrong, what would you say?
(LAUGHTER)
(END VIDEO CLIP)
QUEST: We'll meet the group who puts a different value on Facebook in a moment.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: The hype is reaching fever point. After the closing bell on Wall Street, Facebook will finally name the price upon which the shares will be issued, and they start trading on the NASDAQ on Friday.
Even at this late stage, there's still time for the social network company to raise prices beyond its $35 to $38 target limit. Facebook is set to be the biggest IPO ever, which is impressive. If you join me at the super screen, you'll see what I mean.
This is Facebook's very own page, as designed by QUEST MEANS BUSINESS. Mark Zuckerberg, of course, you'll know. Look at the growth. Look at the growth of Facebook from 2004, 100 million there. By 2009, 200 million. And this exponential growth up to 900 million users by 2012. It's an extraordinary level.
And the way in which it's ingratiated from Mark Zuckerberg and the people, with the Japanese prime minister, with the Skype chief executive, with Eric Schmidt and Herman Van Rompuy of the European Union, Angela Merkel, Nicolas Sarkozy, and Morris Levy. That of course -- I don't know who's more happy to see each other. David Cameron, the UK prime minister and, of course, Barack Obama, the US president and Zuckerberg.
But the company itself has had such a -- let's just look at the timeline from 2004, when it was called The Facebook. And then, the Winklevoss twins, no longer friends. It becomes Facebook in 05. Anyone can join in 06.
Going -- look at this quote. This is classic, from Zuckerberg himself. "Being public has a lot of complexity. We didn't start the company just to have a financial windfall." Wait until tomorrow.
And then, right the way through this link about "Social Network," the movie, and what they talked about there. And finally, the Instagram purchase of $1 billion.
If you take the speed with which Facebook's short life has been -- has gone through, you get an indication of just exactly how powerful this will be when it finally launches on the stock market tomorrow.
And as investors scramble for a slice of Facebook, Jim Boulden found that some of those younger users are already logging off.
(BEGIN VIDEOTAPE)
BOULDEN: It's all well and good for potential investors and for analysts to talk about the future value of Facebook. We thought we'd talk to those users that Facebook is going to need over the next decade.
UNIDENTIFIED MALE: Hello. Hello.
BOULDEN: Hello, and welcome to class. Just tell me what you use, tell me what you don't use, tell me why you use it.
UNIDENTIFIED FEMALE: Facebook, BBM.
UNIDENTIFIED MALE: Yes, I've got BBM, Facebook, Twitter.
UNIDENTIFIED MALE: I use Facebook and BBM. BBM's to talk to people, but Facebook's to check everyone's business.
BOULDEN: How many hours, if it is hours, do you think you're on these at night? And do you -- I know with my family, you might see a friend and then go home and then go home and then go on Facebook with them, which to me makes no sense, because you were already with them.
UNIDENTIFIED MALE: Mostly when I get home, it's what I do, I'm on my mobile or on the internet.
UNIDENTIFIED FEMALE: Probably about an hour a day, when I get home, going through a bit, and then I use it during the day on the phone.
BOULDEN: Are any of you using it less now than you did, say, six months ago.
GROUP: Yes.
UNIDENTIFIED FEMALE: I spent like seven hours a day on it and I have done it most of the time.
BOULDEN: Yes?
UNIDENTIFIED FEMALE: Yes, I think it's -- yes, we don't -- I don't think kids nowadays really use Facebook, because know that we've got BBM, we've got all our friends on our home, easy access to them. But I think if BBM goes down, that's the first place that we go. We don't call them. That's the first place that we go, is Facebook.
BOULDEN: What is it about BBM, other than it's instant messaging with your friends? What's --
UNIDENTIFIED FEMALE: That's really it.
UNIDENTIFIED FEMALE: It's the vogue.
(CROSSTALK)
UNIDENTIFIED FEMALE: It's like, if you need to talk to someone, see where they are, you can't Facebook, they have to be logged on. But BBM is always on, so that you can reach them.
BOULDEN: What doesn't Facebook do yet that you would like it to do? Because you all seem to be very happy with BBM. Should there be some sort of more instant messaging features within Facebook? Or is --
UNIDENTIFIED FEMALE: More like BlackBerry, if you go on Facebook sometimes, it's really slow and it logs off or it does stupid things. They should fix that.
BOULDEN: Do you even notice that Facebook has a lot of advertisement? Do you notice the advertisement?
GROUP: Yes.
BOULDEN: Do you click on it?
UNIDENTIFIED MALE: A bit too much adverts.
BOULDEN: You think it's annoying?
UNIDENTIFIED MALE: You check little things, it opens up, and you don't want it there.
BOULDEN: But you realize you get it for free because of the advertisement?
UNIDENTIFIED MALE: No, I didn't know that.
BOULDEN: In five years, do you fully expect to be using Facebook? Yes or no.
UNIDENTIFIED FEMALE: Yes.
UNIDENTIFIED MALE: Yes.
BOULDEN: An if, maybe?
UNIDENTIFIED FEMALE: Maybe.
BOULDEN: OK, so two maybes -- three maybes. And five yeses.
(END VIDEOTAPE)
QUEST: So, on the one hand, that's the youngest and what Facebook's youngest users make of it. What about those who are not as young as them and not as old as me? We have our own panel. They are The Millennials.
(RINGS BELL)
(BEGIN VIDEOTAPE)
MILISUTHANDO BONGELA, FASHION BLOGGER: Ah, Facebook. The bane of my online existence. I honestly find it one of the most irritating and banal social networks that exists. But like most vices and bad habits, I keep going back to it every single day.
I used to like Facebook. There was a time when I really, really -- it really exhilarated me. When my timeline was filled with the people that I cared about and their stories and seeing their pictures and their babies and seeing how their lives have progressed.
But because of the nature of the work that I do, I have had to befriend a lot of strangers because I don't want to say no to a platform that's going to expose me to thousands of people at the click of a button. As somebody who owns a business, as somebody who has a fashion blog, I don't want to say no to that.
So, the result is that my timeline is filled with complete strangers and stories of people that I can't relate to, that I can't really share my personal life with. So, there's only so much that I can engage with on Facebook.
MICHAEL BURBACH, ASPIRING ACTOR: I really can't imagine a life without Facebook. Facebook has been an amazing way for me to communicate with my friends in the city as well as all over the country and all over the world.
I've met some amazing people through Facebook. It's a great way to upload your photos and your videos and share links, create an event, just let people know what you're up to and as well see what your friends and your family are up to.
DAVID LLOYD, MANAGING DIRECTOR, INTERN LATIN AMERICA: Honestly, I used to hate Facebook. I associated it with a vain popularity contest, people showing off at university. And then, it reached a critical mass where it became detrimental, both personally and professionally not to be on it.
Professionally, it provides a really useful tool to replicate the word-of-mouth recommendations from the real world in the virtual world. Personally, it's just very useful to be able to keep in touch with interesting people from all over the world. I suppose like many people in my generation, I'm addicted to it.
(END VIDEOTAPE)
QUEST: Out of the mouths of babes, into the mouths of those who are slightly older, and now to the old crocks. At least you're looking Zuckerberg-ish.
BOULDEN: I'm channeling Mark Zuckerberg here.
QUEST: You're channeling. He's got his -- look, the youngsters don't like it because they want BBM.
BOULDEN: Yes.
QUEST: The Millennials like it because they can use it for business.
BOULDEN: They can't live without it.
QUEST: And they can't live without it.
BOULDEN: No.
QUEST: So, what's the next -- where is everything falling between the stools?
BOULDEN: It's mobile, and that's what we want to talk about here, with these sort of mobile screens.
Of course, Facebook started off in 2004 as a desktop site. It's now increasingly seen here, and here, and here. On your mobile phone, on your high-speed tablet. That's the extra traffic that is great for Facebook if it brought in any money.
Facebook admits mobile access like this doesn't generate any meaningful advertising revenue at all. That's the growing problem. Of course, more than half of Facebook's 900 million active users used its mobiles apps or sites in March. That growth is now so fast, it's outpacing the number of adverts that Facebook delivers.
Adverts are, of course, Facebook's bread and butter. Ads accounted for 85 percent of Facebook revenue last year. That's some $3.2 billion. If Facebook wants to keep its new shareholders happy, it's going to have to monetize that mobile market.
Now, in the Facebook investor roadshow video, CFO David Ebersman promised that's something they're working on.
(BEGIN VIDEO CLIP)
DAVID EBERSMAN, CHIEF FINANCIAL OFFICER, FACEBOOK: We believe mobile usage of Facebook is critical to long-term user engagement, so expect us to invest heavily in our mobile product experience, even if mobile monetization is uncertain and will take time.
(END VIDEO CLIP)
BOULDEN: Just how much time investors will give Facebook to turn those mobiles into money is the big question, Richard.
QUEST: Jim, come over here quickly. Write down on a piece of paper - - don't show the camera -- what price you think Facebook will be at this time tomorrow when we talk about it. Don't let the camera see.
And while you're writing yours down, I'll write mine down, as well. I'll tell you about the Currency Conundrum. There's a motto printed on one of the world's most widely-used currencies, which reads "Out of many, one." So, which currency do we mean? Is it the dollar, the Chinese yuan, or the euro? Later in the program is the answer.
(RINGS BELL)
QUEST: No, no Googling! Today's currency rates. The euro slide continues, fresh four-month lows. Those are the rates, now time for the break. You can't have that answer, that's my number!
(COMMERCIAL BREAK)
QUEST: It's a fifth straight day of losses for Wall Street.
(RINGS BELL)
QUEST: Alison is at the New York Stock Exchange for us this evening. Small losses, but what's the mood?
ALISON KOSIK, CNN CORRESPONDENT: You know what? The mood still is kind of uncertain at this point. We definitely are, Richard, seeing the selling picking up as the Dow heads for its 11th loss in 12 sessions.
It's these worries about Greece, they're continuing to weigh on the market. And investors are contemplating what an exit from the eurozone would mean for the global economy.
Some economic data that came out in the US today pretty lackluster, not giving an incentive to buy in the market. This was on jobs. In fact, 370,000 people filed for first-time jobless benefits last week.
That's unchanged from the week before, and it shows that the number of layoffs that are happening, yes, they're sort of holding steady, but the problem is, we're not seeing any improvement. That's causing a big worry.
Shares of JPMorgan, yes, they are falling again, down more than 3 percent, weighing on the Dow. This is about concerns about how steep JPMorgan's trading losses will turn out to be. Last week, the bank estimated losses from those bets gone bad at about $2 billion, but now the "New York Times" is saying those losses are going to be closer to $3 billion.
Now though this doesn't come as a huge surprise, Jamie Dimon came out warning last week these losses could grow, it still kind of stings to hear that $3 billion even just now. Richard?
QUEST: OK, Alison. Grab your piece of paper and your pencil.
KOSIK: I've got it.
QUEST: And write down --
KOSIK: I've got it.
QUEST: Don't let us --
KOSIK: In pen?
QUEST: Don't let the camera see, we are not forecasting anything here. But you write down the number that you think --
KOSIK: No.
QUEST: -- this time tomorrow Facebook will be trading at. Fold the piece of paper.
KOSIK: Done.
QUEST: Put it somewhere safe, and we'll see who is right tomorrow. Many thanks, Alison Kosik. See you tomorrow.
Coming up next on QUEST MEANS BUSINESS, the Frank in Dodd-Frank wants action.
(BEGIN VIDEO CLIP)
REP. BARNEY FRANK (D), MASSACHUSETTS: The kind of hedging that JPMorgan Chase was engaged in was inherently risky. And we're not trying to stop financial institutions from taking risks and losing money. We are trying to stop them from doing that in ways that will have negative effects on others.
(END VIDEO CLIP)
QUEST: Congressman Barney Frank tells me now is the time to toughen banking regulations after the break. QUEST MEANS BUSINESS, good evening.
(COMMERCIAL BREAK)
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, more QUEST MEANS BUSINESS in a moment.
This is CNN and on this network, it's the news that will always come first.
The world's crimes trial of the former Bosnian Serb commander Ratko Mladic came to an abrupt halt on Thursday. The defense says the prosecution failed to disclose some evidence against the general.
The long awaited trial only got underway on Wednesday, it's not clear how long the delay will last.
The Spanish government says reports of a run on the Bankia bank deposits are untrue. The Spanish newspaper "El Mundo" says Bankia managers reported a much higher than expected normal withdraw rate last week.
As customers removed more than a billion dollars, Bankia insists it was within the normal parameters.
Greece has now installed its caretaker government to run the country until new elections are held in June. The last nationwide vote for the hunch punch of parties in parliament, they were unable to put together a ruling coalition.
A radical left anti-bailout party is expected to build on its popularity in the next round.
Donna Summer, the so-called queen of disco has died at the age of 63. Miss Summer has been suffering from cancer. She first rose to fame in the mid 1970s with her song "Love to Love You Baby". Donna Summer, who died today.
Barney Frank, the man who helped over whole Wall Street says his banking rules needs to be implemented now. It's been two years since dodd-frank was made law and he tells that one of the most important components are still being trashed out.
The volcker rule, bans banks who are investing their own money in the financial market, except to trade against individual specific risk. Of course bearing in mind what happened with JPMorgan Chase and now the reports of the losses maybe even greater.
I spoke to congressman Frank earlier and asked him whether he feels vindicated after JPMorgan's massive mistake.
(BEGIN VIDEO CLIP)
BARNEY FRANK, U.S. REPRESENTATIVE FOR MASSACHUSETTS: Yes as to this point, it is clear that the kind of hedging that JPMorgan Chase were engaged in was narrowly risky. And when I try to stop pretentious institutions from taking risks and moving money, we are trying to stop them from doing that way, it will have negative effects on others.
And in particular, we think that the banks which are getting deposit insurance fund or could get deposit insurance fund have access to the discount, went through the Federal Reserve, they should not be doing these risky things.
They should be lending money to people.
QUEST: Isn't it inevitable that the regulators will always be just one step behind the financial invention and ingenuity of the banks.
FRANK: No, what happens of course is that we have a time lay ahead in terms of implementing the rule. We have a process in American rule whereby people can make comments and you have to analyze your comments.
But we anticipated this with the law, and within a couple of months I believe there will be a regulations place that will stop it.
Now you're right that at some point, the innovated will outstrip the regulations but you're talking there about I think decade that's been a pattern you know and a new bill they passed the security change act, the best in company act and other things.
And then held up for about 40 or almost 50 years., and then it began to erode. Now we were too late in this country because of this floatation with non-regulation in stepping up. But I believe that the rules we've now put in place are going to be very accurate -- adequate as well.
By the way, one example of how we've already achieved something, if JPMorgan Chase were capable institution, had had these kind of losses five years ago, and other banks might have similar losses, you would have seen a lot more panic.
Part of the advantage of what we've done over the last few years is the banks are now much better capitalized, not because they wanted to be but because we forced them to be.
QUEST: How concerned are -- on your side of the Atlantic, what you see now happening with the further unravelling in the Euro zone with Greece and the inability of the Europeans to get on top of this crisis?
FRANK: From a particular national standpoint, our economy has being doing well. The number obstacle to our continuing to do well and maybe even do better would be if there were some deterioration in Europe.
Now here lie, we were also saying there's a kind of vindication for us, many of us, particularly Democratic side have resisted the notion that yes we need to bring down the deficit but we need to right-away the notion that greater and greater austerity was called for.
We've resisted that in America, we've had a fight with some of Republicans, but on the whole we have had a more expansion as policy, partly through the Federal Reserve.
But also to some extent to fiscal policy than the Europeans have and I think we've been shown for instance -- I think that's one of the reasons why the American economy has performed so much better than the British economy.
QUEST: And indeed of course, we saw the new president in France, with a more growth than austerity plan but at some point Congressman, you're going to have to bite that deficit fullest, and as we know from the super commission which failed from the automatic cuts, which probably will not happen at the end of this year.
But the time for reckoning is coming on nigh.
FRANK: Well I believe that we've put some constraints on the entitlements including -- and by the way we talk about entitlement as if that was some bad boy, I think a woman who has been a waitress since she was 19 years old, she's been carrying heavy trails for 48 years.
I'd like her to be entitled to retire at 67, I don't think she should have to keep working into her 70s or her late 60s. But if we do some more with the thing, the other factor is this, as you see now in Europe, the short term austerity, heavy measures, exacerbate the deficit, because they slow down economic growth.
And to the extent that we could get economic growth going and we will do some military substantially, raise taxes on the wealthy and have some spending constraints elsewhere, we would have our deficits under control.
QUEST: Will you be buying facebook?
FRANK: Will I be buying facebook, no I don't think I use facebook. I guess there's a thing that I -- the notion of a friend whom I have never met, is an odd one to me, maybe I am old fashion. But holographic friends don't turn me on that much.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
QUEST: Now earlier we asked you, which currency has the motto, out of many, one printed on, the answer is the U.S. dollar and if you can't spot it on any of the dollars in your pocket because it's written in Latin -- I mean of course you knew that. The Latin "Annuit Coeptis Novus Ordo Seclorum", it's been on U.S. notes since 1795.
And here I have a "Novus Ordo Seclorum" I'm sure whether it's just on the $1, I have a $10 bill here, Jenny Harrison has probably got 50s and 100s in her wallet, would certainly notice.
Jenny, the World Weather Center.
JENNY HARRISON, AMS METEOROLOGIST: I am. And yes I know you would have a $10 note, everyone else just have to may do with $1 bill.
QUEST: Oh!
HARRISON: But hey, weather wise, people have more rain of course, up there in the north west of Europe across the U.K. It's been coming in from the north west, yet again.
As snow of course to the highlands of Scotland again but I want to take you first of all to central Europe and in particularly to this region of Switzerland.
And I'm showing you of course this valley and then the 2000 meter drop from the top of this mountain, this is why, have a look at this incredible video.
Just have a look at this. First you can't even see what you're looking at, is it dusk, is it water and then you begin to see the lands moving behind and it looks like a flood of land.
And this as you can see is a massive landslide, now began Monday night, continuing to Tuesday morning, and in total, more than 800 thousand cubic meters of rocks and ice have been on the move.
Just look at this, it is unbelievable. And the region is actually Bellinzona, and this is the valley that you can see, they're falling down into now.
And incredibly it's an industrial area and so what they did there, they were able to evacuate many people, there have being no reports of any significant damage either which is just phenomenal.
But just look at it, it's literally like water cascading down the side of these mountains or through this are being -- come back to me and just to show you again, just to give you an idea, this was the sort of landscape we're talking about so when the landslide stops, it is really not going to stop.
But you can see that this state we've had this rain more season snow across to the northwest, the rain has been coming in so much of western Europe.
We've got throttle systems bringing all of this very unsettled air and weather but it is moving back up again across central Europe and Richard, that is all I have time for, so enjoy the warm up.
QUEST: Oh yes, thank you very much. Jenny Harrison of World Weather Center.
I'm still trying to find the motto on the $1 bill that I've now managed to find and that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in -- on the whatever you're up to the hours ahead, hope it cross for double.
(COMMERCIAL BREAK)
(BEGIN VIDEOTAPE)
QUEST (on camera): From Stockholm in Sweden, this is MARKET PLACE EUROPE, I'm Richard Quest.
Doing business in today's global economy, 24/7 requires robust, strong communications and infrastructure. And one of the companies providing it is based right here. It's Ericson.
And on today's program, the chief executive talks about the network society.
Also Matthew Chance in Greece, meets one not just maker, but it's not taking the crisis lying down.
At the heart of all successful companies, is effective communication. And here in Sweden, they know something about that being a trading country whose economy rely so heavily on exports. One of the most important companies is Ericson.
The telecoms equipment maker that is now reaping the benefits of the network society.
(voice-over): The Swedish telecoms group Ericson, is the biggest supplier of mobile networks in the world. Providing equipment and services to both mobile and fixed network operators.
The company is in 180 countries and has more than a hundred thousand employees. 40 percent of the world's mobile traffic passes through Ericson's networks.
The company projects the booming sales of data hungry smart phones will result in mobile broadband reaching five billion subscribers by the middle of this decade.
HANS VESTBERG, PRESIDENT & CEO, ERICSON: It's clear when we look into it, this is a fifth technology revolution that its actual (INAUDIBLE). And we're in the sort of the inflation point where we're going to use the networks in a total different way than we plan from beginning.
And the planning from the beginning was voice services, now it's going to be for any industry, it could be healthcare, transport, logistics that are going to transform their businesses by using mobility broadband and the cloud.
Last year when we ended 2011, roughly 10 percent of the mobile subscribers had a smart phone, and as the prizes come down, we of course are going to penetrate -- must thread it down because it's now a device that can do much more than doing voice.
QUEST(on camera): Mobility broadband and the cloud, and in Europe, are we ahead, behind or just holding our own?
VESTBERG: I think that it's going to be different countries, but in general when we see the biggest push from consumers right now on four different sample, it's U.S. and Korea but on a 3G phones, I mean you obviously look one of the more readers that is strongest on 3G.
QUEST: But we shouldn't be 3G, we should be 4G.
VESTBERG: I think it's -- here we need to be also very observant because 3G, today only 35 percent of the world subscribers have 3G coverage.
So that's the reason, there's many still to get 3G and as we look for power in 3G still, and you can develop it, we are spending a lot of our $5 1/2 billion U.S. a year in research and development on 3G, even on 2G and 4G.
QUEST: How difficult is it for you in this economic environment to maintain an R&D of five billion at that sort of level? The temptation is - -
VESTBERG: Excellent question. I think the temptation is easy to cut down on that but I think that in a fast moving -- one of the most important technologies for the future if you start cutting it you will be irrelevant in five years.
So we hold on R&D investment because we think that is a huge for the company. That's why we are number one in all mobile infrastructure in the world.
QUEST: If we look at Spain, Portugal, Greece or their own, how concern are you -- and I am aware of course -- you come from Sweden, you're a non- Europe --
VESTBERG: Euro base.
QUEST: Euro base, but how worried are you of what's happening in Eurozone and within the debts of the union?
VESTBERG: I think that -- and a business leader, you're looking for these countries and there are important big countries. We have a hoard when softer revenues in so to hoard currency either euro and dollars, of course that is important for us to understand what is happening with it.
Then of course when I look into my infrastructure, say it's the Europe, that's when we ended 2011, it was a 8 percent to my total sales.
So of course, I'm still worried but it's a smaller piece of it but from an employee point of view, I have far more employees in Europe, for example in Sweden and other places.
QUEST: OK, but how worried then are you?
VESTBERG: I'm worried that that of course it's going to happen -- something to these markets but again there are more pressing needs.
I'm looking at one thing on delaying the more of using the mobile networks, new type of devices, and that's being happening.
QUEST: The use of the network, the use of the devices --
VESTBERG: New type of devices.
QUEST: So do you believe that ICT or even mobile technology is just about, just about and I'm not going to go all the way yet, just about countercyclical .
VESTBERG: No, I wouldn't say that, I think we are getting to a stage where it's so important for our life, for our business and for the society that ICT is there. The mobile and the broadband.
So I think it's long term, the fundamentals long term are very good for mobility and broadband. But of course short term, anything can happen.
QUEST: If I was to sit at your desk --
VESTBERG: Yeah.
QUEST: Which you might.
(LAUGHTER)
And I was to look at -- and that phone a bit was closed with solid tape on it of your problems, what will be your biggest problem on your desk at the moment?
VESTBERG: I think we have such hedonic challenges all the time, you want a whole -- I think we're on number one in all the areas we're playing from mobile infrastructure to services and billings et cetera.
It's to keep up that leadership, some motivate us every day to go to work, the 110,000 and very soon the customers of ours, to see that we continue to be number one.
I mean that's what why I get to office every day, with my motivation or the team around.
QUEST: That's Hans Vestberg, the chief executive of Ericson, one of Sweden's most important companies. Coming up after the break, the Greek company that is bouncing with optimism and it's finding opportunity in the crisis.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
QUEST: Welcome back to MARKET PLACE EUROPE.
The financial crisis in Greece seemingly is going from bad to worse as the recession continues to bite. For those in business, now is the chance to prove you know what you are doing.
As Matthew Chance reports, there's a mattress maker that's taking on nightmare scenario and finding some dream opportunities.
(BEGIN VIDEOTAPE)
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT(voice-over): There're some things in Greece untouched by economic crisis. It's beauty, it's nature. And one uniquely Greek company, nestled in this picturesque northern mountains.
PAVLOS EVMORFIDIS, FOUNDER COCO-MAT: I didn't want to take the normal way and I decided to make something different.
CHANCE: Pavlos Evmorfidis is the co-founder of Coco-mat. A family business making high quality beds and mattresses out of natural Greek materials and imbued with Greek philosophy.
EVMORFIDIS: Socrates, Plato, Aristotle, they used to sleep on mattresses made out of cotton, made of seaweed, made out of -- and aromatherapy.
So the principle is the same. We follow the tradition of all these wise people and nowadays we produce non-metal beds and mattresses. Sleeping --
If I go up here, look.
CHANCE: Yes so it doesn't touch the --
EVMORFIDIS: It doesn't touch --
CHANCE: The ground --
EVMORFIDIS: Exactly.
CHANCE (on camera): The unique design behind Coco-Mat has been a commercial success even amid Greece's economic down-turn, they've opened three new stores in Athens and another in New York. A ray of hope for Greece business, at a time when economic despair.
The company says it now has a presence in nine countries, with the workforce of 220 employees and last year it had a global turnover of over $75 million. It is really refreshing to come to a Greek company that's so clearly swimming against the country's economic tide.
Crisis or not, Coco-Mat says it will continue to make these great natural products like mattresses that people like and that people buy. It's a simple business strategy, but it's one of the names the owners can't quite literally sleep easy.
EVMORFIDIS: These are yours.
CHANCE (voice-over): In the factory grounds, Pavlos shows us his cherry trees. Too many Greeks he says have forgotten what makes their own country truly wealthy.
EVMORFIDIS: Fruits, happiness, sun, what do you need more in life. Everything is up here. I believe that Greeks like me, they should listen to God, they should listen to trees, to the sea and not to computers, to solution and see that much going where you are based, to see what's going on.
And I really mean it because nature is waiting for us, with a lot of chances, with a lot of possibilities, with a lot of solutions.
CHANCE: And as Greece in turmoil takes stock of its economic path, firms like Coco-Mat, tapping into the country's natural riches, may just offer a successful way ahead.
(END VIDEOTAPE)
QUEST: Matthew Chance with the mattress maker, offering firm support for the Greek economy. And that's MARKET PLACE EUROPE for this week, I'm Richard Quest in the Swedish capital Stockholm.
Whatever market you're in, I hope it's profitable and I'll see you next week.
END
