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NY Fed Pres.: "Compelling" Case for Rate Rise; NY Fed President Graded Growth Forecast; Dow Closes Lower, Winning Streak Over; SpaceX to Send Passengers on Moon Loop; Security CEO Warns of Cybercrime Risk. Aired 4-5p ET
Aired February 28, 2017 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN ANCHOR: Closing bell on Wall Street. Tried, but couldn't make it. So, we match, but didn't beat the record of 1987, in
terms of record highs, consecutive record highs. But come on, sir, I think we would just call that a firm gavel to bring trading to a close.
The Dow is down for the first time in 13 days and it is Tuesday, it's February, the 28th. In this program, my exclusive interview with the head
of the New York Federal Reserve. William Dudley tells me the case for raising rates has gotten a lot more compelling.
Meanwhile, President Trump prepares to put his pitch to the nation. And William Dudley tells me what he thinks of this president -- this president
tells me what he thinks of the president's growth forecasts.
And does the moon look even closer tonight? Elon Musk plans to send tourists to space. An astronaut tells me why humans should return to the
moon.
I'm Richard Quest live in the world's financial capital, where I mean business.
Good evening. So, the market didn't make it into another record, but nonetheless, tonight, the president of the New York Fed says the animal
spirit in the market have been awakened. In an exclusive interview on the day that Donald Trump addresses Congress, William Dudley tells me the risks
in the U.S. economy are now pointing to the upside, and it all happens amid historic market rallies, with encouraging economic growth and a U.S.
president that's about to announce a raft of fiscal stimuli. Bill Dudley now sees an interest rate rise sooner rather than later.
But what on earth happened in the markets today? Let me show you how the day progressed. The volume -- first of all, it was the -- it's the end of
the month. So, there was a lot of volatility toward the close. The market opened down. We only got that smidgen of green. Just look at it there.
Just after about ten past 11:00 this morning. Otherwise, it really was down throughout the course of the entire session. The down volume easily
outweighing the up volume over the course of the day. But nevertheless, Bill Dudley says, animal spirits have been unleashed, since Donald Trump's
election. And that the White House's long-term goal of growth of 3 to 4 percent, he describes it as achievable under the right conditions.
Also, now, with confidence rising and markets rallying, President Dudley says the case for an interest rate rise has become more compelling. You'll
remember, the Fed has described the next move as coming fairly soon. We needed to know what that actually meant. I sat down and had this exclusive
interview with the Fed president, Dudley, this morning. I asked him how closely the Fed was watching this stock market and the resurgence in the
age of Donald Trump.
(BEGIN VIDEOTAPE)
WILLIAM DUDLEY, PRESIDENT, NEW YORK FEDERAL RESERVE: There's no question that animal spirits have been unleashed a bit, post the election. Stock
market's up a lot. Household and business confidence has increased significantly. There's a survey of small businesses that showed a very
large increase in December, and have sustained that increase in January. There's no question that sentiment has improved quite markedly post the
election.
QUEST: And that animal spirit, whatever -- that market influence, it transmits itself throughout the total economy, doesn't it?
DUDLEY: Well, we would expect to have some consequence for economic activity. But, you know, we'll have to see if that actually -- one, if the
confidence is sustained, and whether it actually materializes in terms of increases in spending. I would say, so far, we haven't seen much effect of
the improvement in confidence actually leading into greater spending. I think the economy is still on about a 2 percent GDP track, which is about
what it's been over the last year or so.
QUEST: The last minutes of the FOMC use the phrase, "fairly soon" for -- now, you know, we all know what fairly soon means. If you and I are going
to have a cup of coffee, we'll have it fairly soon. We could meet for dinner fairly soon. What does fairly soon mean in the context of the
minutes?
DUDLEY: I think it means what it says. It doesn't say it's a week, a month, a couple months, fairly soon means in the relatively near future. I
think the key thing in terms of thinking about monetary policy is what have we basically communicated to people in the markets? We've basically been
saying, if the economy continues on the trajectory it's on, slightly above trend growth, naturally rising inflation, we're going to continue to remove
monetary policy accommodation.
[16:05:00] Let's look at what we've actually gotten. Seems to me that most of the data we've seen over the last couple of months is very much
consistent with the economy continuing to grow at an above-trend pace, job gains remain pretty sturdy, inflation has drifted up a little bit as energy
prices have increased. We're very much on the trajectory that we said -- we thought we would be on. And we said if we were on that trajectory,
we're going to gradually remove accommodation.
What else have we seen? We've also seen things that should make us even more confident that this is going to continue in the future. After the
election, we've seen very large increases in household and business confidence. We've seen very buoyant financial markets. The stock market's
up, credit spreads are narrower, and we have the expectation that fiscal policy will probably move in a more stimulative direction. So, put it all
together, I think the case for monetary policy tightening has become a lot more compelling.
QUEST: And that's obviously fairly soon. Which implies sooner rather than later?
DUDLEY: I think that's fair.
QUEST: There's one new wrinkle into this, of course, which is that the role now of fiscal policy. It's cut -- a large government increase in
spending is coming, we know it's coming. The president is going to talk about it tonight. How does the Fed factor in what you know is coming, but
is not here yet?
DUDLEY: Well, it's hard to actually put it into your forecast yet, because we don't know what it is, how big it is, or when it's actually going to hit
the economy. Other than that, we have it completely nailed down. But we do know, it's very likely that fiscal policy is going to move in a more
stimulative direction. What that says to me is that the risks to the outlook are now going to tilt to the upside. While I haven't really built
entitle my GDP forecast, when I think about the balance of risk up or down in terms of economic activity, I think the fiscal side tends to push things
to -- the risk, to the upside.
QUEST: But you can't wait for it to happen, can you? I mean, the whole question of monetary lag. I know that you've got to think about many of
these policies not coming into force until 2018. But you have to plan now.
DUDLEY: Well, look, I think monetary policies are pursued tonight basis of economic outlook. Fiscal policy affects the trajectory of GDP and
employment and inflation. That's a factor weighing on us. But the fact that we have so little specifics yet about what's going to happen, and it's
got to wind its way through Congress, means I don't put a lot of weight on it in terms of modal forecast, I just think it makes the risks of the
outlook a little bit tilted to the upside at this point.
QUEST: And from what you've heard -- and I'll accept that the detail is few and far between -- from what you've heard, are the sort of spending
fiscal plans that you're hearing about, are they the right sort in terms of productivity gains, that the Fed can live with?
DUDLEY: Well, I think we're going to have to see. Obviously, to the extent that you, you know, reduce burden of regulation, that should lift
productivity growth. To the extent that you pursue greater infrastructure spending, that should lift productivity growth. So, those are the aspects
of changes on the fiscal side that would actually be supportive to stronger economic activity.
QUEST: But, for instance, you know, I'm going to throw the numbers that we've seen. A 50 billion on defense spending that we hear rumored -- well,
we don't hear rumors. The president said that yesterday, 50-odd-billion on defense. That the sort of thing that you find leads to greater
productivity as opposed to just sheer consumption?
DUDLEY: Well, I wouldn't think that defense spending would have a huge benefit to productivity growth, but obviously, we obviously have to spend
money on the military to keep the country safe. Also, if you're increasing spending on military, but cutting spending on the discretionary and
domestic programs, the net effect may not be very powerful in terms of supporting the economy.
QUEST: Into this difficult area, we have the financial markets. They are on a tear. You can't wait for the fiscal plans completely, but your there
next year. You have to take into account what's happening in the markets at the moment, don't you?
DUDLEY: Well, financial conditions are very important in terms of how they influence economic activity. So, if the stock market's up, credit spreads
are narrowing, financial conditions are more buoyant, that makes -- that's going to tend to make the economy stronger. The important thing for us,
though, is not to overreact to every little movement in the stock market. It's got to be something that lasts for a period of time, for it actually
to affect household and business behavior.
So, if the stock market goes up and then goes right back down, it's not going to have much consequences for the economic outlook. But if it goes
up and stays up, then that's going to support, presumably, consumption through higher household wealth.
(END VIDEOTAPE)
[16:10:00] QUEST: A day at the New York Fed. And later in the hour, President Dudley tells me that the U.S. president's target of 3 percent
growth is possible, but only if certain conditions are met.
It's unlucky number 13 for the Dow, after 12 straight days of closing highs, the Dow has finally fallen, as we said at the beginning of the
program. Look, 1987 was the last time of record highs in a row, 12. We matched, we didn't beat. We certainly didn't beat the 13 consecutive gains
in a row. But, if you put this into perspective, it is -- so this is the way the month is. The gold stars, of course, show those -- now, we could
have done it, perhaps we'd hoped that we could have, but we didn't. So overall, it's the one, two -- it's the fourth fall of this month. And you
know, this is an impressive performance. The Dow gains is still almost a thousand points, just in the month of February. Jonathan Corpina is from
Meridian Equity Partners on the floor of the exchange and joins me now. Jonathan, Jonathan, what happened to my record?
JONATHAN CORPINA, SENIOR MANAGING PARTNER, MERIDIAN EQUITY PARTNERS: Listen. We're not going to have green screens every single day. At some
point, this market run is going to have to stop and take a breather. It's very healthy for our markets. What I'm happy to see is that the breather
we took today wasn't a big downturn in the market. There's been no fear or any panic as this market continues to go higher, as to when is this really
going to end. It seems like the market really just took a breather today, and rightfully so.
We've got President Trump speaking tonight. It's a speech that I think everyone's been waiting to hear, anticipating what's going to be said
coming out of Washington. So, investors today had a reason to really just take a seat on the sidelines and let the market do its own thing.
QUEST: OK, but are we making too much of tonight's speech by the president? Because, you know, I know you -- I know the market investors
want details. You want -- you basically want to know that the expectations upon which this rally is based are going to come to fruition.
CORPINA: Right. So, I think what we want is details, and what we want is transparency. What we're going to get is a very structured speech. And as
we've seen before, with President Trump, he speaks and he reads the important monitors and goes into his pattern. If he ever glides off of
that, that's times when sometimes he goes off-script and we do get more information. I think in a normal circumstance, we would pretty much have a
blueprint of what was going to be said tonight, and we obviously know the topics that they're going to be focused on. But the chance he might go
off-script, I think that's what investors are really looking forward to.
QUEST: And if we take -- I mean, I don't know whether you're able to hear President Dudley -- William Dudley of the New York Fed, just before we came
to you, Bill Dudley says animal spirits have been unleashed in the market. Is he right?
CORPINA: That's quite descriptive of what we've been seeing. I think since November, and since the surprise in the election, there's been a lot
of money that was sitting on the sidelines that was forced to come into the market, just because the market was rallying higher, and we were getting
towards the end of the year. As we were getting through this first quarter now we have been seen no end in sight as this market continues to move
higher, and people are missing out on the rally. I think you're starting to see some of this money continue to come back in.
QUEST: Why do I get the feeling, any moment now, you or somebody is going to suggest we're heading to a buy on the dips moment?
CORPINA: Because that's natural. And that's how our markets move. We don't always move in one direction. Overall, conceptually, if you think
our economy is getting better --
QUEST: Is it a buy on the dips? If we see a dip, whether it's o1, 2, 5, 6 percent, whatever the dip is, that you're right is surely coming, is that a
buy moment?
CORPINA: Absolutely. I think investors are confident that this market the going to move higher, yet they get scared of prices sometimes. So, when
the market does pull back, those are your opportunities.
QUEST: Jonathan, good to see you, sir. Being on "QUEST EXPRESS", thank you.
CORPINA: Always a pleasure. Thank you.
QUEST: To Europe, on the other side of the Atlantic, where the markets were in a holding pattern and they closed marginally higher. You know,
it's the same story. Look at the relatively small gains, wanting to hear what Donald Trump is going to say to Congress, particularly when it comes
to deregulation and tax reform. That's what this is all about. We perhaps can't put too much emphasis on this speech that the president is preparing
and is preparing for a political theater in Washington later tonight. It will be his first address to the U.S. Congress, with the goal of renewing
the American spirit and the significance, the significance, of course, is that president Trump needs Congress if he's going to get his plans passed.
[16:15:04] QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: It's an important national event in the United States tonight. Some might see it as a sales pitch before Congress and to the American
people. Just a few hours from now -- just about five hours from now, President Trump will make his first prime-time address on Capitol Hill.
It's an address to Congress. He's facing a public that's giving him currently low marks for his first month in office. He needs Congress,
absolutely, he needs it. Congress has the power of the purse, to fulfill the campaign promises he's made. So, we are expecting to hear more details
on the government's budget priorities. Because after all, Congress holds the purse.
Mr. Trump is clearly the crafter of the blueprint and says he would give himself an "a" for achievement and a "C" for messaging. Now, remember,
let's go back to the promises that was in the contract with the American voter which he did at the beginning of -- before he was elected. If I
remember how to do this, I think I touch this one first. Now, he said he was going to build a wall, well, he's most definitely -- he's started that
process. They've asked for expressions of interest and designs.
Restricting refugees, absolutely, he started to do that. He's made it clear, he's started the process of renegotiating NAFTA. Absolutely, he's
withdrawn from TPP. The restart of oil pipelines, yes. He's done that. He's labeling China a currency manipulator. He said or he's thinking about
that, but he hasn't done that yet. Repeal and replace Obamacare. We're going to give that one, absolutely, it's on the way. But it's not there by
any stretch.
Lower taxes, and I'm sorry, that -- we haven't heard anything on that. Cut back on regulation, rebuild infrastructure, nothing's happened there yet.
Nominate Supreme Court Justice. We've got that one. Defeat ISIS. An interesting one there. I'm looking forward to asking David Chalian about
that, because he's asked for plans about defeating ISIS. So, I think better opinions suggest we will have to -- have a closer look at that,
while I nip around and join Rana and David Chalian to talk to me.
Good to see you, Rana.
RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Hello, nice to see you.
QUEST: David Chalian as well with me. Let's start with you, Rana. You saw the economics, that's not a bad list.
FOROOHAR: It's not.
QUEST: It's progress.
FOROOHAR: Absolutely. And that goes to, you know, one of the two views is that, look, this guy is a doer. This is a doer president. He's come in,
he's accomplished two-thirds of what he said he was going to do and it's only been a few weeks. You've got to like that if you're a Trump
supporter. On the other hand, a lot of people say, he's sewing chaos. There is dissent within the ranks. Nobody knows what's going to happen
next.
[16:20:00] QUEST: No, David Chalian, that's overstating it, isn't it? Absolutely, you're getting hot under the collar.
FOROOHAR: I don't have a collar.
QUEST: If you were wearing a collar, you would be hot under it. If you're going to have this level of change, you're going to end up with a little
bit of dislocation.
DAVID CHALIAN, CNN POLITICAL DIRECTOR: Yes, one person's dislocation, another person's chaos. There's no doubt about that, but you can also
easily imagine, you could look at that board, Richard, and you can easily imagine some of those things may not come to fruition, because as you noted
at the top, a lot of that work has to go through Congress. And that's the part that hasn't really happened yet. That's why tonight, and his big
address tonight is so important, because, yes, he's talking to the American people writ large, there's no doubt, try to address that large swath of
America that's not with him yet, in addition to his base. But there's also the people in the room and they're so hungry for him to set the course.
He's not one for specifics as we know. So, I doubt there's going to be, here's what I want in the bill kind of language.
FOROOHAR: He's also done bait and switch, every time he's said, I'm going to give this kind of a speech, it's turned out to be another kind of a
speech. I'm not counting on this to be a traditional kind of -- you know, we're going to get a lot of policy details kind of a speech.
QUEST: I think you two are being too dog in the manger about what he's done. I mean, in the sense that -- David -- I'll come to you. You're not
going to -- start with David.
FOROOHAR: Chomping at the bit.
QUEST: David, look, Congress, I agree, Obamacare is a big one that's going to be really tricky, but lowering taxes, cutting back on regulation,
rebuilding infrastructure, I can't see Congress frustrating him on those when he clearly was elected on that mandate.
CHALIAN: Well, I don't know -- that tax reform battle is going to be a long one, because, as you know, even Republicans are not all yet on the
same page of exactly how to go about doing that. The goal of reducing taxes, certainly, but getting there. Especially because they've said,
they're going to sequence that after Obamacare and Obamacare repeal and replace is nowhere yet, that's a bit far away now. The markets like the
idea that right now, Richard, as you know better than anyone, but in reality, if that tax cut gets stuck behind Obamacare repeal and replace, it
could be a long time. I don't know how long the markets are willing to believe it will happen.
FOROOHAR: I actually agree that the tax issue is the crucial thing. That's what everybody wants to hear about. And in particular, is the
president going to be a tax cutter or a tax reformer? If he's just going to be a tax cutter, then the math of what he's proposing in his budget
actually doesn't add up. You've got to do tax reform, get rid of some of the loopholes. We're not hearing about that yet.
QUEST: All right, both of you stay exactly where you are. I haven't finished with either of you just yet, because President Trump says a better
economy will pay for his increased defense spending.
(BEGIN VIDEO CLIP)
REPORTER: If you cut all the money from EPA and all the money from state, that's about $50 billion.
DONALD TRUMP, U.S. PRESIDENT: Well, I think the money is going to come from a revved-up economy. I mean, you look at the kind of numbers we're
doing, we will probably GDP of a little more than 1 percent. And if I can get that up to 3, or maybe more, we have a whole different ball game. It's
a whole different ball game. And that's what we're looking to do.
(END VIDEO CLIP)
QUEST: I think he was being a little pessimistic there. The actual latest numbers show 1.6 percent for 2016. 1.9 percent in the fourth quarter, on
GDP. So, you know --
FOROOHAR: Let's just talk about what GDP is. GDP is demographics plus productivity. It's the amount of people you have working and how
productive they are. Trump's policies are not increasing either of those things. You know, cutting immigration, that's one of our key things that
we have as a competitive advantage in this country. Productivity is stagnant. There's nothing happening on main street that's anything
different than what it was before in the 2 percent economy. I don't see how we get up to three or four, certainly not 4.
QUEST: We'll hear from professor -- from President Dudley on the 3 to 4 percent. David, the mood in Washington. I mean, the president described
it as a finely tuned machine, or I think those were -- those sort of words, I think he used.
CHALIAN: That's how he described his own administration.
QUEST: Yes, yes. Is it your feeling from what you know on the inside that things are bedding down to a little bit more, if not normality, at least,
calmness?
CHALIAN: I can say, Richard, that talking to a lot of Republicans on The Hill, they hope so, but they don't know. It's that uncertainty of how
unpredictable President Trump has been. There's still a lot of staffing up that needs to happen. So, every day, they are quite nervous, sort of on
their toes as to where the bouncing ball is going to go, of wherever Trump is interested in at the moment. They hope that tonight is the sort of
beginning of him finding a rhythm and pointing a direction for them to sort get behind and cheerlead for.
[16:25:04] QUEST: We'll need you tomorrow to help us understand whether he did what he need to do. Thank you, David. Thank you.
CHALIAN: Take care.
QUEST: And you.
FOROOHAR: Thank you.
QUEST: Enjoy the speech tonight.
FOROOHAR: I will do.
QUEST: It's a big day for the president and it's also a big day for the Trump organization. Now this new hotel in Canada, the Trump name is, as
you can imagine, plastered across the outside. But forget what's on the front of the hotel, and there I think is Donald Jr. At the front, there.
Someone else is calling the shots. As John Defterios reports.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNNMONEY EMERGING MARKETS EDITOR (voice-over): It's the Trump name of the brand-new tower in Vancouver, but the building belongs to
37-year-old Malaysian property developer, Joo Kim Tiah. He says pitching himself to the Trump family felt like a scene out of a certain reality TV
show.
JOO KIM TIAH, CEO, HOLBORN GROUP: It was quite similar to "The Apprentice," where I had to go to the big board room.
DEFTERIOS: Tiah hit it off with Donald Jr. and impressed Ivanka with his vision. And a final meeting with Donald Trump sealed the deal.
TIAH: I would like to officially announce the Trump international Hotel and Tower in Vancouver.
DEFTERIOS: Tiah and the younger Trumps found common ground as the second generation joining the family business. His father, Tony Tiah made his
fortune in Malaysia starting a financial services firm before branching out into property. But in 2002, he was convicted of giving false information
to the Kuala Lumpur Stock Exchange and fined 3 million ringgits, or $675,000.
Joo Kim Tiah, is now the CEO of the property arm, TA Global in Malaysia and Holborn in Canada. Raising his profile has also made him a bigger target,
as Trump Tower has become a flashpoint for protesters and local officials in Vancouver. But from a business standpoint, he's passed his first big
test. And one that's come with some unexpected political connections and controversies. John Defterios, CNNMoney, Beijing.
(END VIDEOTAPE)
QUEST: As we continue on QUEST MEANS BUSINESS, a second part of our exclusive interview with the president of the New York Federal Reserve,
Bill Dudley, who tells me why Trump's growth targets are achievable at 3 to 4 percent.
(COMMERCIAL BREAK)
[16:30:00] QUEST: Hello. I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. When William Dudley grades President Trump's
growth forecasts, and the head of Kaspersky Labs tells me the risk of cybercrime can't be underestimated. We'll have all of that after we've had
the news, because on this network, this is CNN, and here the news always comes first.
Well, it's a time and a wake and a break. The winning streak on Wall Street is over for a moment. The Dow fell 25 points ending its streak of
12 record closes. Speaking to me exclusively on QUEST MEANS BUSINESS, the president of the New York Fed said animal spirits have nevertheless been
unleashed on the markets since Donald Trump's election. We'll hear more from William Dudley in just a moment.
And a few hours from now, Donald Trump will address a joint session of the U.S. Congress for the first time since taking office. It's Mr. Trump's big
opportunity to build support for his agenda after what some see as a chaotic first five weeks in office. Mr. Trump needs lawmakers' support to
prove he can deliver on his campaign promises.
For the seventh time, Russia has blocked a U.N. security council resolution aimed at Syria. The Russians and Chinese vetoed a measure that
would have sanctioned Syria for its alleged use of chemical weapons.
The billionaire retailer, Sir Phillip Green, has agreed to a cash settlement by paying $415 million to the British authorities to safeguard
the pensions of his former employees at the department store BHS. Sir Phillip reportedly sold the business for one pound before it entered into
bankruptcy one year later.
President Trump said today he needs strong economic growth to help pay for the needs of his spending plans. So far, new numbers revealed today show
the U.S. economy growing at just under 1.9 percent in the fourth quarter. For the whole of 2016, the U.S. grew by 1.6 percent. That's considerably
lower than the 3 to 4 percent long-term growth that Mr. Trump is seeking. In our exclusive interview, I asked the New York Federal Reserve President,
Bill Dudley, if 3 to 4 percent growth is realistic in the Trump economy.
(BEGIN VIDEOTAPE)
DUDLEY: I would say, it's possible. You know, we had productivity growth back in the late 1990s, when growth was averaging over 2.5 percent growth a
year. If we can get back to that level of productivity growth, I think 3 percent plus growth would actually be achievable. That's a pretty high
standard to reach for.
QUEST: You're no longer the only game in town, to use the phrase. Are you? For the last five years, six years, seven years. You, not you,
personally, but you and your colleagues, central bankers around the world have been saying, hey, come on, we can't do this on our own. You're
requiring us to do all the heavy lifting. Well guess what, you've now got a bit of help in Washington, haven't you?
DUDLEY: I think it's correct that monetary policy has had to do most of the heavy lifting over most of the last few years. And I think that's
unfortunate, because monetary policy is a blunt tool. Monetary policy can't allocate resources across the economy. Monetary policy can't do much
to affect productivity growth. So, I think it's good the burden will be more broadly shared.
QUEST: On the question of the Fed and the leadership of the Fed, there's going to be -- there's always two seats. There's a third one about to
become vacant. There's, obviously, the question of the chair and vice chair, whether they stay on the board after their terms in office come to
an end. Entirely, constitutionally, correctly, this president is going to be able to completely reform the board of the Fed.
DUDLEY: Well, the president is going to obviously be able to make some appointments to the board of governors. Of course, remember, the federal
committee also consists of Federal Reserve bank presidents. And more importantly than that, the Fed's mandate is set by Congress. Congress
wants the Fed to achieve maximum sustainable employment and price stability. I would expect whoever gets named to the Federal Reserve is
going to try to carry out that task set to the Fed by Congress.
QUEST: Oh, sir, you know we talk about doves and we talk about hawks, when we talk about Fed governors.
DUDLEY: I've heard that.
QUEST: And therefore, a new president can, my word, not yours, manipulate the board.
DUDLEY: I think that -- I don't expect that. I think that Congress has been very clear about what the Fed's objectives are and I think people
there are named to the board of governors and people who serve on the FOMC, try to conduct monetary policy consistent with those goals. A maximum,
sustainable employment and price stability. And right now, you would have to say we're doing pretty well in those objectives. We're pretty close to
full employment and were pretty close to our 2 percent inflation objective. So, it's not clear why you would want to change any of that.
QUEST: What is it about this job that you enjoy? I mean, if you think about it, you're sitting at the top of the financial system, you're the
president of the New York Fed, which, of course, is responsible for the monetary policy, the open markets policies of the federal government, the
largest bond market. What is it that you enjoy about it?
[16:35:10] DUDLEY: Well, I mean, I think, how I think about it, is I spend a long career in the financial industry, and I learned a lot about
financial markets. I learned a lot about the macro economy. And to bring that experience to bear in the conduct of monetary policy to try to get
good outcomes for the American people, that's challenging, but also rewarding, when we actually, you know, are close to achieving our
objectives.
QUEST: But has there been moment, because you were here during the crisis of course.
DUDLEY: Yes, I was.
QUEST: Has there been a moment where you suddenly say, oh, I never realized it was difficult to do that.
DUDLEY: I saw many things during the financial crisis I never expected to see. I think when you're on the inside, I think what you realize is that
you are constrained by the fact that the FOMC is a committee. It consists of many different members and so, even if you're seeing something, you have
to convince your colleagues what you're seeing is actually important. It's really important to bring along your colleagues so you can rise to the
occasion of do what's necessary to actually stabilize the economy.
I think one of the things that I think I brought to bear during the crisis is I know a lot about financial markets, and the people within these
institutions know a lot about the financial market plumbing. I think that really helped the New York Fed contribute to the Fed's response during the
financial crisis.
QUEST: Did you ever fear that it was going to get away from you? That it was going -- that this train was going to run out of control?
DUDLEY: Absolutely. But it didn't.
QUEST: But you did?
DUDLEY: I definitely worried. There were days in the fall of 2008 that you really didn't know exactly what's going to happen. That's why we
pulled out everything. All the tools at our disposal to help support the economy, because we were very, very close to a great depression.
QUEST: And today?
DUDLEY: Today I think we're in much better shape. I think that the regulatory changes that were put in place post the financial crisis have
made the banking system of the United States a lot more secure. Higher capital, higher liquidity, a better means of resolving large institutions,
should they get in trouble. We've addressed some of the structural weaknesses in the financial system, for example, money markets. Money
market mutual fund reform.
QUEST: But you don't want those reforms to be taken away? Dodd/Frank?
DUDLEY: Look, I think it's fair that we want to take a look at regulation and make sure we've got the cost/benefit right. But if you look at the
U.S. banking system today, is it a good thing that we have more capital? That we have more liquidity? Absolutely. We don't want to roll that back,
because we saw in the financial crisis what happens to households and businesses if we don't have a financial system that can do what it needs to
do in terms of intermediating flows of credit between savers and borrowers.
We really had a fundamental breakdown of our financial system in the fall of 2008. And I don't want to ever go back there. Therefore, we certainly
need to keep the things like capital, like liquidity, like resolution in place, so we don't ever have a financial crisis like that again. That was
the worst, you know, economic environment of my lifetime. It was certainly the worst financial crisis of my lifetime. And I hope to never see one
like that again.
(END VIDEOTAPE)
QUEST: Fascinating. President William Dudley of the New York Fed. The newsletter of course, talks about what he was saying and puts it all into
perspective. Now, you really do or should, or perhaps, might, sign up for the QUEST MEANS BUSINESS newsletter. It arrives in your mailbox just after
New York closes. It's got the best of the day. We tell you what's happened. We tell you what's likely to happen tomorrow, and it's all ahead
of the Asia open. CNNMoney.com/Quest. Please subscribe. And my email is also there.
In our interview with Bill Dudley, he told me that cybersecurity is one of the most significant threats that the Fed faces. After the break, a top
security expert reveals international borders are hampering the fight against the hackers.
And behind bars, facing trial. A remarkable web of political corruption that's entangled the heir apparent of South Korea's Samsung.
[16:40:00] (COMMERCIAL BREAK)
QUEST: Well, hackers may have meddled in the U.S. elections. A leader and cybercrime expert is now telling us that financial hacking and
infrastructure hacking poses the biggest and most significant threats. From the World Mobile Congress in Barcelona, the chief executive to have
the security firm Kaspersky Lab told me earlier that looking at the risk of hacking, particularly as it relates to infrastructure, it simply can't be
underestimated.
(BEGIN VIDEOTAPE)
EUGENE KASPERSKY, CEO, KASPERSKY LAB: The effects on the financial services is one of the most important issues in cyberspace. I don't know
how many, hundreds of thousands, maybe more, cyber criminals from very different nations attacking the financial services. And I think that the
intra based owner existing technologies, which we use in a computer system and in smartphones, it's not possible to fix the problem by technical, but
by the security. The cyber criminals, they find a way out how to attack anyway.
And also, this lack of informational calculation. Unfortunately, the cyber police departments, there's still an operations in a different lens.
We still have a lot of things to improve on the international level. They're cyber criminals. They live in cyberspace, which doesn't have
borders. And the police departments, law enforcement, in some cases, they are limited with the borders.
QUEST: What do we need to do when it comes to cybercrime, cyber criminals, financial cybercrime. Is it just a question of more money and more
resources? What do we need to do?
KASPERSKY: To fight with the cybercrime, especially attacks on the financial services, the resources and money, it's not enough. They have to
be there -- the political will. They have to be the politicians, the nations to talk to each other. And actually, it's -- the good news is that
there is a cooperation with other nations, but it's not enough. The very first international conference on the cybercrime, it happened in London in
2011. The London Cyberspace Conference. And there are many things discussed on the international level, how to fight, how to cooperate
against cybercrime. Unfortunately, not everything worked. Unfortunately, it's still a situation that's far from perfect. So, there's a lot of
things must be done on there, not in the technologies, not in the products, but also in the international corporation.
QUEST: You're not optimistic, are you, about our ability to handle cybercrime. In fact, if I hear you correctly, you're quite pessimistic.
KASPERSKY: Well, I am, in a cybersecurity business for 28 years. So, I am a little bit paranoid. It's like a professional disease. I do understand
how dangerous the environment is. I see what the different types of attacks on individuals, on businesses, on critical infrastructure. I see
how vulnerable we are. So, I see many bad news. But, I'm still optimistic. We will survive.
(END VIDEOTAPE)
QUEST: I'm very grateful we are, too! We will survive. Isn't there a song by that title? The most high-profile business leader in South Korea is
heading for trial. The de facto chief of Samsung is accused of bribery and perjury. A part of a huge corruption scandal in the country. Now that the
scandal extends from the boardrooms to the top tiers of government. CNN's Paula Hancocks is our correspondent in Seoul.
(BEGIN VIDEOTAPE)
[16:45:00] PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT (voice-over): One of the richest and most powerful men in South Korea is behind bars
awaiting trial. Lee Jae-yong, the head of Samsung, charged with bribery, embezzlement and other charges. Embezzlement alone could mean a minimum of
five years in prison if found guilty. Four other company executives also indicted.
Prosecutors alleged that Lee gave tens of millions of dollars to secure government support of a merger he was planning that would help cement his
ascension to power, an accusation Lee denies. A blow to the ongoing transition from father to son. Father, Lee Kun-hee suffered a heart attack
in 2014 and is in ill health. An internal reshuffle could mean the impact to operational side of things could be minimal.
GEOFFREY CAIN, JOURNALIST & AUTHOR: It's just a company that's so big and so spread out across all these different groups and product lines and
affiliates that it can really get anything done with or without a leader up top.
HANCOCKS: It's part of a massive corruption investigation in South Korea, that's led to the impeachment of President Park Geun-hye in December. Park
has been accused of sharing confidential information with a close and unelected confidant. Choi Soon-sil's trial is already underway. She's
been charged with abuse of power, coercion and fraud, charges she denies.
Special prosecutors saying Tuesday they would pass evidence on Park's alleged wrongdoing to state prosecutors to investigate her as a bribery
suspect.
(on camera): There is a sense that this corruption scandal is nearing an end. The special prosecutors will release the results of their two-month-
long investigation on March 6th. And the constitutional court will decide whether the impeachment of President Park Geun-hye should be upheld or
overturned within weeks. Paula Hancocks, CNN, Seoul.
(END VIDEOTAPE)
QUEST: And when we return, going to the moon as a tourist, or at least going around the moon. We told you about it. We'll discuss more about who
would pay the money and what you get for your money. Is it really worth going all the way just to go around the moon and back?
(COMMERCIAL BREAK)
QUEST: Ah, the moon, the moon, the glorious moon. It may feel a little closer to you and I tonight. Elon Musk has paid tribute to NASA helping
SpaceX offer a trip around the moon for two tourists. Now, no human has traveled past low earth orbit in some 45 years. Doesn't it look just
absolutely glorious, just magical, where it stands. What Musk is planning with SpaceX and his rocket is that these tourists will go up and they are
tourists. They're not trained astronauts yet, and what's more, the capsule and rocket that SpaceX planned to use, well, they haven't even flown yet.
[16:50:04] So, you may be asking, who would want to strap themselves to something that's not even been built, let alone tried. Fly up to a place
where nobody's been to for 45 years. Go around it a couple of times, and then come all the way back. When you put it like that, it's not exactly
the most inviting of opportunities. Well, there are some people who will pay a large sum of money. One who didn't need to pay. He actually got
paid, Clayton Anderson is a former NASA astronaut who completed two missions to the International Space Station and he joins me now from
Houston, Texas. Sir, honored, honored to have you in the program tonight. And thank you for taking the time to join us.
CLAYTON ANDERSON, FORMER NASA ASTRONAUT: The pleasure's mine, Richard. Thanks for having me.
QUEST: Now, you heard my introduction, and maybe I was just being partially facetious, but you get my point. You get my point. I mean, why
would somebody -- well, first of all, what do you think of the idea of taking two people, putting them on a rocket, whether tested or otherwise,
sending her up, just because they can go around the moon twice to come all the way back?
ANDERSON: I would say it's probably bold. It's gotten a lot of people excited and talking about it. I think that's a good thing. Whether or not
it can be pulled off and who these folks are and how much they're paying, there are a lot of questions that need to be answered. And I, for one, am
going to look forward to hearing those answers.
QUEST: What is the attraction, do you think, besides the, you know, the cliche, space the final frontier?
ANDERSON: Well, I think the ability to be the first humans to go back around the moon in 45 years, that's probably a nice tugging point for these
individuals. I would venture to guess they have a pretty impressive bucket list, perhaps. But to be able to see the moon from a very close distance,
I think everyone would love to do that. I just don't know how many people can afford to do it the way it's being planned.
QUEST: And apparently, the president is also planning -- not personally, but obviously, part of NASA's plans for the future, a moonshot of some
description. So, let's just talk -- we have an extra couple of minutes, which is -- I'm delighted. How significant is it that we understand going
back to the moon, if we are to then go further on to Mars, where places like the moon is the staging point?
ANDERSON: Well, personally, I think it's a required thing to go back to the moon. I mean, there are so many things we can test and we can do from
a habitat perspective, from recycling of consumables, to mining things from the surface of the rock that we call the moon. I think there are a lot of
lessons that we can learn when we're only three days away with no communication delay, and I think that's very important. You know, when you
head off to Mars, it's a six to nine-month journey, just to get there.
QUEST: When you went up, to the space station, what -- and I know you've been asked this a million times, but, you know, for those of us that will
never come close, what is it like, the moment the rocket fires up? And you think, well, for better or for worse, richer or poorer, in sickness or in
health, I'm going, whether I like it or not?
ANDERSON: Well, just so you know, Richard, those weren't the exact words that I was thinking at the time, but it's the greatest roller coaster ride
known to humankind. It's exciting. It's dynamic. It's loud. It's everything you would want it to be. And the nice thing is, it's so
captivating, you don't really think about the negative aspects of what you're doing, right? You're focused on what you have to do next to
complete your job task for the guys around you.
QUEST: But, was there a moment of fear?
ANDERSON: No fear. They train the fear out of you. I think that, like I said, it's like when you get into a car today, you have no fear. You turn
the ignition on, you buckle into your seatbelt and away you go. But the first time you got into that vehicle as youngster, when you were learning
how to drive, there was maybe a little more anxiety or maybe fear, but it gets trained out of you. By the time, we go, we're too focused on the job
we have to do.
QUEST: And finally, way -- I mean I'll tell you what I was thinking about all of this. You saw two weeks ago, whenever it was, the TRAPPIST planets
that were just discovered, seven planets, which makes me realize how small we are. We're talking about seven planets 40 light years or however many
light years away, and we're talking about the difficulty of just getting back to the moon. It sort of puts the whole thing in perspective, doesn't
it, sir?
[16:55:00] ANDERSON: Oh, absolutely. The universe is huge. I like to tell people, it's a huge pizza. We're on one crust and we're doing what
we're doing, which is going away from the planet to the moon, about 235,000 miles. What if on the other side of that pizza, there's a civilization
doing exactly what we're doing, but the universe is so large, for us to meet at that pepperoni in the middle, it's going to take an awfully long
time.
QUEST: Brilliant analogy, sir. Anytime you're in New York, please come and join us here on QUEST MEANS BUSINESS, and I promise, I'll buy the
pizzas.
ANDERSON: I would love to. Let's have a slice.
QUEST: An honor having you on the program, sir, thank you.
Well, from very big thoughts to perhaps day-to-day mundane matters and the check of the markets, 13 record closes in a row. It proved to be too much
for the Dow Jones. The first fall since February the 8th, but threat ye not, the Dow is still up 5 percent since year to date. We'll have a
Profitable Moment after the break.
(COMMERCIAL BREAK)
Tonight's Profitable Moment. OK, so we didn't make it. We broke the winning streak, both in gains and records and we weren't able to make it 13
in a row. We beat -- well, we matched 1987, but the record from 1897 will have to remain for a little bit longer. But we shouldn't be too down-
hearted about all of this. The market is still up, quite heavily. And the gains are real and the volumes are high. Put it into perspective, overall,
there's still much more to be optimistic about in this market than the tinge or two of worry and fear. That's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. I'll be with you again tomorrow.
END
