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Quest Means Business
World Bank Warns Global Economy is in Danger; Yellen: Inflation is at Unacceptable Levels; Lavrov in Turkey for Talks on Ukraine Grain Exports; Kyiv's Morgues Try to Identify the Dead; Muslim Countries Slam India over Offensive Comments; Dash to the Bell. Aired 3-4p ET
Aired June 07, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ISA SOARES, CNN INTERNATIONAL HOST: It is a roller coaster day on the markets, a bit of a topsy-turvy Tuesday now set to close the session highs.
You can see they are clawing back some of those earlier losses. Those are the markets and these are the main events for you.
The World Bank says inflation and war are stifling global economic growth. World Bank President David Malpass joins me.
Boris Johnson says it's time to get back to tackling Britain's economic problems after narrowly surviving a confidence vote.
And Saudi Arabia is waging a battle for the future of golf luring sports' top stars with huge payouts.
Live from London, it is Tuesday, June 7th. I am Isa Soares, in for Richard Quest and I too, mean business.
Good evening, everyone.
Tonight, the World Bank says the global economy is in danger and is slashing its projections for economic growth. In a new report, the bank now
projects the global economy will grow 2.9 percent this year after originally projected growth of more than four percent as you can see there
on your screen.
It said Russia's war in Ukraine, high inflation, and rising interest rates could have a destabilizing consequences for middle, as well as low income
countries and it is warning of stagflation. That's a period of high inflation and high unemployment, that hasn't really been seen in some 50
David Malpass is President of the World Bank. He joins me now from Washington, D.C.
David, great to have you on the show. I'm not going to lie, David. This is a pretty bleak and gloomy forecast. Talk to us about the expectations, the
forecast for growth pre-war in Ukraine. I mean, are we going from bad to worse here?
DAVID MALPASS, PRESIDENT, WORLD BANK: Hello, Isa.
Yes, the sharpness of the slowdown is really concerning. We think it's the biggest slowdown of the global economy in 80 years, and the reason for that
is after COVID, the recovery was going pretty well in 2021. And so now, the drop off is taking place because inflation is higher than was expected, and
so the interest rate hikes from the Central Banks are beginning. But also the Russian invasion is a sudden really negative shock. It has to do with
food, fertilizer, and the global outlook itself.
SOARES: Yes, and it is something that I have covered, we have covered, our colleagues on the ground in Ukraine, but the picture you paint in your
report is really of high inflation and stagnating economic growth, as we outline of stagflation, really reminiscent of the 1970s when we saw that
oil shock and that sluggish economy, which led to two downturns.
Do you fear that we are heading to a double dip recession in some parts of the world? How real is this fear?
MALPASS: I think many countries will see a recession in this cycle. It has to do with the raw materials, energy prices, fertilizer, food -- all up,
and that that is a big part of people's budget. If you think of households around the world, they're really feeling the strain.
You know, there are two differences from the 1970s that are notable. One is, in those years, the dollar and other major currencies were really weak.
So that was fueling the inflation and then the banking systems were weak.
When we look at it this time, I think we'll see weaknesses in different areas from the 1970s. So one way to think of it is just that was a major
global downturn. This time around, we see that we've lowered the growth forecasts for most of the emerging markets because of the breadth of the
SOARES: Yes, but like you said, it's not just emerging markets or developing nations, it is even richer developed nations that also will feel
the impact, David.
What can be done then in that case, to try and prevent this? Because we've seen the Fed Reserve, the Federal Reserve really raising rates pretty
aggressively to try and cool down these rising prices. But many fear -- and I want your thoughts on this -- that it is just too late to try and combat
inflation. Where do you stand on this?
MALPASS: Many people have said that the Central Banks are coming late to the game as far as the inflation. I think, it took people by surprise as
far as how high it was and those numbers are still going on. That's the combination of the supply chains, but also that the carryover from the huge
So that was occurring in 2020 and 2021.
So that I think what could be done is one, to really boost global supplies. That's of energy, fertilizer, and food. And that means a concerted effort
by the advanced economies, and also the developing countries to just make more, find more energy and bring it to market.
A second thing is on the government spending side to make it count. You know, if you're spending money as a government to be really productive in
what it is, and people can argue about how to do that, and then third is for the Central Banks themselves to use all their tools, not just the rate
They have a lot of influence through regulatory policy that can encourage supply, and also through their bond portfolios, that I think if they
reduced bond portfolios, it would free up some of the capital for businesses.
SOARES: Yes, and you've talked a bit about, you know, what can be done on that side, on kind of the policy front, but I know, for example, that the
World Bank pledge, I think it's $12 billion, you can correct me on this, David, last month to support kind of low income countries that are being
hit by the loss of food and fertilizers with the war, given what's going on in Ukraine.
What kind of kind of national or global efforts do you think at this stage needs for us to kind of cushion the blow of the war, the impact of the war
MALPASS: Exactly right. So one is aid to Ukraine itself. Our Board today just approved the next round of assistance to Ukraine, some $1.3 billion
that will help with government workers. So that's one part of it.
We're trying to support refugees that are coming from Ukraine, but elsewhere in the world as well. So that's -- one aspect is the immediate
kind of support. But then we entered into a co=convening or an alliance on the food issues with the G-7.
Germany is Chair of the G-7 this year, and that is the group of the major advanced economies and within that, we're putting forward $30 billion of
food assistance of various kinds that helps the food systems of countries to be more efficient.
And so all of these efforts, there is the near term, and then the longer term rebuilding that is needed in the developing countries.
I want to get your final thoughts if I could, David. I mean, I heard Jamie Dimon of JPMorgan Chase said recently that an economic hurricane is on the
horizon. Do you agree with this? I just want to get your final thoughts on this?
MALPASS: There are a lot of debt pressure on the poorer countries as well. So I think there is a very challenging whether a hurricane, there's a
challenging climate over the next two years. And the important thing is for there to be more supply, new supplies in order to meet this inflation
challenge and I think better macro policies.
SOARES: David Malpass, President of the World Bank. Thank you very much, David. Always great to have you on the show. Appreciate it.
MALPASS: Thank you.
SOARES: Now meanwhile, in Washington, Janet Yellen told U.S. lawmakers inflation is at unacceptable levels. She said rising prices is a global
problem and that getting inflation under control is the administration's top priority.
Still, she told the Senate Finance Committee that much of the problem is due to factors outside of the administration's control. Have a listen.
(BEGIN VIDEO CLIP)
JANET YELLEN, U.S. TREASURY SECRETARY: We currently face macroeconomic challenges, including unacceptable levels of inflation, as well as the
headwinds associated with the disruptions caused by the pandemic's effect on supply chains, and the effects of supply side disturbances to oil and
food markets, resulting from Russia's war in Ukraine.
(END VIDEO CLIP)
SOARES: It is very much in line with what we heard just a few minutes ago from David Malpass, of course, the President of the World Bank.
Well, while Yellen and other officials spent much last year saying inflation was transitory -- you remember that -- prices continued to rise.
U.S. inflation was 8.3 percent in March, and that is well above the Fed's two percent target as you can see there.
CNN Business correspondent, Rahel Solomon is in New York for us.
Rahel, look, this comes on the back, and I'm sure we all remember of her mea culpa last week. Give us a sense of what you have heard from her today.
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Yes, I mean, look, she said for one that in retrospect, perhaps she and Chairman Powell should not have
used transitory as much as they did, maybe they should have used a better term.
But I think if we're talking about inflation, and we're just sort of concentrating on energy. And by the way, Isa, gas prices have been
skyrocketing here in the U.S.
Yes, I mean, a decent part of that is the war in Ukraine, right? We lost Russian oil, a major exporter of oil, even if we here in the U.S. don't use
as much Russian oil, we know that crude is traded on a global market, right? So there is less supply of oil and demand has increased, as here in
the U.S., of course, it is the summer driving season, we're all driving more, we're traveling more. So that supply demand imbalance.
At the same time, Isa, you're seeing producers, very slow to increase production. So it is the loss of supply in terms of Russian oil, it has
increased demand in terms of not just here in the U.S., but we're seeing certain cities, major cities around the world start to reopen in China from
lockdown, so there is increased demand, not as much supply and it is part of the reason why we have seen gas prices and inflation in terms of energy
prices really spike since the war in Ukraine began.
SOARES: I mean, Rahel, what is she saying? What did Janet Yellen have to say in terms of stimulus bill? I mean, does she face many questions on
Because there is a growing consensus, and I'm sure you can correct me here, that perhaps the U.S. economy didn't need all that stimulus to start off
with, all that helicopter money. I mean, how did she couch this?
SOLOMON: Yes, I mean, look, she was asked about it. And to your point, there is sort of a growing concern that all of the stimulus measures that
were added to the U.S. economy only exacerbated inflation.
In fact, there was a report out of the Federal Reserve Bank of San Francisco, I believe it was that suggested that about three percentage
points of CPI or Consumer Price Index inflation, 8.3 percent, as you just pointed out, Isa, could be attributed to inflation.
That said, Yellen, when asked about that today, she said, look, he, meaning U.S. President Joe Biden had to decide what was an appropriate policy to
address what all of us thought at that time was the greatest risk facing our country, essentially, meaning look, they had a huge problem inflation
or unemployment, rather, had spiked.
We knew more than 10 million Americans were unemployed, and so she essentially said that they did what they thought was best for the country
at the time. Of course, hindsight is 20/20. And yes, these concerns about inflation and whether the stimulus added to inflation are only growing at
SOARES: Yes, but you know what, it's almost like, Rahel, a chicken and egg kind of argument, because some may argue that actually, this stimulus is
providing a cushion at a time when we need it most. Right? The war in Ukraine, post COVID, et cetera.
SOLOMON: Yes. It's an interesting point, because even -- you know, I just -- I know, you just spoke about Jamie Dimon's comments about the economic
hurricane. You know, the one thing he said, the bright spot, is the consumer that the consumer is still flush with cash and part of the reason
why to your point is because Americans were able to save so much in part because of the stimulus.
So it's a very sort of tricky question and it depends on sort of where you stand in terms of what's really to blame here. But yes, Americans are still
sitting on quite a bit of savings. But the issue now is that they're dipping into those savings to pay for inflation. So it is a problem that is
certainly not unique to us here in the U.S., but it is a problem, a huge problem nonetheless.
SOARES: Indeed. Rahel Solomon, always great to have in the show. Thanks very much, Rahel.
Now, Russia's Foreign Minister is in Turkey to discuss restarting grain exports from Ukraine. For months shipments have been stuck in Ukraine's
eastern ports under Russian control. Russia's Defense Minister now says the sea port of Mariupol and one other are ready to ship grain as the world
awaits proof of Turkey's working to mediate a safe corridor for Ukraine's agricultural exports.
Our Jomanah Karadsheh has the story for you.
JOMANA KARADSHEH, CNN CORRESPONDENT (voice over): From his Istanbul terrace, Yoruk Isik has watched part of Russia's invasion of Ukraine
playout in Turkey's Bosphorus Strait.
First it was the military buildup. Now, the ship watcher and founder of the Bosphorus Observer has been documenting Russia's theft of Ukrainian grain.
With the help of satellite images and Ukrainian activists, he tracked and filmed this Russian ship transiting the Bosphorus.
The ship appeared in Maxar Technologies, images obtained by CNN last month. It was smuggling stolen Ukrainian wheat.
YORUK ISIK, NON-RESIDENT SCHOLAR, MIDDLE EAST INSTITUTE: This is a bottleneck spot, and there are so many spots like this. This is easy to
monitor. We almost missed nothing coming out of Black Sea from here. Only in last two, three weeks, we witnessed at least 10 journeys of 10 different
ships carried weight from occupied Ukrainian ports into mostly to Syria, because people are worried about the sanctions et cetera. They are usually
carrying first to Syria, and it is getting distributed to the other Middle Eastern customers from Syria so far.
KARADSHEH (voice over): Turkey Straits are governed by the 1936 Montreux Convention. It has already restricted access to Russian naval vessels under
that agreement, but when it comes to commercial traffic, it is limited in what it can do.
But Russia is not only accused of theft. Ukraine, the U.S. and the E.U. have all accused it of holding the world to ransom, blockading Ukrainian
ports and stopping the export of more than 20 million tons of Ukrainian grain that dozens of countries rely on.
Russia blames Ukraine for the blockade and says its Western sanctions that are causing a global food crisis.
(on camera): Turkey is trying to use its strategic location and its close ties with both its Black Sea neighbors, Russia and Ukraine, to try and
broker a deal that would establish a sea corridor for Ukrainian grain exports.
(voice over): That potential green corridor through the Turkish Straits will top the agenda when the Russian Foreign Minister meets his Turkish
counterpart on Wednesday and meeting Turkish officials are hoping will lay the groundwork for talks soon between Russia, Ukraine, Turkey, and the
YUSUF ERIM, EDITOR-AT-LARGE, TRT WORLD: Turkey can definitely provide service as an auditor to make sure that grain is being sent out from both
Ukraine and Russia. Being one of the Black Sea powers, it has the capacity to provide security inside the Black Sea as well. So it can be a player
that provides security, that provides observation, provides auditing that could be acceptable and considered legitimate by both Kyiv and Moscow.
KARADSHEH (voice over): But the Russians will have their own demands likely unacceptable to Western powers. They've already indicated they want
ERIM: I expect the Russians to want a waiver on their grain sales as well, and they feel that they have the leverage right now. Turkey is going to be
very important in being able to negotiate between Russia and the West to be able to get a sanctions waiver for the Russians for their grain sales as
KARADSHEH (voice over): When few will trust what Russia promises, there is no easy path out of this, but Turkey is hoping it can at least begin the
complex process of trying to end the blockade and avert a crisis the U.N. has warned will lead to famine and instability around the world.
Jomanah Karadsheh, CNN, Istanbul.
SOARES: Similar warning we heard of course from the World Bank.
And up next, the British Prime Minister says he wants to draw a line under bruising leadership challenge. And unfortunately, not all of his lawmakers
are keen to move on.
SOARES: It's time to move on. That is the refrain from British Prime Minister Boris Johnson as he fights for his political survival. He won the
confidence vote Monday, but his party's trust may be lost for good.
Mr. Johnson gave a pep talk really to the Cabinet earlier saying his government will draw a line under partygate and focus on issues like the
cost of living crisis. That echoed his upbeat reaction to the vote last night.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: Of course, I understand that what we need to do now is come together as a government, as a party, and that is
exactly what we can now do. And what this gives us is the opportunity to put behind us all the stuff that I know the media have, quite properly
wanted to focus on for a very long time, and to do our job, which is to focus on the stuff that I think the public actually want us to be talking
about, which is what we are doing to help the people in this country and all the things we're doing to take this country forward.
(END VIDEO CLIP)
SOARES: Phil Black joins me now with more. And Phil, where does this leave Boris Johnson? Yes, it's a win, but not a convincing one. Can he hold on?
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Well, you heard in there, Isa, trying very hard to be positive about this, as have his supporters
over the last day or so ever since we learned the result. They've been using words like "decisive," "clear," "comfortable," even "handsome" to
describe the nature of his victory, because he secured 59 percent of the Conservative Party's sitting MPs in terms of voting for him, declaring
But he can't be confident that that's the case as much. As he wants to move on and focus on policy and put this behind him, he also knows that 41
percent of Conservative MPs want to see him gone from Downing Street.
Now that percentage is not enough to force him from office, but it is more than enough to reveal the deep rift within the Conservative Party to expose
the degree to which, perhaps, even the surprising degree to which his authority has already been diminished.
Now as it stands, we know that he can't be challenged like this with another no-confidence vote for another year. So say the rules of the
Parliamentary Conservative Party, although those rules can be changed. That doesn't mean the pressure goes away, because clearly there is a great
strength of feeling among his colleagues in Parliament and he still has some big challenges ahead.
There is an ongoing investigation into whether or not he lied to Parliament over holding or attending or just what took place here with those parties
here in Downing Street during the pandemic lockdown. And there are a couple of imminent by-elections as well, which have now taken on a much greater
importance and which will be studied very closely as measures of just how popular, just what the British voters are thinking, just how electable they
think Boris Johnson still is -- Isa.
SOARES: On those two by-elections that are happening later this month. I believe, Phil, do the conservatives believe that Boris Johnson, he can win
this, because that fundamentally will determine whether they see him as a liability, or an asset here?
BLACK: That's exactly right. That's what people will be looking to see, and at this moment, I guess you'd have to say they can't feel too positive
about anything. These are traditionally safe conservative seats, but we've seen recently that that doesn't necessarily mean a lot within the current
There is no doubt that some of those people who voted against Boris Johnson last night did so on a point of principle because they don't think his
behavior represents someone who is fit for the office of Prime Minister, but also, you would have to think it's very likely that some of those
people who voted against him made a very cold political calculation, that they do not believe they can hold on to their seats in the coming -- the
next general election, I should say, if Boris Johnson is still the party leader.
So it is, I think, there is still a feeling, an understanding that Johnson's electoral success and popularity, phenomenal electoral success up
until this point has taken a beating as this pressure has been brought to bear upon him in recent months.
SOARES: Yes. It will be interesting to see Phil, how this progresses because it could turn out into a blue on blue wall within the Conservative
Of course, Phil Black for us there outside 10 Downing Street, thanks very much, Phil.
Now, Ukraine's President says he is happy Johnson remains in power. Zelenskyy called the British Prime Minister, a true friend of Ukraine. He
had no such kind words, though, for Emmanuel Macron. The French President warned against humiliating Russia.
This was Mr. Zelenskyy's angry retort. Have a listen.
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT (through translator): Emmanuel Macron has a deep understanding of the process. Macron is one of the
leaders of the Normandy Four. He has a profound understanding of the Minsk Accords. He has a profound understanding of all the details that have --
the details of all the arrangements made by the Russian Federation and Russia's failure to comply with these Accords.
Russia has constantly derailed the ceasefire regime. Russia has derailed exchange of prisoners. So what kind of humiliation are we talking about? I
do not even believe that they are humiliating Ukraine. That would be a weak position.
No one is humiliating us. They are killing us. So in response, we are not going to humiliate anyone. We are going to respond in kind.
(END VIDEO CLIP)
SOARES: Comments directed at Emmanuel Macron.
Meanwhile, fierce fighting is taking place in the critical city of Severodonetsk where Ukrainian forces are attempting to retake control from
Ben Wedeman joins me.
And Ben, I believe you told me yesterday, the situation in Severodonetsk really hasn't changed little. The push and pull of battle clearly
intensifying. Give us a sense of what you're seeing. Can Ukrainian forces hold on here?
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: They're holding on obviously to a much smaller part of the city than they did perhaps over the
weekend. They say they are keeping the line, that they're not they haven't lost more ground, but they are at a disadvantage. The Russians have much
more in the way of artillery and air power and so forth.
And the Maxar Technology came out with new pictures of Severodonetsk, and there are parts of the city that look like they have been utterly flattened
by Russian artillery and resisting that, without similar weapons on the Ukrainian side, it's going to be a very, very difficult task -- Isa,
SOARES: Look at these pictures of Maxar satellite pictures there, you know, it reminded me, Ben, what we saw in Mariupol, just utter devastation,
a city that was pummeled for months, and now, we're hearing that there's a real fear of cholera as dead bodies are left lying in the streets.
WEDEMAN: Yes, apparently, according to Ukrainian officials, there are so many dead bodies from that siege, which officials have said may have
resulted in the death of as many as 21,000 civilians, that the mass graves in that port city don't have enough room for all those bodies and
therefore, in the absence of for instance, they are having problems with running water, in the absence of garbage disposal, an outbreak of cholera
is a real danger.
And not only that, the trauma of that two-month siege continues and was felt over the weekend in Kyiv, where Ukraine received the first bodies
handed over as part of the agreement that ended that siege from the Russians.
Now, before we get to this report, we must warn our viewers that some of the images they're about to see could be disturbing.
WEDEMAN (voice over): And so begins on a sunny summer morning, the grimmest of tasks. Workers it Kyiv Central Morgue examine the contents of
160 dirty, putrid body bags, containing the badly decomposed remains of soldiers killed during the two-month siege at the port city of Mariupol and
in the city's sprawling Azovstal steel plant where Ukrainian forces made their last stand.
Ukraine and Russia have conducted an exchange of bodies as part of the agreement that ended the siege. Forensic examiner Liliya Philipchuk has
been on the job for three years. Since the war began, she has had little rest.
(LILIYA PHILIPCHUK speaking in foreign language.)
WEDEMAN (voice over): "We also examined the bodies from Bucha and Irpin," she says, referring to Kyiv's suburbs where retreating Russian forces are
accused of committing atrocities against civilians.
Olena Tolkatchova is also helping. She is affiliated with the Azov Brigade, which fought in Mariupol. The brigade is a nationalist militia that was
integrated into Ukraine's Armed Forces.
(OLENA TOLKATCHOVA speaking in foreign language.)
WEDEMAN (voice over): "The morgue is already full of bodies from Kyiv, from Bucha, from Irpin," she says, "So we have to put them in a
Morgue workers search through ripped and ragged clothing for documents and tag and bag personal items. This is just the start of a long process.
WEDEMAN (on camera): Some of these bodies have no identification, so their DNA will have to be sampled and it may take a month, maybe more to find out
who they were.
WEDEMAN (voice over): And only then will their loved ones know their fate. Finality for the living and the dead will have to wait.
WEDEMAN: And we had an opportunity to walk among the -- those morgue workers as they were going through the contents of those body bags. I can
tell you very few. In fact, none of the bodies were actually recognizable in any way.
We are told by the authorities that so far out of those 160 body bags, only eight positive identifications have been made.
SOARES: That tells you everything about how the battle was fought there. Thank you very much, Ben Wedeman there.
Tension between India and the Muslim world after alleged anti Muslim comments from Indian officials with boycotts looming and they scramble to
diffuse the situation.
SOARES: Businesses are facing backlash over controversial comments made by officials from India's ruling party about the Prophet Muhammad. Boycotts
are surfacing in Muslim nations. CNN's Vedika Sud tells us more.
VEDIKA SUD, CNN CORRESPONDENT: Over a dozen Islamic nations have expressed outrage at controversial comments made by two representatives of Narendra
Modi's Bharatiya Janata Party against the Prophet Muhammad.
He is summoning his diplomatic representatives and a statement from the foreign office says it wants Indian government immediately condemned and a
public apology to the Muslim world.
Someone described the comments as a war against every Muslim and called the incident unacceptable.
Supermarkets are removing Indian products from racks.
The party has suspended spokeswoman Nupur Sharma and expelled another party member. The Indian government said tweets denigrating religion were made by
fringe elements and do not reflect the views of the Indian government, which is now in damage control mode with Arab countries.
Prime Minister Modi has tried to keep his party's domestic political agenda from impacting ties with Muslim nations. This controversy comes a time when
Gulf states and India looking to enhance their economic partnership.
Also, millions of Indians working in the region sending home billions of dollars in remittances. It is the biggest importer of oil and looks to the
Middle East for 65 percent of its crude imports.
According to analysts, India has been witnessing deep religious polarization on the body's leadership. A recent report by the U.S. State
Department on international religious freedom showed attacks on members of the minority communities in India last year.
About 14 percent of India's population is Muslim -- Vedika Sud, CNN, New Delhi.
(MUSIC PLAYING) ("CONNECTING AFRICA")
SOARES: Hello, I'm Isa Soares. It's the dash to the bell. Markets are up as you can see almost 300 points. A warning from Target that it would need
to cut prices to get rid of excess inventory.
The S&P 500 and the Nasdaq are higher. Meanwhile, the head of the World Bank warns the global economy is in the process of a drastic slowdown.
David Malpass told me about his concerns.
(BEGIN VIDEO CLIP)
DAVID MALPASS, WORLD BANK PRESIDENT: The sharpness of the slowdown is really concerning. We think it's the biggest slowdown of the global
economy in 80 years and the reason for that is after COVID-19, the recovery was going pretty well in 2021.
And so now the dropoff is taking place because inflation is higher than was expected. And so the interest rate hikes from the central banks are
beginning. But also the Russian invasion is a sudden, really negative shock. It has to do with food, fertilizer and the global outlook itself.
(END VIDEO CLIP)
SOARES: On the Dow 30, Walmart is at the bottom.
I'm Isa Soares. The closing bell is ringing. "THE LEAD" is next.