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Quest Means Business
Regulators Shut Down SVB After Rapid Downfall; US Economy Added 311,000 Jobs In February; Saudi Arabia, Iran Agree To Diplomatic Ties; Biden Hosting von der Leyen At The White House; U.N. Reveals Plan To Salvage Oil From Rusting Supertanker; NASA Tracks Asteroid That Has Small Chance Of Hitting Earth. Aired 3-4p ET
Aired March 10, 2023 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RAHEL SOLOMON, CNN BUSINESS HOST: It is the end of an anxiety-provoking week on Wall Street. Taking a look at the markets. You can see the Dow is
off about 240 points. Let's call it three-quarters of one percent. Those are the markets and these are the main events.
A major lender to Silicon Valley collapses. The first US bank failure since the global financial crisis.
Ursula von der Leyen is in DC as Europe and the US try to work out their differences on green subsidies.
And three years on, a look at how the early days of the COVID pandemic really tested the world's top CEOs.
Live from New York. It is Friday, March 10th. I'm Rahel Solomon in for Richard Quest and this is QUEST MEANS BUSINESS.
Tonight, it is the second largest bank failure in US history. Regulators have shut down Silicon Valley Bank and taking control of its deposits. It
is really a stunning and sudden downfall for a key player in the tech world.
SVB spooking investors on Wednesday with its need to raise more than $2 billion. You can see here how the share price dropped 60 percent the
following day. Shares were down another 62 percent in premarket trade this morning before being halted.
Its problems shook other banks on Thursday. The four biggest US banks lost more than $50 billion in market value. JPM though faring a bit better
today, but you can see smaller and regional banks like PacWest, First Republican, Signature Bank all getting crunched while JPMorgan Chase is up
about 2.2 percent.
Now Silicon Valley Bank plays a huge role for companies backed by venture capital, partners with nearly half of all tech and healthcare startups in
the US. Now as VC funding dries up, these high risk companies have been burning through cash and drawing down deposits and that put the squeeze on
SVB's balance sheet.
Catherine Rampell is a "Washington Post" columnist and also a CNN economics and political commentator. She joins me now from Ithaca, New York.
Catherine, great to have you on the program today. Look, it has been a stunning turn of events. Just walk us through all that went wrong here?
CATHERINE RAMPELL, CNN ECONOMICS AND POLITICS COMMENTATOR: Well, there are a number of things to take into account. Some of them are reflective of
broader problems in the tech sector, some of them are kind of idiosyncratic to this one particular bank.
So this bank, Silicon Valley Bank, did a few things that in retrospect, look not so wise, including that they invested in these long-dated mortgage
backed securities, which seems safe, perhaps, you know, they're not inherently risky.
I think the layperson, when they hear mortgage-backed securities, they think that that means something like inherently very risky, that's going to
blow up. That's not the case here.
What happened was that as interest rates went up, the value of those underlying securities went down. And so as a result, there was a lot of
fear about the solvency of the bank, and you had kind of a bank run that a lot of the customers started pulling their money out of the bank.
And, you know, more broadly within the tech community, obviously, the era of rising interest rates has been very painful for a lot of those customers
that were banking with this institution, so that fed on itself as well.
SOLOMON: You know, Catherine, I think it is such a great point that you point out when you say mortgage-backed securities, especially in this
context to sort of condition that so people don't unnecessarily become alarmed, but help me understand how much of a concern and how much of a
failure do you think was what we're now learning was the lack of real funding diversification at this bank?
RAMPELL: It seems like they made some unwise financial decisions. They have a lot of money coming in, they were trying to figure out what to do with
it, and they invested it poorly, essentially. I mean, that's an oversimplification, but I think that's basically what happened here.
Now, the question is, how much contagion will there be to other institutions in the financial sector? How much of this is just about dumb
decisions made by SVB? And how much of this is about broader linkages within the banking sector? And like, is it reasonable, that there has been
some panic about some of those other regional banks, for example that you mentioned, and I think we don't know yet.
This is -- I want to be clear to viewers, this is not as bad as it was circa 2007-2008 when we had this global financial crisis, this is nowhere
on the scale of that, but it's still not a good thing. There could be some contagion and if you are one of the companies that banked with SVB, which
was Silicon Valley Bank, it is obviously not good for you.
Your deposits are insured up to a point, but not in their entirety, and there is a question about, is it going to be difficult for companies to
make payroll, for example.
SOLOMON: Catherine, a big part of this, as you've laid out is rising interest rates, right? I mean, you know, it's hard to know what the Fed is
thinking, but do you think that Chairman Powell or policymakers see a story like this, know of a story like this and think, well, maybe we ought to
slow down before we figure out or before we see what else we break.
RAMPELL: I think they have to be weighing the stresses that are going on in the financial sector. I mean, to some extent, it's a feature not a bug that
there is financial tightening, right? I mean, the goal of raising interest rates is to pull back on lending, and that will, unfortunately have the
effect of causing some stresses at these institutions.
Now, that doesn't mean you want big banks to go under, that doesn't mean you want all of these knock-on effects for the depositors, amongst others.
So I think that this is something they're going to have to consider. But obviously, they have -- the Fed has a number of objectives here. It has a
dual mandate, which is maximum employment and stable prices, and they are laser focused on getting price growth down, inflation down. And that means
raising interest rates now, maybe they'll you know, act a little bit less aggressively if they're really worried about financial market problems.
But if you look at the totality of today's Jobs Report, which was very strong, whatever we see in the inflation numbers next week, I suspect that
those kinds of macroeconomic numbers are going to be weighing much more heavily on how the Fed thinks about what its next steps should be and
SOLOMON: Yes, it's a fair point. We'll talk a lot more about the Jobs Report a little later in the program.
In the meantime, Catherine Rampell, great to have you. Thank you.
Well, amid the meltdown at Silicon Valley Bank, hedge fund billionaire, Bill Ackman argued that a government bailout should be considered. He
tweeted that the bank's failure could destroy an important long-term driver of the economy is venture capital backed companies rely on it for loans and
holding their operating cash.
But not all investors believe that the impact will be widespread. Speaking earlier with CNN Julia Chatterley, Wells Fargo's senior bank analyst, Mike
Mayo says that the core problem with SVB is a lack of funding diversification.
(BEGIN VIDEO CLIP)
MIKE MAYO, SENIOR BANK ANALYST, WELLS FARGO: This is night and day versus the global financial crisis from 15 years ago. Then, banks were taking
excessive risks and people thought everything was fine. Now, everyone is concerned but underneath the surface, the banks are more resilient than
they've been in a generation.
(END VIDEO CLIP)
SOLOMON: David Chiaverini is a Managing Director at Wedbush Securities, and he joins me from New York.
David, good to have you on the program. Thank you.
DAVID CHIAVERINI, MANAGING DIRECTOR, WEDBUSH SECURITIES: Thank you.
SOLOMON: It has been a stunning turn of events 24 hours, about 24 hours ago yesterday, I believe it was you wrote in your note that you did not believe
SVB was in the midst of a liquidity crisis. How did that change so quickly?
CHIAVERINI: Yes, it changed in a heartbeat when the stock went down, first 30 percent and then progressed through the day down forty, fifty, sixty
percent. Depositors, you know, they look at stock tickers, as well and stock screens, and when you see your bank is down 60 percent in the broad
market, it causes some fear.
And I think that's what also added to the panic and the run on the bank, ultimately, and it didn't help when you had some of the largest VC funds
out there advising their portfolio companies to pull their money out of Silicon Valley Bank. So that ultimately led to additional pressure on the
deposit outflows and ultimately the closure of the bank.
SOLOMON: And David, talk to me a bit about how important sentiment is especially for the banks. I wonder if that's part of the reason why we saw
the FDIC step up so quickly to ensure those deposits before that fear, that panic, I really hate to use that word, but before that started to spread
throughout the industry.
CHIAVERINI: Yes, sentiment is very important. When you get into a heightened state of scrutiny, like we are in today, you know, all
fundamentals kind of go out the window. And a number of investors today are wondering, you know, who is next?
And when you're looking at, you know, the ticker list, it is almost as if, you know, forget about fundamentals because the stock tickers where you see
the prices down the most are implied to be the most vulnerable and that can trigger you know, runs on the bank and I think that's what happened with
SVB, contributed to it, with SVB yesterday.
And going forward, you know, anything goes bank by bank. But, you know, from our viewpoint, most of the banking industry is on solid footing, solid
capital ratios and they should through this difficult time, but if enough depositors all at once decided to pull the plug on a bank, it can cause
real fundamental damage and ultimately, a run on the bank and possibly a shutdown of the bank like we saw yesterday with SVB.
SOLOMON: Well, I think fundamentals are really important, though. So help me understand it for our viewers around the world, what are some of the
fundamental differences between a large traditional bank like a JPMorgan, like a Chase, for example, a Goldman Sachs, and just for this example, SVB?
CHIAVERINI: No, absolutely, fundamentals definitely drive stock prices. When you get in a panic and fear, that's when, for reference, that's when I
mentioned that fundamentals go out the window. But yes, diversity of funding base, how funds are invested on the asset side of the balance
sheet, having a diversified loan portfolio, having a short in this environment, a short duration securities book, those all protect the banks
and their shareholders on the downside if things were to go sideways.
So fundamentals certainly are important, but sentiment can drive -- ultimately drive fundamentals as well and SVB, yesterday, I think their
stock getting crushed through the day just exacerbated the outflows that we are already seeing.
SOLOMON: So if you're an investor around the world, how do you play this? I mean, do you use this week as -- I mean, JPM is up right now, but do you
use this overall weakness, this moment in time to perhaps some good quality name, buy some good quality names, but at a discount?
CHIAVERINI: Yes. Absolutely. I think so, and I think the reason why you're seeing some of the money center banks, you mentioned JPM being up, Bank of
America, I think in a heightened state of, you know, panic and concern out there, money kind of flows to the biggest banks, the banks that are too big
to fail, so I think that it does drive opportunity.
And for the banks that do survive, which is going to be the vast majority of them, this is a buying opportunity., So I would suggest to investors
that are looking to put some money to work, is in a diversified portfolio of banks, because there could be a couple that end up, you know, having a
panic and having a fear, but the majority of them are going to get through this just fine and I think the bank ETF is a good way to gain exposure.
SOLOMON: David Chiaverini, great to have your insights and perspectives today, especially on a day when the headline appears really concerning to
some, great to really understand what is actually happening under the hood of the headline. Thank you.
And when we come back, Saudi Arabia and Iran have struck a deal to reestablish diplomatic ties, but it might be Beijing, that's the real
winner. We'll explain.
SOLOMON: US economy added 311,000 jobs last month, that is far more than the 200,000 that economists were expecting. Still, though there are signs
that the Fed's rate hikes are having some effect. Wage growth came in lower than expected, and the unemployment rate rose slightly to 3.6 percent.
The major US averages have fallen sharply, but are off session lows. The Dow is off 200 points -- 260 points there. The S&P is off 1.1 percent, and
the NASDAQ is off almost one-and-a-half percent.
Julia Pollack is the Chief Economist at ZipRecruiter and she joins me now from Los Angeles.
Julia, great to have you on the program.
JULIA POLLACK, CHIEF ECONOMIST, ZIPRECRUITER: Great to be with you. Thank you.
SOLOMON: You know, there are so many ways to read a Jobs Report. When you look at this Jobs Report, what is the best indicator of where we are in
terms of the labor market and perhaps more critically, where we're headed?
POLLACK: So this jobs report is the best of all worlds. We saw job gains slow a bit but remain incredibly strong, and at the same time, wage growth
The labor market kind of looks a bit like it did before the pandemic when job growth was fast, when participation kept rising, especially among
women, and so we could actually sustain that level of job growth and it was non-inflationary, because participation was picking up. That was the key in
this report; labor supply growing again.
SOLOMON: We desperately need labor supply. I can agree on that.
On wages, though. I mean, how much of that do you think is driven by the fact that we're still really seeing job growth are lower wage industries,
we're still seeing job growth in the service industries -- restaurants, hospitality and such -- 245,000 of the 311,000 that we added were in low-
wage sectors. I mean, does that pretty much explain why wage growth has moderated so much?
POLLACK: Yes, it does. And it's a part of this is that change in the industry makes the jobs being added. Right now job growth is concentrated
in those low-wage customer facing industries and that's changed in this report from what's happened in the prior months.
For months, months and months, we've had unusually sort of unprecedentedly broad-based job gains, across the entire economy. Now, industries that are
more sensitive to rate increases are showing slowdown, they are pulling back, whereas those customer-facing industries are continuing to charge
ahead and hire very rapidly.
SOLOMON: Do you agree that we are really starting to see a tale of two economies emerge? We're starting to see for the higher paid, more white-
collar jobs, we're seeing those job gains start to slow, but in the parts of the economy where one, we're still spending in terms of the service
industries, but also the lower-wage jobs, the more consumer-facing jobs, we're still seeing that part of the economy pick up steam.
POLLACK: Yes, and in many ways, though, that is a tale not of two stories, but of one, of convergence, of wage compression of the bottom coming up and
joining the top.
So if any part of the economy has to hurt, a white-collar recession is probably far more tolerable than a blue-collar recession. Relatively few
jobs so far have been affected by job losses. The industries that are hardest hit right now are fairly small, and large industries that are at
risk of job losses in the future if the housing market doesn't recover, like construction are still for now doing remarkably well.
SOLOMON: Julia, you know, I have to ask you, because ZipRecruiter, as I understand it, utilizes AI, right, to match job seekers with jobs. And AI
is something we talk about a lot in the business community, and certainly a lot more in the last few weeks.
When you look at your studies, who is most concerned about AI perhaps taking their job? I mean, what do you see?
POLLACK: So this was something we found very interesting. It was the youngest workers who are most worried probably because they know that AI is
going to get so much better during their lifetimes and become so much more capable.
All the workers are relatively unconcerned. But young workers, three in four worry that AI could take their jobs. That's pretty good news for them
from economic history. Typically, new technologies create many higher paying jobs, even though they do replace some lower paying jobs.
SOLOMON: So it was nice to have fun with that question. I can't let you go without asking, of course, all eyes on the Federal Reserve's March FOMC
meeting. After a Job Report like this, do you have a prediction in terms of what we see with interest rates? Or do you think that it still really
hinges on what we see next Tuesday with the CPI Report?
POLLACK: So I think if I were the Fed looking at this report, I would feel more comfortable about a lower rate increase later in the month, that's
because anytime inflation rises, it makes the Fed's job easier and actually is perhaps a rate increase that doesn't need to happen. That's it.
Everything is going to hinge on the CPI and PPI reports next week. Those, we'll swing it either way.
SOLOMON: Julia Pollack, great to have you today. Thank you. Have a wonderful weekend.
POLLACK: Thank you very much. Take care.
SOLOMON: Well, after seven years of hostility, Saudi Arabia and Iran have agreed to re-establish diplomatic ties. In a deal brokered by China, the
Middle Eastern rivals agreed to reopen their embassies.
Iran and Saudi Arabia also plan to reinstate a 2001 Security Pact, as well as a Trade and Technology Deal from 1998. The two countries have supported
opposing sides in the Yemen Civil War, although an unofficial ceasefire in that conflict does seem to be holding.
Nada Bashir joins me now from Istanbul and Nada, practically speaking, what will this deal really look like? I mean, in what areas might we see the
biggest changes after this deal?
NADA BASHIR, CNN REPORTER: Well, look, Rahel, this is a significant step, as you mentioned, these are two regional arch rivals, essentially. This is
a seven-year diplomatic rift, and we're talking about two of the most significant and politically influential players in the region, and this is
going to take form on various fronts.
We are expecting to see further diplomatic cooperation between the two parties, the reopening of their respective embassies, but, as you
mentioned, a crucial element of all of this will be the activation of a Security Cooperation Deal, which was essentially drawn up back in 2001.
This includes a framework for cooperating when it comes to terrorism, when it comes to conflicts, when it comes to drug trafficking, for example, a
whole range of areas.
So this will be a significant development in a region where those tensions between Saudi Arabia and Iran have long threatened security across the
entire Middle East region have certainly been a concern further afield, internationally.
And then, of course, there is question of Trade and Technology Corporation, that framework drawn up back in 1998. And there is significant scope there
for that sort of relationship to develop between Saudi Arabia, and Iran.
But of course, the seven-year riff that has been in place between the two parties has had a significant impact regionally. We are talking about
tensions rising in the Gulf, we've seen oil facilities in Saudi Arabia, in the UAE, even being attacked by groups and actors that have been backed by
Iran, namely, the Houthi rebels in Yemen. And, of course, the deepening of conflicts in Syria and in Yemen in turn, since 2015. We've seen Iran and
Saudi Arabia throwing their support and backing between opposing actors.
And while there does appear to be some sort of ceasefire, some sort of lasting peace holding at the moment in Yemen, this will certainly go some
ways into the calls that we've heard repeatedly now from Saudi Arabia for a more long-term, permanent ceasefire to be established in Yemen.
But of course, we have to consider the international stage here, and of course, the situation and the context in which this is happening. Iran is
finding itself increasingly isolated on the international stage, both in response to the Human Rights abuses we've seen off the back of the anti-
regime protests that have taken place, but also, of course, crucially, Iran's failure to adhere to its commitments to the international community
when it comes to its nuclear activity.
Those talks, those efforts to revive the 2015 nuclear deal have stalled, they are frozen at the moment. And so Iran is finding itself increasingly
looking to its regional allies, its regional partners for backing there, and that's the message we've heard from the Foreign Minister today saying
that Iran will continue to actively seek further diplomatic relations with its regional neighbors.
SOLOMON: Nada, look, as you say, it is a significant development, but I think what is perhaps most interesting is the fact that this is a huge win
for China, as it of course tries to establish this reputation as being a peacemaker, as a peace broker.
What do we know about how China was able to broker this deal?
BASHIR: Yes, absolutely. I mean, this isn't the first time we've seen attempts and efforts to broker some sort of agreement, some sort of
negotiation between Iran and Saudi Arabia from 2021-2022. We saw efforts led by Iraq and also by Oman to try and get this agreement underway.
Now, after five days of intensive talks in Beijing with high level delegations from Iran and Saudi Arabia, this deal has been reached with
China brokering this agreement.
This is a significant shift. Of course, we know that China is expanding its efforts to establish diplomatic and of course, economic ties in the Middle
East, and we are talking about a region, the Gulf in particular, which has long been considered under the sphere of influence of the United States. So
this will certainly rival that.
We are seeing China trying to deepen those relations with the Middle East, but trade and economy appears to be the key focus at this point and as we
begin to see Iran and Saudi Arabia focusing more on trade relations on that front, China will certainly continue to be a key player in those
SOLOMON: That is fascinating development. Nada Bashir, thank you from Istanbul there.
And let's stay with China now. China's President is extending his grip on power securing an unprecedented third term. Xi Jinping is now the longest
serving Head of State and Communist China after Parliament rubber stamped his reappointment as President on Friday.
Selina Wang is in Beijing with the details.
SELINA WANG, CNN INTERNATIONAL CORRESPONDENT: The role of the President in China is largely ceremonial, but it is still symbolic and important that Xi
Jinping has secured an unprecedented third term as China's President. It's a reminder that he has got an iron grip over the country. It solidifies his
control and makes him the longest serving Head of State of Communist China since its founding in 1949.
Now back in 2018, Xi scrapped the two-term limit on the presidency meaning he could stay on as Head of State for life, but his true power comes from
being the head of party and military. These are rules he was already reappointed to at the Communist Party Congress back in October.
So what we saw today was political theater. He got more than 2,900 unanimous votes from China's rubber stamp legislature, then they all stood
up for a standing ovation.
At this ongoing big political event, we will also see reshuffles in leadership roles and state organizations, changes that will all further
increase Xi's power.
On Saturday, Li Qiang who's one of Xi's most trusted protegees, he is expected to be chosen as China's Premier. He was the former Party Secretary
of Shanghai and oversaw the brutal two-month COVID lockdown last spring.
And the team of officials that run China's economy is also getting a big shake up. The four main men, unlike their predecessors, have not been
educated in the West or are seen as having little experience dealing with international financial organizations, but what they do have in common is
that they're close allies of Xi.
So what should we expect to see in this coming term? We should expect to see increasing Communist Party control at home and this continued assertive
more aggressive foreign policy abroad.
Beijing views its actions as trying to restore China's rightful standing in the world as a great power, and it is clear there is not going to be an
easy off ramp to US-China tensions. Xi Jinping's view of the bilateral relationship is turning more pessimistic.
Earlier this week, he made the rare move in directly accusing the US of leading a campaign to contain and suppress China. It is rare for him to
directly call out the US. Then the following day, China's new Foreign Minister warned that conflict with the US is inevitable if the US does not
To the people here in China, the message from Beijing is that the US is trying to choke the country off.
Selina Wang, CNN, Beijing.
SOLOMON: And as concerns mount about a rising China, there is also optimism about the return of the Chinese traveler. Today, the Chinese government
announced that group tours to 40 more countries could restart soon.
The head of the Intercontinental Hotels Group, Keith Barr told Julia Chatterley that demand from China is rebounding strongly.
(BEGIN VIDEO CLIP)
KEITH BARR, CEO, IHG HOTELS AND RESORTS: . China with the kind of the reversal of the Zero-COVID policy has really sprung back to life in 2023
with an incredibly strong start to the year, too.
So travel is back. You know 2020 and 2021 was the year of tech and goods, and now it is about services and travels out in front.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, "FIRST MOVE": Yes, because the base on all of these numbers was clearly tough. What you're saying is
revenge travel is a real thing. Do you expect it to continue and to increase in 2023?
BARR: You know, we've been talking about the potential of a slowdown since the second half of last year, and we saw every single month get stronger
and stronger and stronger. Leisure travel is up versus 2019. Business travel is back to normal almost. Groups meetings and events are happening,
and it just seems to power on.
And the tailwind for the global travel industry will begin. China reopening, Asia Pacific. People want to travel and our consumer research
shows that travel is one of the last discretionary spending items that people will stop doing.
So it gives us a lot of confidence about 2023 and is continuing to continue on.
(END VIDEO CLIP)
SOLOMON: The legal drama surrounding Donald Trump could be at a turning point. US prosecutors have invited the former President to appear before a
grand jury. What that means about the potential for landmark charges when we return.
SOLOMON: Welcome back. I'm Rahel Solomon. And there is more QUEST MEANS BUSINESS in a moment when we will be at the White House where President
Biden is hoping to ease tensions with Europe over the Inflation Reduction Act with a meeting with Ursula von der Leyen.
And three years after the World Health Organization declared COVID-19 a pandemic, we will explore how some companies didn't just weather the storm
but also came out stronger. But before that the headlines this hour.
United Nations has revealed its plan to avert a possible environmental disaster off the coast of Yemen and wants to offload one million barrels of
oil from a rusting super tanker that's been moored there for 30 years. The U.N. says that a large crew carrier will attempt a ship-to-ship transfer in
Valentine's Day of 2046 could be one to remember. NASA says that an asteroid the size of an Olympic swimming pool could have a date with Earth
on February 14th, 23 years from now. Both the U.S. and European Space Agency say there's actually a very small chance that it will actually
strike our planet but never too soon to start preparing, huh.
And a federal judge says that he is prepared to further tighten. Sam Bankman-Fried's bail conditions. Judge Lewis Kaplan says that the founder
of FTX is "savvy enough to get access to technology." He agree that the existing restrictions should be strengthened. He added that Bankman-Fried
bank been freed has strong reasons to be suspicious.
The city of Hamburg, Germany remains in shock tonight one day after a gunman opened fire at a Jehovah's Witness hall killing seven people
including an unborn baby. The baby's mother who's seven months pregnant is being treated at a hospital along with seven other people. Hamburg
officials say that the shooter who acted alone turned his gun on himself as police stormed the building.
CNN's Jim Bittermann has been following this developing story.
(BEGIN VIDEO CLIP)
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Germany Chancellor Olaf Scholz said he was left speechless by the attack last night in
Hamburg. He actually comes from Hamburg and he said it was a brutal act of violence.
The interior minister said there's never been anything like this in Hamburg. What we know about the gunman is that he's been identified as a
35-year-old former member of the Jehovah's Witnesses, and he left the organization 18 months ago. According to security officials not on the best
terms is not clear whether he left voluntarily or was expelled. In any case, he had a legal right to carry the semi-automatic pistol that he used.
Nine magazines of bullets were fired during the attack last night. Police have said that it is not a terrorist-related attack. And they're
investigating the mental state of the gunman.
Jim Bitterman, CNN, Paris,
SOLOMON: To the White House now where U.S. President Joe Biden is hosting European Commission president Ursula von der Leyen Mr. Biden is eager to
ease the tension with the E.U. over electric cars and today's meeting. Now both sides have been embroiled in a trade dispute in the wake of his
Inflation Reduction Act. You just heard from both leaders just a short time ago. Let's take a listen.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: We're driving new investments to create clean energy industries and jobs and make sure we have supply chains
available to both our continents. And the idea -- under that idea is it underpins our Inflation Reduction Act, and it lies at the heart of the --
your Green Deal Industrial Plan in the E.U. So, you can talk a little bit about that today.
URSULA VON DER LEYEN, PRESIDENT OF THE EUROPEAN COMMISSION: I think it's great that there is such a massive investment in wind and clean
technologies now. Indeed, we want to match it with the Green Deal Industrial Plan. (INAUDIBLE) to discuss together. Thank you very much.
BIDEN: I look forward in doing that.
(END VIDEO CLIP)
SOLOMON: Plenty of topics indeed. Let's bring in Arlette Saenz who's in Washington, D.C. for us. So, Arlette, as you know, look, this is not the
first time the White House and President Biden has welcomed a European leader to the White House to try to smooth over this issue of the Inflation
Reduction Act. I'm thinking about Emmanuel Macron from France and that state visit. Was this trip a success as far as what we know so far?
ARLETTE SAENZ, CNN WHITE HOUSE CORRESPONDENT: Well, Rahel, was -- we're still waiting to see if there's any deliverables coming from this meeting
President Biden is having with the European Commission. A Union Commission President Ursula von der Leyen. But look, this comes at a time when the
U.S. and the E.U. are trying to show this united front when it comes to Russia's war against Ukraine.
But behind the scenes, there's also that tension that has been playing out over these clean energy tax credits that were included in the Inflation
Reduction Act. Officials said heading into this meeting that that would be a key issue of discussion for President Biden and President von der Leyen.
And one thing that hasn't been of great concern is the fact that these tax credits are currently being distributed through the Inflation Reduction Act
to countries that are sourcing, or it's tax credits for batteries and materials, a percentage of which is being sourced from countries in North
America or those countries with free trade agreements which right now, the European Union is not a part of.
There are many countries who have said that they feel penalized by this provision of the Inflation Reduction Act. So, this meeting between
President Biden and the E.U. president offers an opportunity to try to address some of those tension points. One thing that officials said going
into this was that there -- were hoping that it would start a discussion and start negotiations, that it would allow some European countries to
benefit from this proposal.
So, we will see if after the meeting, if there is any type of announcement from the two leaders. They simply said there, as you heard that they had
plenty of issues to discuss between the two of them. But this is certainly a tension point that is underlying so much of the relations right now
between the U.S. and many countries in Europe at a time when the U.S. still needs Europe, and its allies to be on board in standing up to Russia's
aggression against Ukraine, including at a moment when China, a U.S. official said may be considering providing aid to Russia as they continue
to carry out this war.
So, this is certainly a very important meeting for President Biden that he is having today as he's trying to smooth over some of this tension that
currently exist or these clean energy tax credits.
SOLOMON: Yes, absolutely. Very important meeting. But as you lay out very well there, Arlette, it's a delicate balance with all of these geopolitical
interests at this time. Arlette Saenz, thank you.
And former U.S. President Donald Trump could soon be facing criminal charges. Prosecutors in Manhattan are offering Trump a chance to testify
next week before grand jury. A signal that it may be preparing to indict him. Now all of this stems from a $130,000 hush money payment to adult film
actress Stormy Daniels. That payment was made just days before the 2016 presidential election.
That was after an alleged affair between the two that Trump denies. And it's not yet clear if he will actually testify. Kara Scannell has been
tracking Trump's legal woes and joins me now. So, Kara, the consensus does appear to be that an indictment could soon be coming.
That is at least the consensus but what does that signal in terms of the evidence prosecutors must have in order to bring charges and what charges
might we see?
KARA SCANNELL, CNN REPORTER: Well, Rahel, it's right. I mean, all the evidence is pointing toward this wrapping up this investigation, finally
coming to a conclusion. And this all centers around the hush money payments, just as you would describe. Now, there are a finite number of
people who were involved in those conversations and a number of them -- all of them, frankly, have been brought before the grand jury or met with
federal -- with the Manhattan prosecutors investigating this case.
So, they've gotten firsthand testimony from the people whether it was Michael Cohen, who was Trump's fixer, who was meeting with prosecutors
again today, as well as Hope Hicks and Kellyanne Conway who were on Trump's campaign. Now, evidence in Cohen's federal case. Remember, he pleaded
guilty to campaign finance charges in the federal investigation. A lot of evidence had come out in that where we saw that there were phone calls, and
people were scrambling and trying to ink this deal.
So, those people have all met with prosecutors or gone before the grand jury. And the other piece of this is what the charges will be or could be
and what prosecutors are looking at, according to my sources, is whether Trump was involved in falsifying business records of the Trump
Organization. That all relates to how Michael Cohen was reimbursed and how that reimbursement was noted in the books and records of the company.
That would be a misdemeanor in New York, but it could be a felony if they're able to prove that the records were falsified to commit another
crime or to conceal another crime. And that takes you back to the campaign finance. So, we've seen a number of people come in, prosecutors have been
investing -- investigating this for years, Cohen is back again today. And then they've made this invitation to Trump. So, this is all beginning to
come to a head, Rahel.
SOLOMON: Kara, if in fact, we see a criminal charge, that would be historic in and of itself. But a conviction, of course, is an entirely different
matter. And certainly, far from certain. What is the former president saying about all of this?
SCANNELL: Yes. So, I mean, at an outset, Trump has denied any knowledge of this payment and for prosecutors to succeed. They need to prove that he had
intent, and that he was involved in the falsification of the records and intended to conceal or commit this campaign finance violation. I know
Trump's lawyers have saying that, you know, the Manhattan District Attorney's office have been turning over every stone in Trump's personal
life, in his business life.
They haven't come up with anything. Now they're focusing on this. They say that that is selective prosecution. Interestingly, we're also seeing maybe
a signal of how they're going to play this as a defense. They're suggesting that this was an extortion attempt and that Michael Cohen, who was Trump's
attorney at the time took it upon himself to make this hush money deal. Rahel?
SOLOMON: Very interesting. We will see. Kara Scannell, great to have you. Thank you.
Coming up next, we were heading to Ukraine next where fierce fighting continues in the eastern city of Bakhmut. Russia is also continuing to
strike other parts of the country and one of its biggest aerial assaults. We'll be right back.
SOLOMON: Now to Ukraine where fierce fighting continues tonight in the eastern Ukrainian city of Bakhmut. Ukraine's Armed Forces saying it is
still the hottest spot on the front line and the target of heavy Russian fire. Meanwhile, on Capitol today, a somber ceremony was held to remember a
fallen soldier. Thousands of people showed up to honor Ukrainian commander killed on the brutal battle for Bakhmut.
CNN's Ivan Watson reports now from Kyiv.
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: This is how Ukraine is honoring one of its fallen warriors. A young man, 27 years old named Dmytro
Kotsiubailo. He was the youngest battalion commander in the Ukrainian armed forces killed this week in that grinding battle of Bakhmut that has gone on
for months. Now he went under the codename Da Vinci. And Kotsiubailo was famous in Ukraine because as a teenager, he had joined the pro-democracy
protests here in Kyiv's Maidan Square.
A face off against the security forces in which the protesters ultimately won and a pro-Russian President fled to neighboring Russia. And he joined a
militia group after that battling pro-Russian forces in the Donbas region, a group called the Right Sector whose flags had been demonstrated here and
patches as well. Now, Moscow considers that organization a terrorist group and denounces them as Nazis.
But last year, the Ukrainian president Volodymyr Zelenskyy gave Da Vinci the award calling him a hero of Ukraine. Now, he is being laid to rest. And
as you can see, he is truly regarded as a hero by many, many Ukrainians. This underscores the immense costs that the battle for Bakhmut, the cost
that is incurring on the Ukrainian Armed Forces. Ukrainian commanders insist that this battle is bleeding the Russian military dry, but it is
also causing immense sacrifice for the Ukrainian Armed Forces.
Ivan Watson, CNN, Kyiv.
SOLOMON: It seemed three years ago that the economy was going off a cliff. After the break, I'll talk to author Liz Hoffman about how bit business
manage the pandemic crisis.
SOLOMON: -- they respond to the pandemic.
LIZ HOFFMAN, AUTHOR, CRASH LANDING: Actually, the airlines are a good example there. This is an industry that is just constantly stumbling from
one screw up to another. It's a really -- it's fundamentally a boom-and- bust industry they're in the business of flying very expensive hunks of metal around. And, you know, coming into 2020, there was a sense that they
kind of escaped that cycle.
There's a quote that I opened the book with from the CEO of American Airlines, Doug Parker in 2017, where he says, I don't think we're ever
going to lose money, again, just a good reminder of the hubris that had been baked into the corporate class over the course of a very benign 10
years in the 2010s. And they would not have survived but for the government. I mean, just billions of dollars payroll was covered.
Ultimately, again, I think that was the right call. Think about the travel hell that we've been living in and 2021 and 2022. The holiday meltdown at
Southwest would have been immeasurably worse had those people been off the payroll off of their training schedules. It's an incredibly regulated
industry. And so, I hope that that industry is humbled by this and they owe a debt of gratitude to the taxpayers.
SOLOMON: Yes. It's a great point. Liz Hoffman, it sounds like a fascinating read. Thanks for being on the program today. Thank you.
HOFFMAN: Thank you for having me.
SOLOMON: And there are just moments left to trade on Wall Street. We will have the final numbers and the closing bell right after this.
SOLOMON: And there are just moments left to trade on Wall Street. The Dow is set to close lower for fourth straight day. It is now off 345 points. A
little bit more than one percent there. Now, some of this reflects jitters over the failure of Silicon Valley Bank which we've talked a lot about this
SOLOMON: That is QUEST MEANS BUSINESS. I'm Rahel Solomon. The closing bell is ringing on Wall Street. "THE LEAD" with Erica Hill starts right now.