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QUEST MEANS BUSINESS

GM Sells Opel to Magna; Madoff on Tricking SEC

Aired September 10, 2009 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Magna takes the wheel or Opel after six months of trying to get in the driving seat. Buying time, the Bank of England banks on low borrowing to keep the recovery on track. And criminal mastermind at work, Bernie Madoff caught coaching colleagues how to deceive America's SEC.

I'm Richard Quest. It may be Thursday, but we have an hour together where I mean business.

Good evening.

The lengthy tug-of-war over the future of Opel is finally over. General Motors is letting its European subsidiary go to Canada's Magna and Russia's Sberbank. The consortium will get a majority 55 percent stake in Opel, which includes the U.K.'s Vauxhall operations. Employees hold another 10 percent of the company. General Motors, GM of the U.S., keeps 35 percent.

The German chancellor, Angela Merkel today welcomed the decision.

(BEGIN VIDEO CLIP)

ANGELA MERKEL, GERMAN CHANCELLOR (through translator): I can inform you that a short time ago the chancellor's office was informed by Mr. Henderson that GM's governing board has decided to sell Opel to Magna, the structure that we had negotiated, and the German government welcomes this.

I'm very happy about this decision that was arrived at, which is along the lines of what the government hoped for and is also along the lines of what the employees of Opel hope for.

(END VIDEO CLIP)

QUEST: Diana Magnay is in Berlin tonight for QUEST MEANS BUSINESS. She joins us now.

Diana, I mean, to some extent, this was always the preferred solution by many. So it begs the question, why did it take so long for GM and for Merkel and everybody to come along with this?

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Well, Richard, the reason it was preferred here in Germany was because it was the one option that would save the most jobs here. Magna said that they would keep all four plants up and running and would try and keep jobs within Germany, at least.

But the fact that they were teamed up with this Russian bank, Sberbank, which also has involvement, a close alliance with the Russian car-maker GAZ, was a bit of a stumbling block for GM.

GM didn't want its technology and the technology of Opel to fall into foreign hands, or to become owned by Russian car-makers. So that was one big stumbling block. And I think that once GM had restructured to a certain extent, had come out of bankruptcy, now that it's owned by the government, it wasn't sure that it did actually want to let go of Opel altogether.

It decided to spend a bit of time looking at its own options whether it could keep Opel within the family tree, but probably kept that an impossibility with the fact that it simply didn't have the funds. And that is what the German government is going to provide -- Richard.

QUEST: So do we know how much money Angela Merkel's government is providing in terms of loans or guarantees?

MAGNAY: Well, she has already provided 1.5 billion euros, that was a bridging loan that GM -- that the government said GM, if it kept hold of Opel, would have to pay back.

She's now saying that she will provide 4.5 billion euros again in government-backed guarantees to the Magna deal. And that apparently the German government will try and syndicate amongst the other European countries who have GM Europe plants on their turf -- Richard.

QUEST: Is there a feeling that despite the delay, actually the best deal has been done, not only for protecting the jobs, but for protecting the name Opel, which I know now and understand is much loved within Germany?

MAGNAY: Absolutely. And people believe that the Opel brand and cars that Opel makes are good cars. The Opel Insignia, which is produced out of Russelsheim, which is the main headquarters of Opel, was voted European car of the year. Opel has some strong brands, as does Vauxhall. And it is believed to be a strong car-maker.

But it was the first of the German car-makers back in November to ask for government help in the auto crisis. But I think with the finances in place for this Sberbank-Magna deal, it does have a certain amount of -- it has a future, whereas with the other options that were on the table, that wasn't really so certain.

QUEST: Diana Magnay, live for us tonight with the German side of the story. Diana, many thanks, indeed.

We need to put this into the totality of the GM Europe, because as you will be aware, the deal is a considerable boost for Chancellor Angela Merkel, just two weeks before national elections.

Opel has four production plants in Germany, with more than 25,000 employees. But GM also has factories in across the other parts of Belgium, Spain, and Portugal. You get an idea there. In Germany, 25,103.

Now the auto giant employs more than 54,000 people across Europe. But for this part of our discussion tonight, let's look over here. Let's look into the U.K., where cars and vans with the Vauxhall name are being built at two British plants.

(BEGIN VIDEOTAPE)

PAT MCFADDEN, U.K. BUSINESS MINISTER: Our approach was to seek the best commercial solution for GM, and in particular, to seek the best solution for the U.K. plants. So we've been in touch with Magna throughout. They have assured us that they see a production future for both Ellesmere Port and for Luton.

In the discussions that continue now, we want to make sure that those assurances stick and that Vauxhall production continues here in the U.K.

: How many British jobs are going to go?

MCFADDEN: I don't think we can say that. There will be some restructuring across Europe. I think it's far too early to say that jobs will go in one country or another country. I think there are reasons to be hopeful and confident about Vauxhall production in the U.K.

We've got a great workforce here. They make strong products. The Astra is a very popular car, customers like it. So I think Vauxhall in the U.K. is in a strong position. And our objective in the discussions that will happen about government finance and support for a restructured GM Europe, will be about securing the future of those plants.

We've got assurances on that from Magna. And we want to make sure that those stick in the future.

(END VIDEOTAPE)

QUEST: So that is the British government's position from Minister McFadden, if you like. Of course, as seen from the worker's point of view, that might be a very different outlook, since jobs have been guaranteed, or at least factories have been promised not to be closed in Germany.

ITN's Daisy McAndrew joined me a short while ago outside Vauxhall's factory in Luton, north of London. So clearly the question for Daisy was whether Vauxhall workers were right to be worried.

(BEGIN VIDEOTAPE)

DAISY MCANDREW, ITN CORRESPONDENT: That's absolutely right. Now whilst Opel in Germany have 25,000 workers, yes. Vauxhall over here in the U.K. only has 5,500. But of course, as far as we're concerned, those are 5,500 very important jobs.

Now we have two different plants, Ellesmere Port in the north of the country, and Luton here where they make the vans. And this is where I think most of the jobs are particularly vulnerable.

And the anger here from workers I've been talking to today is that as they see it, the British government didn't put their hands in their pockets and flash the cash in the way that Angela Merkel did.

Now of course we can all say, well, Angela Merkel has got an election coming in the next few weeks, and you can see why she did it, but again, these workers very, very disappointed here that they haven't been guaranteed their jobs.

QUEST: You see, that's the point, the -- Magna has said no job losses or no "planned closures," to be precise, in Germany. So the fear that it's the U.K. that will bear the brunt if it's going to become profitable.

MCANDREW: Absolutely, because we all know that there is a fundamental problem no matter how much we tinker at the edges. And that is overcapacity, factories making cars across Europe are simply making too many.

Now when credit was cheap, it was easy for people to buy new cars. Now with the credit crunch, the recession, cars are simply not selling. So with that overcapacity and with the German plant guaranteed to stay open, well, the squeeze has got to come somewhere. We're making a third too many cars and it's going to come here.

QUEST: So what happens next in terms of these U.K. plants? The British government says today it's hopeful they will remain open, but is it likely that the British government is going to have to put its hand in its pocket, or is it just too late and really it's now up to Magna?

MCANDREW: I suspect it will be a bit of both, as so often is the case in politics. As I said, Ellesmere Port, we've been told by Magna that it's safe. But they are only talking about the short term. They're not giving any guarantees.

This plant has a contract with Renault, which lasts until 2013-2014. And I think that's when we're going to see the squeeze come in here. So yes, I think no job losses in the next few weeks or months, but also, of course, don't forget, there is now this cloud hanging over the workers.

Many workers here have worked here 20, 30, 40 years. And they simply now believe that they're going to have one or two more years and then they will not be working at Vauxhall and there won't be any other jobs for them to get in the area.

(END VIDEOTAPE)

QUEST: The comprehensive coverage that you've come to expect on this program. That was Daisy McAndrew of ITN on the British side of the Magna- Opel decision.

The Opel deal couldn't come a moment too soon. It's the Frankfurt Motor Show next week, and we'll be there speaking to the big names in the auto world. We'll have the chief executive of Opel. We'll also be speaking to the executives of Audi and of Saab, all auto companies, particularly Saab, in the news at the moment on QUEST MEANS BUSINESS next week.

The news headlines now. It has been a busy day, doesn't matter which way we look about it. Max Foster is at the CNN news desk.

MAX FOSTER, CNN INTERNATIONAL ANCHOR: And, Richard, Afghanistan's election monitoring body tosses out votes, ballots. It released 83 polling sites have been disallowed, citing evidence of ballot box-stuffing and fraud. The results come from three provinces generally seen as strongholds of incumbent President Hamid Karzai. The tallies from several hundred more stations are also under the microscope.

Mr. Karzai's main rival says results should not be released until all fraud claims are sorted out.

A series of blasts has shook Iraq today, killing at least 26 people, wounding more than 80, the deadliest attack happened just before dawn in a Kurdish village near Mosul in northern Iraq. A suicide truck bomber triggered a massive blast, killing at least 20 civilians. Many houses in the village were destroyed in the bombing.

Police in Turkey free a group of scantily clad women they say were tricked into appearing on a fake reality show. Nine women were reportedly told they were on a "Big Brother"-type set in a villa in Istanbul. They were held captive for months -- for two months after several suspected it was a hoax. In reality, their naked images were being sold over the Internet.

The Lebanese prime minister-designate says he is abandoning efforts to form a new government, but the Hezbollah-led parliament minority has rejected his lists for the 30-member cabinet. The president now has to start fresh consultations to nominate a new prime minister. Hariri could be selected again, though.

Those are the headlines, Richard. Back to you.

QUEST: And we'll see you, Max, in about 15 minutes from now. As we continue, overheated or a sign of the recovery? It really is time that you and I took stock. Global stock markets have been basking in the welcome late summer sunshine. Investors may shiver, autumn has begun. And this is QUEST MEANS BUSINESS, so we need to put it into perspective. Good evening.

(COMMERCIAL BREAK)

QUEST: And welcome back to QUEST MEANS BUSINESS where we're looking at the markets and how they have traded. Investors around the world seem to be exercising a little caution as Thursday the picture for global stocks is fairly uncertain. Some markets pulling back. You would have had to be living on a different planet or not watching this program not to have seen the bull run.

Today's number suggest investors are pausing to reflect. The Dow Jones Industrials, now let's begin there where we're seeing a gain of just three-quarters of a percent. Investors are cautious after the run-up.

One thing to note is that jobless claims in the U.S. down 26,000 last week. Forget that perhaps economic number, what we need to realize is the Dow has climbed more than 3 percent in just a week, it has put on more than 270 points. So without a strong rally in the Dow. That much you know so far.

In Paris, though, today, the CAC 40 down just half a percentage point. It was banks that were taking a bit of a blow. Some industrial production numbers in France. Now let's talk about those just for a brief second, if we may.

Industrial production in July rose 0.1 percent. Now that is good on one level, but it's not as good as was seen in June. So although France has still got industrial production under way, it has eased off just a tad. And that gives grist to the mill of the critics who say that actually the recovery is really very, very tepid, indeed.

Which brings us onto the FTSE, down a third of a percent, all the big banks were down quite sharply. This despite Halifax. Halifax one of U.K.'s largest home loan organizations, they say prices rose in August for the second month in a row.

Prices rising the housing market and this could be one of the reasons because what we've seen is prices rising in the housing market as a result of low interest rates. The low interest rates from the Bank of England, they kept them at historic low at some half a percent. They've also decided they're going to continue their policy of quantitative easing.

There has been an enormous amount of talk about whether the real world and the stock market have now operated on completely different planes. Trevor Williams of Lloyd's TSB joined me earlier.

(BEGIN VIDEOTAPE)

QUEST: And really, can we gauge that the stock market is a good barometer of what is happening in the economies?

TREVOR WILLIAMS, LLOYD'S TSB: Partly why you're seeing such strong recovery in markets is that it has been backed by public money. That's to say that a lot of the institutions that you see active in these markets are only around because government gave them guarantees on the money that they were borrowing from the markets, and that the government itself has taken stakes in many of these organizations.

And so when the liquidity, which has been pumped in, which runs into hundreds of billions across the world as we've drawn, as it will be gradually, one isn't sure what the state of these markets are going to be like. So using the markets as a benchmark for an economic recovery is highly misleading.

Moreover, we know that there still exists toxic assets, those that are clearly under water compared with the values that were thought they prevailed at a year or so ago. And it's not clear what is going to happen to those going forward.

And that a lot of the stimulus, which has been put into these markets will have to gradually be withdrawn. So it isn't certain at all that we are short of an uptick which is a V-shaped one. It's a supposition and it's an expectation, but it isn't yet there.

QUEST: So when we factor in the stock market, we are not necessarily going to see that strong a recovery, at least that's what we're being told.

WILLIAMS: That's absolutely correct. The stock markets have recovered some of their losses, but they haven't recovered all of it. If you took our stock market back to where it was in January of 2007, for instance, it still remains significantly below that level. And moreover, of course, it remains well below the peak, which was reached nearly a decade ago over nearly 7,000.

So when you look at it in context, you see that stock markets don't necessarily recover all of their losses quickly either.

QUEST: When we keep hearing warnings, whether it's from government officials or private economists like yourself, that the recovery will be slow, even the National Bureau sort of said it was going to be a very tepid recovery, a long -- and take a long time.

And yet, consumer confidence seems to suggest we still believe it might be V-shaped.

WILLIAMS: Well, I think that it's not necessarily the case that it's not going to be a V-shaped looking recovery. There will be a pickup, I think, after five quarters of decline. But that it's going to be a very slow pickup, that is to say that it won't bounce back to where it was previously.

And most graphs that you look at show more like a tick than a V.

(END VIDEOTAPE)

QUEST: If there was ever a case of.

(RINGS BELL)

QUEST: . time to pause for thoughts, from Trevor Williams at Lloyd's TSB, that was it. It's an interesting in many ways dichotomy between seeing the numbers rise but not really being able to comprehend why they should be going up so sharply.

In a moment, a lesson in deception from the real life master of the art, Bernie Madoff goes on the record, a billion-dollar fraudster shares a few tricks of his trade on tape in a moment.

(COMMERCIAL BREAK)

QUEST: Welcome back.

And Apple devotees will be happy to know that airline manufacturers have a new use for iPods on planes. If you don't own an iPod, don't worry, there are lots of other airplane gadgets that are in the works.

We went to check out what may be keeping business travelers entertained in the sky.

(BEGIN VIDEOTAPE)

EUNICE YOON, CNN INTERNATIONAL CORRESPONDENT: I'm Eunice Yoon at the Asian Aerospace Show in Hong Kong. There are a lot of new and interesting things on offer here.

First things first, I want to find out what the latest is in in-flight entertainment. Do you get a little bit bored with the movie selection on the plane? You can now watch movies off your iPod.

(voice-over): And soon you'll be able to get on to the Internet, as if you were logging on at a hotel and charged a fee.

DAVID BRUNER, V.P., PANASONIC AVIONICS: No more days of, oh, my phone doesn't work, I'm on this 14-hour flight and I can't communicate. You turn on that BlackBerry and you can receive all of your messages.

YOON (on camera): What are you doing? I enjoy my downtime in the aircraft.

BRUNER: You still can have that. You still can read that book. You still can watch a great movie. But at the same time, you'll be watching that BlackBerry, seeing that little red light and saying, ooh, I need to respond, oh, and what happens if it's a contract? What happens if it's a big PowerPoint presentation? You actually have the bandwidth that you can download that in an instant.

YOON: Traveling on long-haul flights, especially in economy, can be uncomfortable, but we found one company that is trying to bring massage chairs to all passengers.

JUDIE ROTHENBERGER, CEO, INSEAT SOLUTIONS: Economy is the most cramped. They're the ones with the least space and the least amount of options to get up, move, to circulate. And that's where the system actually does belong.

But the whole point of economy is that you're trying to keep the cost down. They charge you for a drink. They charge you for things like that. You could also offer this as a revenue-producer, slide your credit card, get 20 minutes.

YOON: Anything you could find on a plane is being sold at this expo, even the cutlery.

Safety is a prime concern on any aircraft, this life raft is for corporate jets. But the company is hoping to sell new models to commercial airliners that are seven times this size.

(voice-over): At this air show, all sales are welcome, big or small, whether they're planes or plane models.

(END VIDEOTAPE)

QUEST: Eunice Yoon reporting, she's at the Asian Aerospace Show in Hong Kong.

U.S. regulators are being hauled before Congress, and they're being put into the hot seat. The Securities and Exchange Commission is shortly to be asked to explain how it failed to detect Bernard Madoff's multi- billion dollar fraud scheme.

Last week the -- David Kotz, the SEC inspector general, revealed how the agency bungled five investigations of Madoff's shady businesses. Now they're going to have to answer why. He has already admitted receiving complaints that raised red flags, not once was there ever a full investigation into third parties to have actually found out.

Providing further embarrassment, Madoff, in his own words, telling colleagues how to dance around questions from the SEC. Listen to this newly released audio recording.

(BEGIN AUDIO CLIP)

BERNARD MADOFF, JAILED FINANCIER: These guys, they work for five years at the commission, then they become a compliance manager at a hedge fund now.

"MR. VIJAY": Right.

MADOFF: Or they go work for proprietary trading desks. Nobody wants to stay there forever. So nobody wants to give them that information, and you know, it's none of their business.

(END AUDIO CLIP)

QUEST: Now the mind of Madoff is a strange and complex place. One who has looked into more than most is the author of "Too Good to be True: The Rise and the (sic) Fall of Bernie Madoff." Erin Arvedlund joins me now from Boston.

Erin, as we look at this particular case -- now great extracts from your book, the core becomes that it really was a masterful operation, but frankly could have been easily discovered.

ERIN ARVEDLUND, AUTHOR, "TOO GOOD TO BE TRUE": This is what is so disturbing about the SEC's investigation. I actually read the inspector general's report that came out last Friday. It was about 450 pages. It came out before a big U.S. holiday, so I imagine they didn't want a lot of people to read it.

But what's really embarrassing is that the agency had a chance to catch Madoff as far back as 1992. They shut down two of Madoff's biggest fundraisers, but they never went back to actually see where the money was going.

QUEST: All right. Now you actually wrote an article in which basically raised the possibility that there was a fraud going on. Erin, did you ever believe that there was -- it was a long article, did you ever actually believe it was a full-scale Ponzi scheme of this size and magnitude?

ARVEDLUND: Not at all. I -- when I wrote the original Barron's story in 2001, I just knew he was running a hedge fund, he claimed to be using this very complex options strategy, and yet he was getting returns that nobody could replicate.

And then I got a tip from a very good source, Deutsche Bank, guy by the name Ken Nakayama who explained to me why the returns seemed manufactured. And I wrote the story and I just knew he wasn't doing what he said he was doing. But I had no idea it was a Ponzi scheme.

QUEST: One thing your book does shine light on is the -- is, if you like, the technicalities, because I have been amazed about how did he produce the receipts? How did he produce the documents, the physical reports that investors -- feeder funds would want to see?

ARVEDLUND: Yes.

QUEST: I look at my bank statement every month.

ARVEDLUND: Yes. Well, I totally agree. It's pretty shocking the amount of effort that he put in to create a phony hedge fund. It actually would have been less work to really -- run a real hedge fund. The guy and his staff created millions of pages of phony trades, phony statements, mailed out over decades.

QUEST: Right.

ARVEDLUND: It's stunning.

QUEST: I'm going to ask you one difficult question now when.

ARVEDLUND: Sure.

QUEST: . I freely give you the right to plead the Fifth, as you would say. Did he do it alone? Were others involved?

ARVEDLUND: He did not do it alone. Bernie Madoff pled guilty in August and he was sentenced -- I'm sorry, in July, and he was sentenced to 150 years. He went to prison claiming he had done it by himself.

We now know that to be false. His right-hand man, named Frank DiPascali, pled guilty not too long ago, a few weeks ago. And he explained in his -- in the complaint exactly how they enacted this fraud. And Frank talks about he and other co-conspirators. So I have a feeling other indictments are coming.

QUEST: Erin, thank you very much for giving us time. Please come back on the show when we have more time, because I would.

ARVEDLUND: Thank you.

QUEST: . love to talk more. You've done some superb investigative work in this story, and we'd like to hear more from you. Many thanks, indeed. Erin joining us from Boston.

Now we are watching Wall Street. The markets, I'd say they're a bit grumpy today. The Dow Jones Industrials open and doing business, we're in New York in just a moment.

(RINGS BELL)

QUEST: QUEST MEANS BUSINESS, don't be fooled, that gain is fragile, we'll talk about it in a moment. Good evening to you.

(COMMERCIAL BREAK)

QUEST: Welcome back. I'm Richard Quest, QUEST MEANS BUSINESS, this is CNN.

U.S. trade deficit swelled in July by the most in more than a decade. The trade deficit grew by 16.3 percent from June to $32 billion. The widening gap was largely due to a surge in demand for foreign cars, oil, and consumer goods.

So imports once again being sucked in, much larger than the imbalance that economists were expecting.

Analysts are calling the smaller deficit one of the few bright spots amid the downturn. But frankly, it's not particularly encouraging at the moment. Susan Lisovicz at the New York Stock Exchange.

Up 60-odd points on the Dow today, Susan. What is the main factor influencing trading?

SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: I think a sign that, you know, we're continuing to see improvement in the economy -- the global economy as well. You know, looking at airline stocks today, for instance, we know what kind of trauma they've been through, whether it's, you know, sky high fuel prices, or just people, businesses that aren't traveling.

They're taking off. JPMorgan writing a note that you can't ignore the trend and that -- that the winter won't be as bad. And you're seeing airline stocks taking off.

Health care stocks, for instance, like Aetna, WellPoint, United Health Care, Pfizer, they're all up on the sense that even after President Obama's highly anticipated speech to Congress on a health care plan that there are no game changers.

So those are just two. And then one last one. Initial jobless claims coming in lower than expected, this is on the back of Friday's monthly jobs report. Yes, the numbers are still awfully high in terms of jobless, but the trend is going lower. The market likes it.

QUEST: Susan, I've been listening to a couple of commentators, both radio and the newspapers. And the feeling is that we are getting ready for another leg up into the market, another strong rally. The correction that had taken place over the last two weeks is coming to an end. We've got another reporting season coming up.

Is this what you're hearing, as well?

LISOVICZ: You know, I mean there were people on the floor today saying that today was a head scratcher. But, you know, when you have this kind of trend -- and now we're talking five days in a row, never mind six months in a row -- or six months where we've seen the market going higher - - you know, I think that it is ripe for a correction, no question about it.

And when you get into this -- this period of whisper...

QUEST: Hang on. Hang on, Susan. No, no. No, no, no. (INAUDIBLE). So, oh, no, no, no, no. I -- I'm saying exactly the opposite. I'm suggesting that the commentators I'm hearing are saying that the correction has happened, the -- the worries have subsided and, actually, we're getting ready for an autumn push up the market.

LISOVICZ: But to go even higher. Well, I mean, you know, the numbers will bear it out. I think that if you have some big disappointments, I think that there is certainly a school of thought that says stocks will be punished and the market will -- will take it out. There is a sense that things aren't getting worse and the market has responded quite well.

I mean you look at the NASDAQ, it's up 31 percent year-to-date. We're talking about, you know, pre -- almost pre-Lehman levels now. So there's no question that there's a sense that things are better.

But how much more -- how much better?

I don't know. Well, we'll see. I mean we're getting -- you know, we're getting into the -- again, that whisper period and -- and announcements, pre-announcements in particular.

This is a big half of the year now and, you know, you're going to want to see growth and not just things that -- not just signs that things are stabilizing.

QUEST: Susan, many thanks. We -- you and I will do battle on this one again I -- I feel sure. We've got more...

LISOVICZ: I look forward to it.

QUEST: Yes. Well, let's see if you're saying that when one or other of us is proven right over the long-term.

All right, Susan, many thanks.

LISOVICZ: You're welcome.

QUEST: Back to the bourses. Back to work.

The demand for oil is raising. The IEA -- that's the International Energy Agency -- says the U.S. and China are using more than previously expected. It's increased its estimate of global oil consumption by nearly a half a million barrels for this year and next. The agency warned recovery will be slow and it could even die out next year.

It seems to me the IEA is having its argument both ways. Right now, a barrel of maramax (ph) costs $72 a barrel. The falling U.S. dollar makes oil look relatively cheaper, and that's spurring investors to buy.

Treasury secretary, Tim Geithner, is on Capitol Hill talking to a panel of lawmakers tracking billions in TARP money.

CNNMoney.com's Poppy Harlow has been listening.

And Poppy joins me now.

This is interesting, because this is the oversight panel that's been challenged or charged with making sure the money is not wasted. But there's so much money around.

I mean what did he tell it?

What -- what's happening here?

POPPY HARLOW, ANCHOR, CNNMONEY.COM: Yes, and that's a great question. This is the Congressional oversight panel led by Harvard Professor Elizabeth Warner tasked with tracking that $700 billion in TARP money, Richard. They don't get to decide where it goes. That's up to Treasury and the administration. But they have to ask the follow-up questions. And that's what you're looking at right now. It's happening as we speak in Washington, DC.

Treasury Secretary Tim Geithner, getting grilled on where that money is, how it is being used. They want to know more specifics. Time and time again we hear this panel asking for increased transparency.

I want to put up a sound bite from what Geithner said in terms of him talking about where we are in economic recovery in the United States and why.

Take a look at this.

(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, TREASURY SECRETARY: I think the U.S. financial system today is in a substantially stronger state than it was three months ago, six months ago, nine months ago and on the eve of this recession. It is very early and we did a lot of damage to the financials of this country. And it's going to take a while to get through this. And it's going to take longer to do it because we're going to do it right.

So I would not -- I would not want anyone to be left with the impression that we are not still facing really substantial, enormous challenges throughout the U.S. financial system.

(END VIDEO CLIP)

HARLOW: There you heard it from the Treasury secretary. Great, outstanding risks to economic recovery. But he did say -- and he has noted in this hearing -- that private forecasters are saying the economy is growing. We are recovering. But how we got here clear to everyone, as he put it, we borrowed too much, we saved too little, Richard, and we lived beyond our means -- Richard.

QUEST: The -- the -- the oversight panel has this responsibility to make sure the money is being spent correctly. But I do wonder -- and certainly Dr. Elizabeth Warren, as a Harvard professor, knows her business. But they must be having a hard job keeping track of it all.

HARLOW: I mean, they are. We have $70 billion that Geithner said today has been paid back in terms of bank loans. You've got $180 billion outstanding. You have money at Fannie Mae and Freddie Mac. You have money at the automakers that we heard this week, much of won't get paid back from General Motors and Chrysler. And they're also investigating, I should note here, it's interesting, what happened with the money put into Citigroup and Bank of America. There was a small note in this vast report that you see pulled up right here that said that -- that Elizabeth Warner and her committee, Richard, have asked for confidential memoranda from Bank of America -- on Bank of America and Citigroup from the Fed and from the Treasury.

I asked her why and she said let's just say they may be the future subjects of a report.

And you have to remember it goes far beyond just the loans that both of these banks got. Talk about hundreds of billions of dollars in debt guarantees, as well.

So there's a lot of outstanding questions. And I would suspect those banks would be the subject of a future report on this. It's a huge, daunting task. She said, though, Elizabeth Warren, the transparency is getting better, Richard, but they still want more answers from the regulators -- Richard.

QUEST: OK. Poppy Harlow joining us from New York.

And Poppy, I expect a full accounting for every penny of the money over the next few weeks from you.

Poppy Harlow in New York.

QUEST MEANS BUSINESS -- it is a busy sort of day, the sort of day that we like.

Max Foster is at the News Desk.

MAX FOSTER, CNN CORRESPONDENT: Richard, Turkey begins recovery efforts after deadly flooding. Emotional scenes here from a funeral for seven women caught in a flash flood inside a minibus. In all, at least 31 were killed after two days of record rains.

The prime minister calls it Turkey's worst disaster in a century. He blames illegal construction projects, in part, for the deaths.

A protest turned violent in Eastern Afghanistan. Some 2,000 people were demonstrating in the city of Ghazni a day after the death of a cleric. Police say militants threw a grenade into the crowd, killing one person, wounding a dozen. Local clerics and some city officials say security forces fired into the crowds. President Hamid Karzai has ordered an investigation into the incident.

A Bolivian preacher who attempt to hijack a Mexican plane says he was on a divine mission. Jose Pereira said he was -- he had to warn Mexicans of an impending disaster. After he was hustled off the Aeromexico flight in Mexico City, Pereira told a flight attendant that he had a bomb and demanded to talk with President Felipe Calderon. Police stormed the plane. No one was hurt in the incident.

And crystal clear new images from deep space courtesy of the newly spruced up Hubble telescope. NASA released photos of distant galaxies taken with improved sensors recently added to the satellite observatory. Astronauts gave the space telescope an extreme make-over during last May's shuttle mission. NASA says the Hubble will keep sending spectacular photos for many years to come.

It never disappoints -- Richard. Spectacular images.

QUEST: It never does, indeed.

Max Foster. And hopefully you should have some more of those in the hours ahead.

Max with the news.

When we come back in just a moment, look, when I met my last -- when I met my next guest, Heidi Hetzer, I met her earlier this week. Well, it was an event, indeed. When we come back, we'll hear from her about Opel.

(COMMERCIAL BREAK)

QUEST: Welcome back to QUEST MEANS BUSINESS tonight.

So, Opel is to be sold to Magna. G.M. announced that today. And Angela Merkel going along with it.

Earlier this week on this program, I met Heidi Hetzer. Heidi, of course, is the owner of one of the largest independent dealerships in Berlin. Heidi scared the living daylights out of me as we drove around the car park in a Berlin parking lot.

But Heidi joins me now.

Good evening, Heidi.

First of all, can you hear me?

Heidi Hetzer, can you...

HEIDI HETZER, CAR DEALER: And good evening, Richard.

QUEST: Good evening to you.

First of all, Heidi, what do you think of the sale to Magna?

Do you support it?

HETZER: Yes. I'm very, very happy. This morning, I thought it's all over. I thought General Motors is going to keep Opel and I was very sad. And then all of a sudden a journalist called me from a newspaper and he says well, what do you say that Opel is sold to Magna. And I was surprised because I hadn't heard about it.

The -- I -- nobody told me before. And I was so -- a stone was falling off my heart.

I'm so, so happy that we are free now, that Opel can become Opel again. And that I hope that we can now make our own decisions in Germany.

QUEST: Let's talk about what customers have been telling you, Heidi.

Has it been difficult to get people to buy Opel cars because of the uncertainty?

HETZER: Yes. Lately it was very difficult.

People were just asking what about Opel?

What about Opel? What about guarantees?

And I mean it was very slow, the business. And today, not much happened right away. But I think there is now a big chance that the Germans are happy that we have Opel back and that the German management can decide what kind of cars we're going to build.

QUEST: Right...

HETZER: And so I think business will be big again.

QUEST: Now, Heidi, let me ask you, this is a -- a difficult question to ask you, Heidi, but you will never forgive General Motors for what they did to Opel, will you?

HETZER: No, I cannot. I think the American management in Detroit, for many, many, many years, they just ignored Opel in Germany. It was just a small business for them and all they wanted was taking out money. And they didn't live Opel. They didn't live automobiles. And that we cannot forget, no.

QUEST: Heidi, many thanks, indeed.

Heidi Hetzer joining me from Berlin tonight.

We thank Heidi for that. The woman quite terrified me in Tuesday's program. That's something I won't forget in a hurry, whizzing around that car park. We might show it again on Friday's program.

The weather forecast, if you are traveling around, we're now in that interesting time of the year it gets a bit -- a bit uncertain, particularly in parts of Europe, as the season changes.

I don't know why I'm doing Guillermo's job for him -- but, Guillermo, you'd better agree with me after that.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, and there's something very important that I need to convey to your viewers. Be careful in the next days, including tonight, because that pressure in the great -- the (INAUDIBLE) is very high and you may get headaches or migraines. So those who suffer from migraines, careful in the next two days.

As you see, we're not going to have precipitation at all. I'm sure, Richard, that you've seen that already. No precipitation whatsoever. I was checking Lutwin (ph), Gatwick, everywhere. Nothing at all. And for the next two or three days, it's going to remain dry with a humongous high pressure. So watch for that.

Remember, the north will continue to be plagued by clouds and we'll see clouds in the south, blah, blah, blah, blah, blah.

But the other thing and which you mentioned has to do with the fact that it's cooling down a little bit. This is a time over here when you have to be very careful because if you go out in the morning and, yes, it's sort of fresh, then at night it may be cold. And we are expecting like 20 degrees. Now I'm talking about Northern Europe in general. You see it's going to remain stable.

Unfortunately, we see a new low pressure center into Turkey and that's the story we've been covering n Max was talking about, that funeral and -- and the situation in Turkey. Unfortunately, we get now a low pressure center in the area with more rain. And we're going to see some intense storms, especially west of Anatolia (ph). So all the way into Rhodes (ph), that area, in the next two days, is going to see how the system approaches the area and brings rain all the way to Istanbul in the Western parts, Bursa (ph), Chanacale (ph), Pamucele (ph), anywhere here on the Aegean Coast, too -- Bodrum (ph), Mamaris (ph). We are going to see over there the instability, as well.

Winds in Paris. The winds are going to be significant, as well, in Britain. They are from the northeast right now, so they are cooer. Zurich with some rain showers. Vienna with some rain showers. And into Poland is where the storm remains. And, as you see, in Rome we may see some bad weather.

So this is a new low. There you go. It's in the south and it's racing into Greece. And later on, it's going to affect Turkey then central parts will be fine. Germany here all the way into Berlin with clouds, but all the way to the north, too, and to Schleswig-Holstein and here into the west, as well, we'll see clouds.

And another system rising into the Gibraltar-Malagar Cavid (ph) area.

You see 30 Madrid is the high, 22 in London, 20 in the vicinity or somewhere there, 21.

In Berlin, look at the east, warmer now -- 25 and 27.

Remember the headache part of it because I told you -- I warned you. So if you're in the British Isles, take some precautions.

We'll see you on the other side of the break.

Stay tuned.

(COMMERCIAL BREAK)

QUEST: Africa is seeing an emergence of what is a highly pampered elite that are using their power to enrich themselves. This as ordinary Africans are struggling to get by. It's not my assessment. Oh, no. But that's of Moeletsi Mbeki, the deputy chairman of South Africa's Institute of International Affairs, the author of "Architects of Poverty: Why Africa's Capitalism Needs Changing."

In this book, Mbeki, who is the brother of the former president of South Africa, Mr. Mbeki says the blame for corruption lies with the current black elite.

(BEGIN VIDEO CLIP)

MOELETSI MBEKI, SOUTH AFRICA INSTITUTE OF INTERNATIONAL AFFAIRS: I'm saying these are the people who inherited political power from the colonialists. And instead of using their political power, which they inherited, for the benefit of the mass of the black people who supported them, incidentally, in their fight against colonialism, they are using their power for their own private benefit.

QUEST: But hang on, is it the system that's at fault or is it the practitioners of the system?

Because are you questioning capitalism as the system?

MBEKI: No, I'm not questioning capitalism as such. I'm questioning the practitioners. I'm questioning those black political elite in Africa.

QUEST: Dishonest?

MBEKI: Yes. Corrupt.

QUEST: Corrupt?

MBEKI: Yes.

QUEST: Thievery?

MBEKI: Yes. All those things. They do all the -- in my own country, South Africa.

QUEST: But why?

Why?

Why?

Because nobody teaches them to be corrupt and to steal.

MBEKI: Well, you know, you don't need to be taught to be corrupt and to steal because you -- you -- if you see one person richer than yourself and you want to live like that person, then you say, how do I get the money?

QUEST: You see, isn't there a fundamental fallacy, though, in your argument in that -- in blaming, if you like, the previous regimes in that the developed world does not run on those principles today, by and large. The developed world does not run on a principle of, now, corruption. There is transparency in markets and in the way companies are run and backhanders are frowned upon and most certainly you end up in prison and the courts.

MBEKI: Yes, but that's why the subtitle of my book is that capitalism in Africa has to change so that we go away from the thriving mercantile capitalist system toward the more industrial system with respect of rule of law, with respect of due process, with -- get rid of the big men who are above the law, which is what we are living with in Africa today.

QUEST: The difficulty with your philosophy there, is how to put it into practice.

MBEKI: Oh, it's a very different, how to put it in -- you can -- that -- (INAUDIBLE) like I have done, but obviously, these guys have got the guns, let me put it that way. And they will resist because they -- they're making money out of bad governments.

QUEST: Your brother is exactly an example, perhaps, some would say, of what you are talking about -- poor governance -- bad governance, resigned among scandal.

MBEKI: Well, absolutely. But this was the ANC government. It wasn't my brother as an individual.

QUEST: No, but part of.

MBEKI: Well, sure he was...

QUEST: Does this not put you in a difficult position?

MBEKI: Well, it puts me in a difficult position because I was part of the ANC myself. But, you know, you -- you -- in a political party like the ANC, you -- we are not all leaders of -- of the organization.

QUEST: And where does the blame lie?

Because when it's all said and done, the argument -- it doesn't matter how we slice this argument, it always come down to a basic -- is it the colonial legacy -- we left a basket case and therefore we are responsible, or the colonial government -- countries are responsible?

Or is it the current black elite?

MBEKI: It is, in my book, anyway, I am saying it's the current black elite. The colonialists left Africa 40 and 50 years ago. So you can no longer say they are responsible for what's happening in Africa.

QUEST: So why have so many leaders in Africa got warped moral compasses on this issue?

MBEKI: Because they think they can make quick money. You know, if you think that you can make quick money by stealing...

QUEST: But why do they believe that?

I mean we all know we can make quick money...

MBEKI: Oh, as the...

QUEST: We -- we all know we can make quick money by stealing, but we don't do it because it's wrong.

MBEKI: No, because you get caught.

QUEST: Yes.

MBEKI: It's not...

QUEST: Yes, well.

MBEKI: It's not just because it's wrong. It's because if you steal in the United Kingdom, you will get caught by the police, by the CIV (ph)...

QUEST: That's a cynical view.

MBEKI: But -- but it's human nature. You see, if -- if you are -- if there is a deterrence, then you don't do it.

QUEST: So you...

MBEKI: If there's no deterrence, you will do it.

QUEST: So you're saying there's no inherent morality in why we don't steal?

MBEKI: No. I -- I think there's no deterrent in Africa.

QUEST: Right.

MBEKI: We -- we need to build deterrents which deter these guys from stealing, which deter them from oppressing the people so we have to strengthen the power of the people.

(END VIDEO TAPE)

QUEST: Tonight's Profitable Moment, our final time together.

It has taken six months. Now, General Motors has decided Magna is the preferred buyer for Opel. G.M., the owner, keeps 35 percent. Just think about it. In the time it's taken to decide the European subsidiary's fate, G.M. has been in and out of bankruptcy. The car's scrappage (ph) schemes have been and gone and the recession has just about ended.

Some will say that this has been hesitation over action, delay over results. I wonder whether or not, actually, it's been the right way to proceed. From bailouts to bank sales, this recession has been caricatured and punctured with fast moves, often ill thought out.

For instance, Lloyds buying Halifax; Bank of America and Merrill Lynch; never has the phrase marry in haste, repent in pleasure been more true.

So maybe Merkel was right not to force the issue. Maybe General Motors did the right thing by not rushing to sell, as it did elsewhere. In the long run, this may be the most profitable moment of all.

And that is QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

Michael Holmes is at the International Desk.

Whatever you're up to in the hours ahead, I do hope it's profitable.

We'll see you tomorrow.

END

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