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Dubai's Debt Delay Is Seen As A Default By Markets, Shock Waves Rattle Investors.

Aired November 26, 2009 - 14:00:00   ET


RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: A seismic shock to the system. Dubai's debt crisis makes the markets quake.

Who wants to be a millionaire? Britain gets set to lay down the law on executive pay for bankers.

And the dollar's downward spiral. The greenback hits another low.

I'm Richard Quest. There's lots to be thankful for, because I mean business.

Good evening. Today it became clear the problems in Dubai are sending shock waves around the world. Stock markets across Europe fell sharply on fears that there is more and worse to come. The way Dubai told the world it was delaying payments and seeking a debt moratorium on billions of dollars of debt, just at the start of a long festive holiday week, has caused great dismay.

So just when things were starting to get better and we were used to hearing words like "profit" a new financial crisis is well and truly upon us. Stan Grant reports from Abu Dhabi.

STAN GRANT, CNN INT'L. CORRESPONDENT: Richard, we are talking about Dubai World. This is a state-owned conglomerate that specializes in managing ports, real estate, leisure activities. It has around $60 billion U.S. in debt. Now it is asking that repayments on that debt be held for six months. This is very worrying to investors. Around the world stocks markets have fallen on the back of this news. And ratings agencies are wondering if this is less of a delay and more of a default? Agency Standard & Poor's, for instance, has already downgraded several Dubai entities.

Now, Dubai has some debt coming in the next month. It has to repay around about $10 billion. Now it is hoping that Abu Dhabi is able to help out. Oil rich here, with a massive sovereign world fund, the biggest in the world. It is already bought billions of dollars in Dubai bonds to help pay off some of this debt.

Dubai has been very hard hit by the global financial crisis. Real estate, for instance, has lost up to half of its value. Now, Dubai has become the world over for big things. It has the biggest shopping mall in the world. It is building the biggest building in the world as well. Now it is known for big worrying debt - Richard.

QUEST: Stan Grant, reporting from Abu Dhabi.

Let's show you the sort of scale and the sort of size, and the sort of issues that we are talking about when we refer to Dubai. We begin, of course, with an overarching skyline view of Dubai. This gives you an idea. This is just one small part of the massive construction that has been in Dubai. Actually all the pictures you are about to see I took with my own - with me own cell phone camera, on a recent aerial trip over there. This gives you an idea of what it is about.

If you go up to the famous Palm Jumeirah, there it is right at the top, the new hotel, the one and only owned by (UNINTELLIGIBLE) hotel. If you look at the Palm Jumeirah, you see that there has been quite a lot of building actually completed. In fact, inhabited, and many celebrities bought on the Palm. And perhaps they are regretting the investment.

But it is up and running. This is part of the project. It is one of Nakheel projects that has been in trouble. Nakheel is one of the companies you just heard about, along with part of Dubai World that has asked to restructure. But this bit is up and running. Look at the Palm Jebel Ali, and you start to see that there is very much -the structure of this latest Palm is there, but there is not building taking place. Now, both of these are indeed major infrastructure projects within Dubai. The effects of what has happened, it will be much wider than just Nakheel and Dubai World. For instance, take a look at it. This is, of course, the Burj of Dubai, which will be the large - you see that thing -in fact the largest building in the world, at the moment.

All companies in Dubai, government registered entities, with a government identity, have seen their debt, and their potential, downgraded. And Emaar, which of course has built this -nothing wrong with Burj Dubai, per se, but Emaar, the company involved in the building of this, the developer, has indeed seen its debt downgraded along with everybody else. This is to be expected.

Now, elsewhere, away from Dubai, you see the markets and the rest of the world really did take a thumbing. The stock markets in Europe reacting. The FTSE 100 tumbled more than 3 percent. It was the banks that bore the brunt. The FTSE's biggest percentage drop since March of this year. Shares in the London stock exchange closed down over 6 percent. There was also concern over bourses Dubai's stake in the LSC. In Frankfurt, the Xetra DAX slipped 3.25 percent. Porsche fell more than 7 percent on fears that Qatar Investment Authority, the QIA, make cut its stake in the car maker.

You are starting to see the implications.

Among the big losers in London? Banks, the falls, HSBC down nearly 5 percent, RBS and Barclays, 8 percent. And Lloyds Banking Group ended the day down 5.75 percent.

One note, just to bring to your attention. We'll talk more about, and London did have its own unique problems. There was a computer glitch which halted trading in London for several hours during the course of the session.

Let's stay with Dubai, though. Earlier I spoke to David Butter, a regional director for the Economist Intelligence Unit.


DAVID BUTTER, ECONOMIST INTELLIGENCE UNIT: Part of the reason is the nature of the specific markets you are talking about. The ones which move very fast, where the particular bonds that were at an issue here. The price of that bond had gone down very sharply in February. It had been hovering and going up on the assumption that there would be some sort of bailout. And it fell down very fast when that bailout didn't happen. The other thing that moved very fast was the credit default swaps for Dubai. Which, again, had been very high earlier this year. There had been this kind of false assurance that things were OK. And now they reverted very fast to kind of panic mode.

QUEST: Has there been in some ways a miss-stepping by the Dubai authorities? Having led markets to believe that these companies, or others, would be bailed out and then pulling the rug out?

BUTTER: I think that is overstating it. I think if you look quite carefully at what the government has been saying and doing over the last few months, there were some warning signs. They went to the markets only a month ago to raise some money in their own name, in the name of the government of Dubai. And in their documentations, their presentations, they said we are not liable for the obligations of government related entities, such as Dubai World and Nakheel. So, I think that the writing was on the wall to some extent, that these companies would have to sink or swim.

QUEST: But investors, turning the tables, investors choose to blindside themselves and believe that Dubai would never let something like this take place. They wanted to believe it.

BUTTER: Well, I think so, because -yes, that is where perhaps there was some misleading, the particular deal, the Nakheel bond falling due next month. They had received signals that that would be paid on time. They saw some more money coming from Abu Dhabi. They saw Dubai government officials, Sheikh Mohammed, himself, saying that the money would be there. So, I think they had read these statements as being a signal that there would be OK.

QUEST: Where does it leave Dubai? Clearly, what has been shown is that there is a need for a strong, well-regulated financial center in the region. And Dubai is, to some extent, that center.

BUTTER: Well, I think that premise is not necessarily true. Dubai is where it is by virtue of being a trading and a services hub. It has been trying to be a financial center. It has been trying to be a big real estate center for the last 10 years or so. But it is core capability has been in trade and general services. The financial center was a gamble. There are other financial centers in the region. Bahrain has served pretty well for a long time. Saudi Arabia, again, is the biggest economy in the region. Qatar has its own ambitions in this direction. So, perhaps that part of the business is not quite as essential as they thought.

QUEST: And how secure? Because there are several other government entities, independent entities, they all saw their debt downgraded, or were effected today. How secure are we, do you think, from further knocks from Dubai?

BUTTER: Well, I think we are not secure until we know precisely what is going to happen to Dubai World. But I think when we are talking about Emirates Airline, talking about DP World Ports, talking about the government, in itself, I think that is pretty secure. Because although the Abu Dhabi backstop wasn't evident here, I think, ultimately, when push comes to shove Abu Dhabi will be there to keep Dubai afloat.

QUEST: Investors don't know when Abu Dhabi will choose to ride to the rescue. There is not overarching banking guarantee in that respect?

BUTTER: No, and I think that comes down to the lack of transparency in how all these things work. We simply don't know how the relationships are managed between Abu Dhabi and Dubai, and between Sheikh Mohammed and the al Maktoum family. And the business empire sort of grown up under their patronage. We are learning a little bit more about this as time goes on, but it is a painful process.

QUEST: And what we are learning does that give confidence?

BUTTER: I think it clearly has shaken confidence that some very big businesses are in big trouble. I mean, we knew that, but we didn't know how bad. And we didn't know that some of them are probably going to go to the wall. But perhaps, in the long term, we maybe more confident because of the reality check that came to Dubai a year ago, hasn't yet completely been absorbed or taken on board by the authorities. Perhaps the time has come that it has been.

QUEST: David, have a look at the traffic lights, our QUEST MEANS BUSINESS traffic lights. What do you think? A red, and amber, or -well, it is clearly not a green! But what would you choose. I'm not going to put words in your mouth.

BUTTER: Well, I do think it is an amber. I think we don't want to go overboard and say Dubai is finished. I think there are parts of Dubai, parts of what Dubai has achieved over a long period of time that will survive. Other parts are more questionable. So, I'm afraid, I can't give you a red or a green, it has to be an amber.


QUEST: And amber for Dubai, from David Butter.

Now, Wall Street trading is non today. It is the U.S. holiday of Thanksgiving. Wall Street opens again on Friday, a very important day. We will have full coverage, of course, as it is the first big shopping day of the year, for the festive season.

Tribute and prayers for the victims of the deadly Mumbai attacks; security tight after 10 gunmen targeted India's financial capitol a year ago. Now we take a look at how Mumbai has fared financially since the attacks.


QUEST: Welcome back to QUEST MEANS BUSINESS. The news headlines now and Fionnuala is at the CNN News Desk.

FIONNUALA SWEENEY, CNN INT'L. NEWS ANCHOR: Richard, the archbishop of Dublin has issue an apology after the release of the new report that says the Roman Catholic Church in Ireland hid decades of child abuse by priests. The three-year independent investigation into once secret records says the cover up was aimed at protecting the church's reputation.

Beijing today announced at 10-year plan to cut carbon emissions by 45 percent of their 2005 levels. But it comes with conditions. The percentage is to be tied to China's gross domestic product. Considering the country's rapid economic growth the total emissions may actually rise by 2020, but much less than they would without the new measure.

The September attack in Afghanistan has lead to the resignation of Germany's army chief. The German press says General Wolfgang Schneiderhan suppressed a report about the air strike on the hi-jacked tankers. At least 100 people were killed in the attack, many of them civilians. The report reveals that the German commander on the ground couldn't rule out civilians were present before he called in the air strike, which is a violation of NATO policy.

It was one year ago today that a group of terrorists struck India's financial capitol, Mumbai, sparking a three-day siege that ended with more than 160 people dead. The city remember the occasion with memorial services and candlelight ceremonies.

Those are the headlines, Richard. Back to you in the studio.

QUEST: We thank you for that.

Let's continue talking about that story of Mumbai. Earlier I was joined by Sara Sidner from outside the Taj Hotel, in Mumbai. And I asked her, obviously, a year on, there must have been a very, very wide range of feelings.


SARA SIDNER, CNN INT'L. CORRESPONDENT: Well, people are dealing with it in many different ways. There is certainly plenty of anger. People angry that, for example, the authorities did not have the weapons they needed. Did not have the training they needed to try to take on these 10 men, who came into this city and wreaked so much havoc.

And then you have those who really don't need a reminder of this day, because they lost loved ones, they lost family, they lost friends, in that terror attack. And they are mourning on this day.

And then you have those who are really looking at what they can do. What the average citizen can do to try to stop something from happening like this, again. And a galvanization, actually, of people trying to figure out how they can come together and make Mumbai, and India, a safer and better place, Richard.

QUEST: Is there a feeling, though, that in this respect, there is an inevitability of a future action. Maybe not as serious or with such loss life, but the authorities have failed so far to deal with the core problem that allowed this to take place.

SIDNER: There certainly is some skepticism here as to whether or not authorities are properly trained now, whether they have all the tools that they need. Whether they would be able to do something different than what happened back in 2008. There was a lot of miscommunication. There were a lot of problems between departments and a lot of people were very angry about that.

But what you saw over the last couple of days is the government trying to show off what they are doing. The have put a special task force here in Mumbai to try to deal with terror. They have also purchased some vehicles. They have purchased some armored cars, they have purchased some guns. And they showed those things off over the last two days. And they showed the task force training; so, certainly tried to show that there are things being done. But still, there are people here, including some of the police officers family members who are concerned that not enough as been done, Richard.

QUEST: If you look at the way in which international business has to some extent returned, the various hotel reopened, in relatively short order. Was that designed to send a message that business will continue. And if it was designed to send that message, Sara, has it been successful.

SIDNER: It was absolutely designed for the purpose you just stated. And as far as a success, yes, you are seeing some success of that. Although, I have to tell you that the Mumbai attacks that was one reason why people did not start coming into this city for a time. But there was also the global financial downturn and that certainly had its impact on foreigners coming into this country to visit. But just behind me you are looking at the Taj Mahal Palace and Tower, that was hit the hardest, that it was there, over some 60 hours, during the siege trying to deal with all of this.

And they say that at this point in time they have about 80 percent capacity. And mind you, some of those rooms, in the hotel, have not actually yet been refurbished. And so you are seeing Mumbai, certainly come back. It is buzzing like it always has been.

And one more thing, Richard, I went to one of the cafes that was hit by the terrorists, the Leopold Cafe. And it is completely packed, day after day, after day. Even though there are still bullet holes that the family has decided to leave in that restaurant as a reminder of what happened that day.


QUEST: Sara Sidner, joining me from outside the Taj Hotel, in Mumbai. It is worth you and I just taking a moment, since for many business travelers and for many tourists, Mumbai is one of those destinations.

Let's look at the sort of measures that have been taken over the last year. The demand for security systems is up by 125 percent, according to the central association of private security. The Oberoi Group itself, of course, one of the hotels affected, has spent over $80,000 on new scanners, metal detectors and security guards. But that is really only part of the issue because at the end of the day it is the official security forces, the police, that have the duty and the task.

Now, the force has grown by more than 1,000. They are now, of course, being specially trained in dealing with terror tactics. And so one of the criticisms that came out of the way it was handled last year and was, of course, that they didn't have the necessary experience, despite the experience that there are terror attacks; 1,000 men deployed to keep watch over high-profile targets. Overall, the top city police says that visible measures, the sort of covert measures that are taken to make people safe, even if that is not the overt, has cost the best part of $27 million U.S.. So that is what is being done.

To factor in how all of this has been on the markets, let's just show you where the Bombay Sensex, the main index, the BSE, has risen considerably during the attacks. Now what point do we make when we say this: If you look at the index over it has gained more than 85 percent, in just over a year. One can't make too many connections with, obviously, what happened before, however, you can say that that is an indication of why the India market is so important. Bearing in mind, of course, economic growth, which the finance minister himself forecasts will be up to 7 percent, possibly more; an impressive performance in one year.

Investors across Asia had a tough day. The Sensex suffered its biggest loss in nearly a month. It fell the best part of 2 percent. Elsewhere, major indices were down. Shares in the export firms sank in Japan. The yen hit a 14-year high against the dollar. In Hong Kong the Heng Seng fell more than 1.75 percent. The Shanghai composite was the hardest hit, 3.6 percent. Sydney's main index also closed in the red.

You have to bear in mind a lot of these issues on falling markets. There was no U.S. trading that could perhaps give some direction on this particular Thursday. It being Thanksgiving. That didn't effect what was happening to the dollar; down and deep in doldrums. It might have hiccupped on Thursday. But the trend is still one-way.

When we return we are going to look at what is dragging it down in just a moment. QUEST MEANS BUSINESS, good evening.


QUEST: Welcome back. The dollar up slightly from 14-year lows against the yen. Fears over the Dubai debt crisis sent investors scurrying for safe haven. That, of course, is one reason why the dollar did decide to perk its head up, not by much, it does take - it is a bit weird, isn't it? It takes a crisis before the dollar gets any form of strength. The worry is how long U.S. interest rates will stay at low levels.

This shows the euro has made against the dollar, over the last few months. It has gone from around $1.43 to rough, $1.50. That is 1 euro worth that much. Euro versus the U.S. dollar.

We talk to Jamie Jemmeson, who can talk more about what is causing the U.S. dollar to slide.

It is not immediately clear what is the -we know it is going down. We know that the inability of Geithner, and even Bernanke, to talk it up. But what is pushing it down?

JAMIE JEMMESON, CURRENCY STRATEGIST: Well, actually the main reason for the dollar weakness at the moment is the prolonged effect that the low interest rates is actually going to have. And what the dollar is actually being used for at the moment is a funding currency for this carry-trade scenario, that has already actually happened. And --

QUEST: Now, just let me pause there. I've read a lot about this carry-trade. Now, for viewers who may not be familiar, it is basically, you buy in one currency and you take it to another.

JEMMESON: Basically.

QUEST: You are buying in dollars and you are turning it into what? Yen or euros?

JEMMESON: Yes, something with a high yield. I mean, interest rates at the U.S. are at 0.25 percent and it looks like they are going to be at 0.25 percent for a prolonged period of time now. And what people are actually doing there, taking -borrowing in dollars and then buying - investing in something like the Australian dollar, which has got a lot higher yield. So, therefore, benefitting on higher rate of interest.

QUEST: Are people really doing that?

JEMMESON: Yes, it has been happening for years.

QUEST: No, but have you noticed an upturn in it, of people actually doing this. I mean, we were familiar with the carry-trade that took place with the yen.


QUEST: But now you are saying the carry-trade is taking place with the dollar. People borrowing in the dollar and investing in the high yields?

JEMMESON: Yes, absolutely. I mean, that is why if you look at across the board, the dollar is actually weak. I mean if you look at the Australian dollar. It is up at its high levels and the euro, again, is up at its high levels.

QUEST: OK, so that is not a sort of fundamentals play. That is a speculative (UNINTELLIGIBLE). If you look at fundamentals, the U.S. is still running a large trade imbalance, a trade deficit, a horrific trade deficit. Interest rates will remain low. Unemployment is going to remain high. Do the fundamentals justify this rate of the dollar, do you think? That is the key question.

JEMMESON: The fundamentals have started to improve in the U.S. If you looking at sort of the rate of unemployment. Yes, we are seeing it go up. Yes, it is expected to come out at 10.2 percent next Friday with the non-farm payroll figures. But what is going to be key is actually the rate of unemployment is actually slowing. Or the speed of job losses is slowing.

QUEST: It is sort of economic growth. I mean the Fed increased its view on where economic growth was going to be. It went sort of now, to 2.54 next year.


QUEST: Is the dollar -- this is the key question I know of as one daunting (ph). Is the dollar still on a one-way bet lower?

JEMMESON: In my opinion, yes. Just simply because the broader fundamental picture that you actually see in the U.S. economy at the moment, as you have already highlighted.

QUEST: What numbers are you looking at for the dollar in the coming up, do you think?

JEMMESON: Well, we have been stuck in a particularly tight range for quite a long time now. Cable has been trading against the pound sterling and Cable -

QUEST: Cable is fine by us.

JEMMESON: Cable has been trading between, a range of sort of like $1.57 to $1.68. It does look like on a technical basis that sterling could break higher. We could see it testing up towards $1.70 to $1.75, and maybe an .80.

QUEST: Yes, but Cable is on its own, because the U.K. economy is in such trouble.


QUEST: What about the exotics? The Australians, the Kiwis, the Canadians?

JEMMESON: The Australian -

QUEST: All the other currencies that the dollar is trading with. Where is the bet going against them, do you think?

JEMMESON: Well, again, the U.S. dollar is definitely lower. I mean, people are talking about parity against the Australian dollar. We are expecting, maybe, the Australians see an increase in interest rates again on Monday.

QUEST: Yes, yes.

JEMMESON: I'm afraid there is about a 75 percent chance of that actually happening. And if that does happen, again, going back to

QUEST: That would be the third.

JEMMESON: Going back to this carry-trade scenario again. That makes that, again, more attractive investment still.

QUEST: Finally, is there not a problem, though, with carry-trade, that you inherently at risk of the currency going against you?


JEMMESON: Of course.

QUEST: Yes, I mean,


You borrow in the dollars. You invest in these say, the Aussie?


QUEST: But if there is a reversal in that? That is what happened last year with the U debt, the U debt (ph) nutcrackered (ph).

JEMMESON: Of course, and that is what we have seen with the Japanese yen, let's just take for example. That is now trading, as you already commented, at 14-month high against the U.S. dollar. And there is obviously some concern how that is actually going to impact that economy once normality returns.

QUEST: Jamie, a fascinating discussion. Really enjoyed getting to the nitty-gritty of currencies with you tonight. Many thanks indeed for coming in.

JEMMESON: Thank you very much.

QUEST: Now, if you are a U.K. banker -actually I should have asked Jamie whether he would be on the list. That would be most unfair. Does he earn more than a million pounds? $1.8 million? Soon we will know how many people earn that sort of money. Because the idea is to make Britain have some of the toughest rules on bankers bonuses.


QUEST: Good evening. I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN.

Banks in Britain look set to face the toughest pay and bonus regime in the world. At least that is according to a new report that was commissioned by the Brown government, which has called for a major shake up. It is called the Walker Report and it says banks should be forced to reveal how many employees are earning a $1.6 million a year, $1.6 million. The pay disclosure is the most, if you like, controversial aspect.

Executives will be placed into bands according to what they take home. The bands start at $1.6 to $4 million. And a second band at $4 to $8 million. And bands in the $8 million, plus, thereafter.

It is a revolutionary idea. No names would be given. It would all just be the numbers of people in that bank earning over a million pounds a year. Britain's finance minister says the government will take immediate steps to implement these recommendations. The changes could come into effect in April, the first year the earnings disclosures will not be available until 2011.

The report's author, David Walker, is the former chairman of Morgan Stanley International and says there are more than 1,000 bankers -more than a 1,000 -who earn more than $1.6 million a year.

David Walker says his proposals will minimize the chance of another banking collapse. He spoke to CNN affiliate, ITN.


DAVID WALKER, AUTHOR, WALKER REPORT: If you have the sort of regulation that we now see being rightly put in place, with improvement in the way boards are run, supported by their owners, as I have proposed, that is a pretty powerful combination. And my fairly confident expectation will be that although there will be blips perhaps in the individual institutions, the risk of anything like a reoccurrence of what we have gone through will be hugely minimized.

UNIDENTIFIED MALE: Does this have to be the end of the ol' boys network? Perhaps too much comfort in the boardroom, everyone being good friends and pal-ee, and not actually questioning each other?

WALKER: Whether people have to remain good friends I am not sure. My very strong conviction and based on a fair amount of experience is that you can have perfectly agreeable disagreements. And if the disagreement is about something strategic and important, well, if the disagreement has to become a disagreeable, well so be it. But there is no reason why disagreements should be disagreeable.

And I agree with the observation that boards have been too matey and cozy and loyal and comfortable in the past. We have to change that. It doesn't mean they cease to be collegial. But there has to be mutual respect for the ability of other members of a board to stand up and be challenging.

In the specification for the ideal non-executive director, not just in a bank board, but in any board, which is husbanding a lot of assets on behalf of shareholders, all of us, I think there are two critical qualities. One is a feel for knowledge of the business. The individual has to be capable and be well-informed. That actually can be acquired to some extent on the job. You can have executive business awareness sessions to keep people up to date. But if you look at some of the bank boards of banks that got into severe difficulty in this situation, you had very capable individuals who had great knowledge of the business.

But they didn't do the other thing, which I see as a sine qua non, and necessary condition for being an effective non-executive director, you have to be ready to raise your hand and say, hang on a minute, I don't understand. I'm not -you know you have to be able to do that without embarrassment. You have to be ready to feel that others are seeing you as a fool. I mean, you have to cut through that. I don't understand. Can this please be explained to me? And until it has been explained and I understand it can we please go slow on this proposition? Or can we stop it, or can we change it? That hasn't happened enough.

UNIDENTIFIED MALE: What is your message to British banks, or British traders, who don't like what you are saying? Would rather it just didn't happen?

WALKER: Well, some of them won't like it. But my message signal to them is, get the message, because if you don't get the message I see no alternative to a combination of much tougher regulation based on more legislation. And then you are freedom to be competitive in the world marketplace will be at an end.


QUEST: Jim Boulden joins me now to put this into perspective. Fascinating stuff listening to David Walker.

JIM BOULDEN, CNN INT'L. CORRESPONDENT: Yes. And the criticism is coming from both sides. There are people who are saying it isn't tough enough. You know nine months, 180 submissions, and he won't even allow the banks, or won't even make the banks give the names of the people who make all this money.

QUEST: Well, what is the purpose of the -

BOULDEN: Yes, I'm still trying to figure that out myself. I mean, we can't say name and shame, these aren't people who have broken the law. So I'm not sure why people think that the names should be given. The idea of telling the shareholders how much these people are making is so that the shareholders can decide whether they are too many people making too much money if the bank itself isn't making enough profit. So that is why, the reason for these bands. But that is not going to change anything that I can tell. I can't find any reason why that is going to make any difference. Then the idea, of course, that the board should be more independent. There should be a risk committee inside the board.

You should be able to have -other countries should follow these rules, because of course the banks are saying, hey, look, if you do this to us who says we are not going to move to Singapore and get rid of the whole thing? Well, that's not going to happen. But they would like to see more, other banks, have to go through this as well.

QUEST: But there are some eminently sensible ideas on the questions of deferred bonuses. It should be for five years. Maybe that is a little bit long. But the idea of long-term reward rather than short-term sprint to the bank.

BOULDEN: And really, I think one of the most important ones here is "claw back". We keep hearing this term, "claw back". But the idea is that the banks should have written in their contract. So that it is not the government getting involved. It is not the Bank of England getting involved, but the bank should be able to have claw back.

QUEST: How does claw back work? If I


QUEST: I mean, you know, it is a bit like me -it is a bit like me lending you 20 pence for a cup of tea and trying to get it back.

BOULDEN: My assumption is you wouldn't get the bonus back. You might just not give some in their salary for the next couple of years. I don't know. It is an interesting one, isn't it? Can you claw back somebody's money?

QUEST: There are two distinct issues here. One is the philosophy and the other is the practice. And where are we between that debate? Because is there -you know, we talk about claw back, we talk about five- year deferred, we talk about all these. Where are we between the acceptance of the principle of the need for change?'

BOULDEN: Well, that is why there is so much criticism coming out. There are people who are so angry about bonuses, for instance, they wanted to see even more come into this. And they think this is a pretty weak report after nine months of work. And it doesn't come in `til next year. We won't get the numbers until 2011. One person says they are fighting the last war. They are trying to talk about what happened two, three, you know, the last two years.

Where are the banks going to go now? What is going to change about the banks? It is not going to change any of the culture. But you heard him say in that interview. If the banks don't do something like this, if they don't take this on board, then regulation is going to come and that is where it becomes -where the banks are going to get really upset. Are they going to be regulated much more heavily by the government? And we have more and more reports and more and more commissions out there, you know, who want to make these -make some of these decisions.

QUEST: Let's put this into international context.


QUEST: The United States is looking at its own various rules, Geithner and the various regulatory authorities, and is there a real worry that all these jurisdictions, the U.S. the EU, the -


QUEST: The G20, will shoot themselves in the foot?

BOULDEN: You mean by hurting the banks in the long-run?


BOULDEN: Well, that is what the banks will say. But people seem to be so focused on what did the banks do wrong in all of this, that they really want to punish the banks in some way.

QUEST: Finally, just assume for the purposes of our discussion, that you earned a million.

BOULDEN: How do you know I don't?

QUEST: Jim Boulden - I do.


QUEST: No, would you object to, you know -

BOULDEN: The name? I would object to the name being released, but I wouldn't object to my number being, you know, a tick in the box.

QUEST: All right. Jim, many thanks, indeed.

Jim Boulden joining us. It is an interesting thought, isn't it? You earn a million? Well, I think we'll leave it there for the moment.

Thanksgiving is all about having fun, families and feasting. American families are struggling to put food on the table this year. It is an uphill battle, too, for those trying to help the poor. We will explain in just a moment.


QUEST: For New Yorkers nothing quite like helping to usher in Thanksgiving and the start of the festive season. Thousands of people lined the streets of Manhattan. They were trying to catch a glimpse of the annual Macy's parade. Pretty hard not to catch a glimpse of those things wending their merry way down the Westside. Having started in 1924 it is just as much a Thanksgiving tradition in the U.S. as having turkey and pumpkin pie.

So much for those who have, but what about those who have not. Many Americans have little to feel cheerful about this holiday season. With unemployment now more than 10 percent people are losing their homes. Things look bleak for Christmas, just 29 days away. For the agencies, those who have the duty and responsibilities of helping the people in need, there are tough times.


JIM ACOSTA, CNN CORRESPONDENT (voice over): It is a new sign of the nation's hard times during the holidays, not the ringing of the Salvation Army bell.


ACOSTA: But the credit card machine that now comes with the kettle.

CRISS: It is one more tool for us to be able to use to help people, men and woman, boys and girls in our community.

ACOSTA: The Salvation Army has 300 of these cashless kettles stationed across the country. All in an effort to raise more money to meet a growing demand for assistance.

CRISS: Our requests for assistance are up about 50 percent over last year.

ACOSTA (on camera): 50 percent?

CRISS: Our telephones are ring off the hook, all day long for people needing help with rent and utilities, medical care, things like that.

ACOSTA: So you can feel this recession?

CRISS: We have -we feel it and we see it everyday.

UNIDENTIFIED MALE: This line is just like - I haven't seen a line this long ever. It is just mind blowing.

ACOSTA: Coast to coast food banks and other non-profit groups offering turkey giveaways are being flooded with thousands of families, waiting in long lines, many hoping to put a Thanksgiving meal on the table after being laid off.

CASSANDRA WOODS, FOOD BANK PATRON: If I don't come here, I don't have food. And I have to pay my rent and my utilities and try to stay out of being homeless.

TOM VILSACK, SECRETARY OF AGRICULTURE: Frankly, this is not just the government's responsibility. I think we all have a responsibility.

ACOSTA: Agriculture Secretary Tom Vilsack is trying to expand the use of his department's food stamps program, now known as SNAP. He even made a personal appeal to the warehouse discount chain Costco to get on board.

VILSACK: I actually called officials at Costco, asked them to take a look at, on a pilot-project basis, to see how it would work. We were convinced that it would be a good business decision for them.

ACOSTA: A good business decision because shoppers are already hitting the stores while consumers are expected to cut back this year, Brian Burton found one credit card machine he just couldn't refuse.

(On camera): Are you going to be cutting back a little bit more this year, would you say, because of the economy and the recession?

UNIDENTIFIED MALE: For giving to the Salvation Army, no, but for other things, probably.

ACOSTA: 49 million Americans are what the Department of Agriculture calls food insecure in this country. Those are folks who have to scramble every month to feed themselves. Secretary Vilsack says part of the problem is that many states simply do a poor job on administering federal aid to the hungry. Jim Acosta, CNN, Washington.


QUEST: Now turn our attention to weather matters. There have been deadly floods in Brazil after days of torrential rain. And the question of whether or not there is any relief on the horizon is a question that Meteorologist Ivan Cabrera at the CNN World Weather Center.

IVAN CABRERA, CNN METEOROLOGIST: Richard, we are going to be talking about more rains but I don't think they're going be as significant as we've seen over the last couple of days. And the bulk of which are going be concentrated across portions of North Argentinia, a less populated area right along here. So, certainly some better news for friends in Southern Brazil.

Forecast map will begin to show that the accumulation of upwards of 15 centimeters have fallen here. So, anytime you begin to see the greens here, that is certainly better news. On the lower end of the spectrum, as far we are expecting over the next couple of days. But it is going to be an unsettled weather pattern. I mean, this is not unusual for this time of year. We have a frontal boundary, kind of stalled out across the region there. An area of low pressure spinning along it, so you have the bouts of heavy rain, unfortunately, came down too quick and too hard for some folks in Brazil.

The same deal can be said for parts of south Australia, heading into New South Wales, and into Victoria. Not only did the rain come fast and furious, but take a look at some of these winds. My goodness, upwards of 110 kilometer per hour winds. This was registered through the day on Thursday, through New South Wales and Victoria even getting in on that now. I am expecting the same weather system that brought that kind of severe to continue into tomorrow. So if you are watching this from Australia, get ready for another round, I think, heading in through the day on Friday.

Take you to Europe now, we have a weak frontal boundary leaving the Alpine region, moving in through Eastern Europe, but an unsettled weather pattern continues across the British Isles. Now you are wondering if we are going to get the heavy rains, historic rains, that we have been registering here, last week or so. I don't think so. I think we are going to continue with this pattern here. But I don't think the accumulation is going to be all that significant but it is going to stay unsettled.

And by the way, with this next weather feature coming in, Richard, and the rest of our friends who are in the U.K., are going to expect a significant temperature drop. I think we are going to be talking single digits highs as a cool shot of air begins to move in with this secondary low. But again, not the severe winds we have been seeing. And certainly not the heavy rain, upwards of 300 millimeters here. We are talking about 25 millimeters. You see the weak little spin there moving through? Nothing doing as far as any major storms moving through the British Isles, as I see it, over the next 24 to 48 hours. But you see some greens there accumulating. And there is that temperature drop I was speaking of. Only single digit highs, get ready for that through the weekend. It is going be a raw weekend, cool, and with on and off rain showers. Temperatures only into the upper single digits.

The same deal can be said for Paris, as we get a break here as we end the week. But then we get into that unsettled pattern through the day on Saturday and Sunday. And there you see that depicted on our surface map heading in through the day on Friday.

As far as temperatures, take a look, Vienna, 8 degrees, 9 in Berlin, up through Stockholm, about 6.

If you are worried about airport delays, I think, the worst of it maybe here, because of some winds through the day tomorrow into Amsterdam. But nothing significant across to the airports, so safe travels.

QUEST MEANS BUSINESS continues after the break, right here on CNN.


QUEST: I always get slightly worried when it comes to be talking about fashion. After all, a man like myself for whom the most fashionable thing that I ever wear is a new pair of pinstripes and there is not many changes that happen to that every year. Maybe a bit of a something on the tie, just to add a flash of color and the odd cuff links, once or twice.

But there is that just for me, because there is now a new trend afoot in the world of high fashion. When we talk about that we are not talking about hemlines going up, or other bits coming down. Oh, no, no, this is really the art of embracing new technology. It is the art that allows us to understand the cat work - the catwalk, even, remember that prancing down in a particular way. But the art which brings the catwalk to your laptop.

Ayesha Durgahee, who is a woman who knows how to walk in heels, has the details.


AYESHA DURGAHEE, almost CNN INT'L. CORRESPONDENT (voice over): The lights, the cameras, the action on the catwalk. Previously only for the eyes of fashion's elite, now millions can eyeball from all angles and tell the designers what they think.

(On camera): It is called social media, web sites that enable messages to be read and images to be seen in an instant. And fashion houses have taken notice and steps towards embracing what has almost overnight become an integral part of the industry.

(voice over): the message couldn't have been clearer at Dolce Gabbana's Spring/Summer 2010 show. Not only was it streamed live on their web site, influential fashion bloggers took some of the most coveted seats in the house, the front row.

FREDERICO MARCHETTI, CEO, YOOX GROUP: They give a fresh view about fashion. They have been around for a while, driven by curiosity, passion for fashion. And I think they deserve to sit on the front row.

DURGAHEE: Yoox, and online high fashion retailer has been sitting in the front row for a few years, another sign that the fashion industry needs to make room for digital dignitaries.

EILIDH MACCASKILL, EDITOR, INSTYLE, UK: Initially I did raise an eyebrow, because I hadn't seen them before this season, sitting front row, but actually I thought it was quite exciting.

Sixty years ago photographers were not allowed into the high fashion couture shows, because the designers were worried about being ripped off. That has changed massively. This is just merely another evolution of the whole process. And you just have to welcome it. I certainly don't feel in anyway threatened.

I just think it is wonderful, it is just kind of another way to speak to people. I think it is probably one of the few growth areas, but maybe it is making people more creative about how they do extend their brands.

Maybe the recession has made people think more carefully. I think there is a bigger era of collaboration. And that definitely tailors different brands of kind of working together to get through the time.

DURGAHEE: With sales in luxury goods set to fall 20 percent this year, collaboration is the key. Enter bloggers like Scott Shemin. Burberry announced to team up with the silent symbol of sartorial elegance for their new social networking site, Art of the Trench, launched earlier this month.

CHRISTOPHER BAILEY, CHIEF CREATIVE OFFICER, BURBERRY: He understood that it is important to get an attitude into the images and all of a sudden it is changing the whole thing of seasons and it less about seasons. And it is about that kind of immediacy and kind of touching a consumer and letting them interact with what you are doing, immediately. You have to current. And you have to be talking in the language that consumers are living in as well.

DURGAHEE: In other words, it is knowing what your customer wants.

GRAHAM HALES, INTERBRAND: It is incredibly dangerous for any brand to ignore what is going on within social media. If they engage it in the right way it allows for them to have a direct dialogue with their consumers. And therefore, understand not just what their customers are think at the moment, but what their customers are going to be thinking about in the future.

DURGAHEE: Without social media Alexander McQueen wouldn't have known just how much fans listen to fashion icons. One Tweet from Lady Gaga about McQueen's show being streamed live, with so many people trying to log on it crashed.

(On camera): The social media phenomenon has taken flight in the fashion world, giving consumers a choice, whether it be in the comfort of their own home, or whilst on the move. Thanks to web sites, blogs, and i- Phone applications, we can all keep our fingers on the pulse of the latest fashion.

Ayesha Durgahee, CNN, London.


QUEST: Finally, I always wondered why on the catwalk they always look so miserable. The always look like they are sucking a lemon. It was explained to me once, it is so that none of their facial expressions detract from the clothes they are meant to be exhibiting. That is one reason.

I'll have a "Profitable Moment" in just one moment.


QUEST: Finally tonight's "Profitable Moment". There was always a bit suspect about the Dubai miracle; the temerious way in which they spent and built with seemingly no end. Well, the end has arrived for the time being. The decision to seek a moratorium on billions of dollars of debt payments for Dubai World has rightly shocked the markets.

Today the tide has gone out and we can truly see who is swimming without cover. The fear is, who is next? So now is the time for Dubai to grasp the fact that if it wants to be a financial center it cannot dump bad news on the global markets in such a fashion. This is a terrible shame for Dubai, a city that made its name as a trading center. Dubai has proved the need for strong financial center based in the Gulf, not in London or New York.

Dubai's problems come from execution and excess. Remember, execution and excess not from the concept.

And that is QUEST MEANS BUSINESS for this Thursday. I'm Richard Quest in London. I thank you for your time and attention. New York will be open tomorrow. Whatever you are up to in the hours ahead. I do hope it is profitable.

Christiane is next, after the headlines from the I Desk.