Return to Transcripts main page
QUEST MEANS BUSINESS
Interview With Spain's Finance Minister; Bank of America's Former Chief Accused of Fraud
Aired February 4, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Tonight, Spain, the latest country under attack from the markets. We speak to the finance minister on this program.
The continental contagion spreads to the U.S. share markets, the Dow is falling more than 200 points.
And facing charges, Bank of America's former chief accused of fraud.
I promise you one thing, I'm Richard Quest, it is going to be a busy hour, because I mean business.
Stock markets are clocking up some of their biggest losses in months, both here in Europe and in the United States. A toxic combination is coming together. High anxiety about governments that are deep in debt, and doubts about the strength of the economic recovery. Jobless numbers in the United States, also giving cause for concern.
This is how the European markets closed the day, just a couple of hours ago. It is the nastiest set of numbers that we have seen so far this year. And believe me they were the good numbers in Europe. In a moment or three, I'll show you how the worst markets fared. But the major markets all down more than 2 percent.
Over in New York, at the moment, as the Dow Jones industrials trades, the market is currently off 225 points, 2.2 percent, 10,044 is the level of the market. It must now be highly suspect whether or not 10,000 can be held by the end of the week.
The markets are telling us one thing very clearly. Investors are seriously worried about rising government debts and how countries across Europe are going to fund them. The spotlight has been on Greece, so far. And the plans that Greece is putting in place, to try and address its fiscal deficit and of course bring the budget back into balance.
But today, other markets also felt the wrath. Take for example, Spain, where the IBEX plunged, 6 percent. It is at its lowest level since July and every share on the market-look at the ones that fell, so sharply. Santander down nearly 10 percent, BBVA, 7.5 percent, Banesto, 6.2 percent, Banco Popular, 6.23 percent.
This is a serious and very dramatic fall at this stage in the recovery. And what it tells us is that the deficits and the market are going heavily for those countries perceived to be the weakest.
There is another example of it, over here. Spain was bad today, Portugal, which of course has had to withdraw part of its debt offering. Now, saw the stock market falling by nearly 5 percent. And what is more, the credit default swaps, on Portuguese debt, government debt, rose to more than 200 basis points for the first time. The record cost to ensure debt now in Portugal is taking its toll. This tells us, again, the markets believe that the credibility promises made by the government are simply not there.
The euro is having a sad time of it, as well. The euro has slid against the dollar quite dramatically since the beginning of the year. We are now back to levels that-well, I suppose you can work it out yourselves- back to sort of mid-to-late last year. And this is because -not that the dollar or the U.S. economy is doing that much better, but as a safe haven, the euro is now-the dollar, that is-the euro is perceived to be, of course, the victim of all these countries like Portugal, like Spain, like the banks, like the sort of problem areas in the Southern European economy.
A few days ago it was the Greek prime minister who was cursing speculators when he said he wanted to exploit his country's plight. Now, with Spain under attack the finance minister Elena Salgado told me she is confident the government will close the budget gap. And I asked her whether this was, in fact, a worrying trend?
ELENA SALGADO, FINANCE MINISTER, SPAIN: It is worrying, but not especially, because we are very confident in what we are doing.
QUEST: What would you say to the markets to reassure them, tonight?
SALGADO: Well, I think that first, that our financial system continues to be sound, and robust. And I think this is very important. Secondly, that we have implemented, we have announced a whole package of measure in the last-over the last few weeks. I my hand, we are doing, we are going to do the structural reforms so that our future growth is as strong, sustainable and balanced.
QUEST: Isn't the problem, though, Minister, that the market seems to be suggesting that it has doubts, either about the credibility of these plans, or about the ability to implement them?
SALGADO: Well, I think I have to say that I do not understand this lack of credibility because we have a very good record related to our fiscal consolidation policies. We have done it before, several years ago. And we are going to do that because we are very much committed to it and it is the same for the rest of the public sector. So, I think, I think we are sure that we are going to succeed.
QUEST: An finally, do you expect either to have to go and explain your plan again to the European Commission, or to seek any fiscal assistance from the commission?
SALGADO: No, not at all. Not at all, because, listen, we have our public debt, it is 20 points lower than the average in the European Union. So, we have a very good situation. And so we have-we strongly believe that everything is under management, is temporary and we are very confident in the ability of our economy to overcome this difficult situation. And of course, we are not going to explain again to the European Commission because we have done it. And, of course, they have said that we are in the correct path to reduce this deficit in the next few years.
QUEST: A robust response there, from the finance minister in Greece (sic), saying that the plans are in place and that there is not a credibility issue. But what will the Spanish people make of all of this as they face what the minister calls a time and a plan of austerity?
Al Goodman joins me now from Madrid.
Al, the market is beating up on Spain. But Spain, like Greece, has come up with a very serious budget cutting plan. How is it going down with ordinary people?
AL GOODMAN, CNN INT'L. CORRESPONDENT: Hi, Richard, well her boss, the Spanish prime minister, was in Washington this day as the honored guest of President Obama at the National Prayer Breakfast, there, the annual event. And a lot of people in this country thinks he's got a lot of praying to do. That is an answer to your question.
His poll numbers are down, the latest poll shows the ruling socialist trailing the opposition conservatives by about 4 points. The conservatives say let's get some clarity. Let's get your plan for how to get out of this mess. The leftist unions, traditional allies of the socialists, are up in arms, threatening big demonstrations and possibly worse, maybe a general strike, according to one leader, if these cost cutting plans go through. There is a $70-billion cost-cutting plan for the next three years.
But people in the street are not liking it. There have been balloons floated here in the last few days, by the government, to lengthen the retirement age, bring it up to 67, and do a retirement plan that would effectively cut the pensions for people. There is a lot of unrest here, Richard.
QUEST: But, Al, they must accept, of course, as the minister said, people do recognize that there is a serious financial crisis. So, as a fundamental question, is it likely that there would be a general strike, industrial action, as a result of this? Because if that happens then the credibility of the government's plan goes right down the pan?
GOODMAN: Right. The unions at this point are threatening demonstrations over these cost-cutting plans that would hit at pensions. The government says that we have got to do something to guarantee the pension plan. But there was one of the more leftist unions who said, if we don't get some action we might have to take more serious measures. And there was some interpretation in the media, that that was the first sort of shot, that if things don't get better, and plans don't change, maybe there will be a general strike down the road, here, Richard, yes.
QUEST: Al Goodman, joining us from Madrid.
Now, this latest European crisis began in Greece. And in that country, there was mixed news. The government's austerity plan has provoked a two-day strike by tax collectors and customers workers, with other unions promising further protests. Greek government bonds fought back somewhat. It seems to be little thanks to supportive words form Jean- Claude Trichet, the president of the European Central Bank.
President Trichet said that he thinks Greece's plan to reduce its debt will work.
I would say that the position of the ECB the following: The ECB governing council approves of the medium-term goal, that has been fixed by the Greek government, to get that to less than 3 percent for public financed deficit, as a proportion of GDP in 2012.
Now, we expect, and we are confident that the Greek government will take all these decisions that will permit it to reach that goal.
(END VIDEO CLIP)
QUEST: President Trichet was speaking after the European Central Bank said that it was keeping European interest rates on hold. And that was a similar decision from the Bank of England, in London, where the Monetary Policy Committee kept rates on hold as well. They are now at a record low, at a 0.5 percent. They may not be loosening the monetary purse string, further, also there will be no extension of its quantitative easing in the program, the famous printing of money, buying of guilt and other government debt. The bank has, so far, created more than $300 billion-$317 billion, of money by creating that into banks' accounts. And thus hoping, eventually, eventually, that that will pour into the British economy; the UK economy is now growing at a crawling pace. It is growing in just about name only.
So, with that there is much that Bob Parker needs to chew over, the vice chairman of Credit Suisse Asset Management.
Bob, I think you would have to agree, you know-since we came out of the depth of the crisis, 18 months ago.
BOB PARKER, VICE CHAIRMAN, CREDIT SUISSE ASSET MANAGEMENT: Yes.
QUEST: We haven't really seen too many weeks like we are seeing this week, now, have we?
PARKER: I'm not surprised at all that we are seeing problems in the Euro Zone. These have been, if you like, bubbling under the surface for a very long time. And they have now come a head.
QUEST: What is happening though? Is it the market just selling the debt of places like Greece and Spain? Because at the end of the day they are Euro Zone countries, so you can't attack the currency.
PARKER: Well, the currency, they have no escape. No, they are locked into the euro. And whereas there are very clear rules for countries to join the euro, there is no rule to leave it. You can't leave it. Once you are in it is exceptionally difficult to extract yourself. Therefore, when you have an economic and debt problem, as Greece has, as Portugal has, as Ireland, certainly used to have and is attacking it very aggressively, indeed. And I would argue, successfully in the case of Ireland. Clearly, what the markets do is you get a debt sell off. That means that the prices of their bonds goes down. The yields go up, it becomes much more expensive and more difficult for them to refinance.
QUEST: And of course, not only can they not refinance, they can not inflate their way out of the debt, they can't have a debt inflation.
PARKER: Well, what you are going to have in countries like Greece-for at least the next two years, if not longer-is going to be very difficult economic conditions. Whereas, countries like Germany are starting to grow again, very satisfactorily. Greece is probably going to be in recession at least this year, if not next year.
QUEST: The Bank of England decided no more QE, no more-I mean, academics are loving this. And economists, you know, two economists, three decisions on whether they should have done a bit more, should they held a bit of powder dry for later? Is it enough? Where do you stand on it?
PARKER: Well, if you actually talk to the Bank of England, they will say that it is actually a little bit too early to judge the success or the failure of QE. I actually think we are probably going to see a positive result from QE during the second quarter. You will see better economic numbers coming out of the UK and one statistic that is staggering on the UK, is what the consumer has done. The consumer was dis-saving two years ago. There has now been an extraordinary rebound in savings.
QUEST: Yes, but they may be rebounding in savings, but at some point .
PARKER: They have got to start spending.
QUEST: They have got to start spending.
QUEST: And accessing that spending, well, it with lower interest rates at the moment, accessing that spending into the retail chain, that is still some way off.
PARKER: I would argue we might see evidence of that during the summer months. But if you look at the very short term, the next month or two, I think the consumer is going to remain very low indeed.
QUEST: In a word, that horrible question, in a word, does Greece default?
PARKER: I think the probability of that is close to zero, but I think an IMF and or an EU bailout is highly likely.
QUEST: Bob, many thanks, indeed.
PARKER: Thank you.
QUEST: Thank you for being with us.
Bob Parker, with some assessment on what is happening.
In just a moment, the road to nowhere. It is now quite fair to say the wheels are coming off of Toyota, but it is the only problem that hasn't been reported so far. We're back in a moment.
QUEST: Welcome back.
Toyota raised more questions than it answered today. The company is beset by safety problems and said it found the cause of the braking defect in some Prius hybrid cars. Apparently it is a software glitch that delays the functioning of the brakes when it goes between the gas and the electric mode of the vehicle. It is now as yet officially ordering a recall of that model, at least, not for now.
There have been more than 100 brake-related complaints since the new Prius went on sale last summer. In the United States the National Highway Safety Administration said it was formally investigating the problem. It was also the day that Toyota published its latest financial results. Now, despite the immediate problems, the results actually were better than you might have expected, because it was before the storm over the unsafe cars. In the latest quarter Toyota made a profit of nearly $1.7 billion. Sales rose 10 percent. You will know, of course, in January they were down whopping 16 percent. So that has certainly been reversed.
Toyota's senior managing director, Takahiko Ijichi said today, in Tokyo, it was difficult to gauge how the crisis would affect sales in the future.
(BEGIN VIDEO CLIP)
TAKAHIRO IJICHI, SR. MANAGING DIRECTOR, TOYOTA (through translator): Quality is our lifeline. We must tell this to ourselves once more. By dealing with this issue in a swift appropriate, and more than anything, sincere manner, we want our customers to feel safe and regain their trust as soon as possible.
(END VIDEO CLIP)
QUEST: Well, so much for the statements, on the markets the shares sank 3.5 percent, in Tokyo's trading. Over the last nine of 10 trading days they have given around 22 percent of their value. That is $30 billion of the company's value, has disappeared.
So, what this is really all about when all is said and done are that motor vehicles and dealerships that have to put things right.
Susan Candiotti is at a Toyota dealership in New York. And, Susan, joins me now.
SUSAN CANDIOTTI, CNN CORRESPONDENT: Hi, Richard.
Actually, we are just across the river in New Jersey, but close. Of course, we are in the New York metropolitan area.
And here at this particular dealership you certainly see a number of cars over my shoulder, in all of these service bays, but they are here for other issues. There are also cars that are part of the recall but for now, those are rental vehicles that belong to this dealership.
Here is the latest that has happened at this particular location. Just this morning, this dealership has been sending, throughout the day, some of its mechanics to a Toyota seminar, for a one hour session on how to do the fix. And that is what they have been doing.
This is one of the cars, a Toyota Highlander, that is involved in the recall. And her at work, on it, is one of the master technicians who went to that session this morning, Mike Gauge.
Great last name to be involved in this.
Tell me how did the session go? And do you feel confident on how to do the fix?
UNIDENTIFIED MALE: Yes, it was about an hour long class. And they informed us on the paperwork and everything, and to follow videos to watch, and answered all the questions we had.
CANDIOTTI: And this has to do with the pedal that has the speed issue, right?
UNIDENTIFIED MALE: Yes, here is the pedal right here.
CANDIOTTI: All right. You just removed it. I'm going to swing around to the other side, Mike. So that we can get a closer look on what that looks like. Part of what Mike is doing is to show some of the other technicians what to do. But they also have been attending the classes and will also know how to do it.
So, here is a close up look at the gas pedals here. This is where you are going to put in the new part?
UNIDENTIFIED MALE: This metal bar here is the reinforcement bar. We are installing, it reduces the friction in the pedal.
CANDIOTTI: And why do you want to reduce the friction on the pedal?
UNIDENTIFIED MALE: Friction causes the wear, which causes the sticking problem.
CANDIOTTI: Which caused the sticking problem, so flip this around. This is what this looks like, too.
UNIDENTIFIED MALE: This is what it looks like in the vehicle.
UNIDENTIFIED MALE: And it moves.
CANDIOTTI: And so now you see the movement and going. All right, now, it takes about how long on each repair?
UNIDENTIFIED MALE: About a half hour per vehicle.
CANDIOTTI: Per vehicle. And we are talking about, potentially, thousands and thousands of vehicles.
UNIDENTIFIED MALE: Yes, many vehicles.
CANDIOTTI: It depends on how many customers come back here? How may live elsewhere and bring their cars in to you?
UNIDENTIFIED MALE: Yes, people who bought at other dealers that live here, that didn't buy from us, also would come in, anybody in the area.
CANDIOTTI: Thank you very much, Mike. I appreciate that.
So, they will be very busy here. Expect it to be so, in the next days, weeks, months. I know that they have been swamped with phone calls from people who are asking whether their cars are part of the recall and how soon they can get them in.
Back to you, Richard.
QUEST: Susan Candiotti in New York. Many thanks for that, Susan. Putting it into perspective, exactly what is this repair that we keep talking about and why it is significant.
Now, let's turn to the question of Toyota, itself. The company has been heavily criticized for the way it handled the crisis. It is not as if it burst upon Toyota overnight. Look, see what I mean. Now, in October 2009, it began recalling the cars in the United States to prevent the floor mats in some models getting tangled with the accelerator pedal, 5.3 million have been recalled for that problem.
Two weeks ago, on January the 21, a second problem, a gas pedal with a propensity to get stuck. That is the one that we have just been talking about, 2 million owners in the U.S. told to bring their cars in. Millions more, you know that particular story.
On January the 26 another bombshell, suspending the sale of eight models in the U.S. and stopping the production line to make sure no more dodgy pedals get into circulation.
And now the 29 of the month, the chief executive made his first public comment on the crisis, when confronted by a Japanese crew in Davos, "I'm very sorry."
Since then the company has communicated by adverts in the U.S., and executives have been speaking to CNN and other media outlets. All doing what they can to try and put the message right.
And yet, Toyota is being roundly criticized, left and right. Is this criticism fair? I'm joined now by brand strategy guru, Simon Middleton, who joins me via broadband.
Simon, in any crisis, crisis happen fast, they happen in a fog of confusion. What more could Toyota have done?
SIMON MIDDLETON, BRAND STRATEGY EXPERT: That's a very good question. I'm not going to beat up on Toyota. Toyota should have acted swifter. They should have communicated more openly and they should have admitted the problem very, very fast. I think that is the rule they broke.
But these things do-I mean, they do creep up on organizations. I think part of Toyota's problem is it has gotten very big and maybe communications broke down inside the organization.
QUEST: But hang on a second, any reasonable organization of the size of Toyota-and one can think of a 1,001 organizations-the moment you start getting problems, it is going to take time for them to be filtered, collated, dealt with by senior management, even before you realize you have got a serious problem.
MIDDLETON: Yes, that is true. But they, as I say, it did creep up on them, in a sense, but on the other hand, the big challenge that Toyota faces is that we think of Toyota as the brand that represents reliability and quality. And if they are not looking after that, and looking out for early signs of it, which that seems to be the problem. They didn't spot the early signs, therefore they didn't react quick enough. Then, they undermine the whole idea of what Toyota brand means to the rest of the world.
QUEST: Isn't it inevitable that in any form of environment like this, you will get the company involved is going to be roundly criticized. Whatever they do, it will not have been fast, or far, or deep enough.
MIDDLETON: Yes, but they can make a bad situation slightly better. I'm delighted that the chief executive has finally said sorry, but it felt like he was being pushed into a corner to say it. It would have been-if I had been advising them, I would have got him out there a month ago to say, I'm really sorry, this is a very bad situation. What you have to do, when you are any brand, whether you are tiny little bicycle shop, or the world's greatest motor company, if you make a mistake you have to come out and apologize abjectly and look for forgiveness. And there, from that place, you can rebuild the brand.
QUEST: Right, now let me-I'm not being an apologist for Toyota, here, but if you have made a mistake? Isn't the issue, here, it takes time to determine whether mistake has been made?
MIDDLETON: Yes, of course. And that is why I'm not sort of beating up on the company, as I said. However, to back to my earlier point, the thing we value most about Toyota is an obsession with quality, which leads to ultra-reliability. And those two things, quality and reliability, are massive undermined right now. So, Toyota have got to work very hard in order to recover the brand meaning. And in the end that is all a brand is, meaning. And they are undermining their own meaning.
However, they are a great brand, without a doubt. And they will recover. But it is going to hurt them.
QUEST: Right. So my final point to you tonight, then, is-and I come back to my fundamental thesis, it is inevitable, inevitable, that any major company caught up in a product recall or a consumer product crisis, is going to get it wrong.
MIDDLETON: Well, by definition, if they're caught up in a product crisis they have already got something wrong. But they should address it as fast as is humanly possible. And I-one of my fears about Toyota is they have got big and they have got unwieldy. And there seems to be some evidence that they have driven down the cost of parts, and therefore compromised quality issues.
QUEST: Mr. Middleton, we had a few problems with the broadband connection to start with, we stayed with it and we were rewarded at the end. Many thanks, indeed, for joining us.
MIDDLETON: Thank you.
QUEST: Now, I have some news that I need to bring to your attention. It is being reported, it is being reported that nine out of the 10 Americans who allegedly tried to take 33 children out of Haiti are to be released. You'll be aware of this. These are the Americans who had visited, allegedly, numerous orphanages trying to get children. Finally, did.
Anyway, they were arrested, apparently, according to the Associated Press, nine of the 10 are to be released. We'll have more of that in the hours ahead.
This is QUEST MEANS BUSINESS. I'm back in a moment.
QUEST: Good evening.
QUEST MEANS BUSINESS, I'm Richard Quest, this is CNN. Some breaking news to bring you this evening. Nine of the 10 Americans who have been arrested in Haiti on allegations that they were attempting to take children from orphanages, nine of the 10 are to be released. No word on what is happening to the 10th. They are from a religious organization in the United States and they have apparently visited several orphanages before they were arrested. We'll have more on that in the hours ahead.
The markets, now, and our other big story that has been going all day, with the markets sharply lower. A rousing start to the week turned sour. We know that the New York market is off more than 2 percent.
Alison Kosik joins us now from the New York Stock Exchange.
Alison, we know the reason on this side of the Atlantic for a route was sovereign debt worries. But you had some of your own concerns that were uniquely American today?
ALISON KOSIK, CNN CORRESPONDENT: Exactly. I mean some of those worries that you're having are big worries here on Wall Street. But the big sell-off that you're looking at right here on Wall Street all boils down to jobs, Richard. The consumer, you know, really drives the economy. And if the prospect for jobs growth dims, that could hurt both the consumer and hurt business spending.
Now on Friday, we get the government's crucial big jobs report for January. And -- and there really was some hope that employers added jobs, but those hopes have fizzled after a weekly report that we got this morning. The number of people who joined the unemployment line last week rose to 480,000. That is up 8,000 from the previous week. Wall Street was expecting a decline, so this came as a big surprise.
And, as we know, Richard, Wall Street does not like surprises. What's worse is that these claims haven't been this high in two months -- Richard.
QUEST: All right. Many thanks, Alison.
Short and sweet, but the New York market down 2 percent. We'll revise that before the program is over.
We're back in Europe in just a moment. A sea of government debt -- we'll talk about that.
This is QUEST MEANS BUSINESS.
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
Our top story at this hour, rising government debt in Southern Europe has become public enemy number one for investors. It's thrown stock markets into convulsions. European indices ended the day deeply scarred. Government bonds fallout in favor. Spain and Portugal struggled under a mountain of debt. They're finding it much dearer to borrow money.
Those are the good numbers that you're looking at on the screen.
Spain was down much more sharply -- down nearly 6 percent.
And shares of some major banks fell off a cliff. Barclays were down nearly 8 percent. We also saw heavy losses for banks in Germany, France and Switzerland, with the sharpest loses, as you can see, for the U.K. bank.
At the moment, Greece, Spain and Portugal are all suffering from speculation. The next country to come under the pressure could well be Italy.
Mario Draghi is the governor of Italy's central bank. Also, crucially, he is the head of the Financial Stability Board. That's the new organization charged by the G20 for financial regulation and reform. It's an extremely powerful position.
I met Mr. Draghi in Davos last week and asked him about the business environment.
MARIO DRAGHI, GOVERNOR, CENTRAL BANK OF ITALY: The -- the financial landscape, today, is very different from what it was two years ago, both because of the progress made in regulation, but also because, actually, banks have changed quite a few things.
But a lot more has to be done.
QUEST: Now, when you talk about what has to be done, where is your focus?
Is it on capital adequacy?
Is it on risk assessment?
Where would you put the focus?
DRAGHI: We have two leading projects this year. One is the capital level, capital quality, improved quality of capital, liquidity guidance on one hand. And the other one is we have to roll back the moral hazard that still prevails in the financial services industry. In other words, we have to solve the problem with the systematically bought (INAUDIBLE) financial institutions.
QUEST: If we look at compensation within the banking systems, do you believe that banks are now moving toward a satisfactory compensation regime -- bonuses tied once again to performance and to long-term profitability of the institution?
DRAGHI: Well, here, I -- I mean I -- I can speak only for my own banks. The answer is yes, because I supervise them and I have evidence immediately. For -- as far as the other banks, which is the rest of the world, we will have a first picture by early March, where we will publish a review. But that's -- that's how it works. We do reviews. And if there are no compliance, then -- if there is no compliance, then we come back and we tell them what to do.
(END VIDEO TAPE)
QUEST: Mario Draghi, the head of the Financial Stability Board.
Late this afternoon in the United States, it was midday there, the New York State attorney general's office announced it was taking legal action against Bank of America and its former boss over the purchase of Merrill Lynch.
Allan Chernoff is in New York with the latest on this particular saga -- Allan, I mean this -- this was -- everyone agrees the deal was a disaster in one sense, financially.
But for them to be taking action against them, what are they essentially saying?
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: The New York attorney general is saying that there was fraud here. He's saying that Bank of America and its former chief executive officer, former chief financial officer, hid the extent of losses at Merrill Lynch.
Let's put it all in perspective. Think back to the fall of 2008. This was the weekend that Lehman Brothers collapsed very rapidly. Merrill Lynch threw itself into the arms of Bank of America. Bank of America agreed to buy Merrill Lynch.
But the charge is here, from the New York attorney general are that Bank of America actually hid the extent of the mounting losses at Merrill Lynch so that the shareholders of Bank of America would actually approve this deal.
In addition, the attorney general is charging that Bank of America actually pulled off fraud on the United States government by threatening to withdraw from this deal unless it received $20 billion of bailout money from Washington.
So those are the charges that we have here -- Richard.
QUEST: The one thing we do know in all of this, Allan, is that it was an absolute dog's breakfast (ph) sort of a mess. It happened very fast. There were questionables about whether Hank Paulson pressurized, who knew what and why and when.
But to allege fraud takes it one stage further, doesn't it?
CHERNOFF: Richard, let's remember, this all happened during a period of intense financial crisis. The world -- the financial world was literally falling apart. The U.S. Government wanted this deal to happen. They were panicked that another Lehman Brothers collapse might occur -- might possibly occur to Merrill Lynch. Here was Bank of America, the apparent savior. So the government of the U.S. actually wanted the deal to go through.
Nonetheless, we're seeing the New York State attorney general say that there was fraud involved in getting the deal done. Let's also point out that Bank of America is saying that these charges are totally without merit and they're also saying that they and the former CEO, the former CFO, will aggressively defend themselves -- Richard.
QUEST: Allan Chernoff.
You'll, no doubt, know more about this particular case than you'd ever wish to by the time it gets to court. And I'm sure you'll be covering it for us.
Allan Chernoff, who's always across these matters in New York.
When I come back with you in a moment, two former cold war rivals are playing a high stakes game of chicken over chicken. In a moment, it's a bitter trade dispute. We'll explain.
QUEST: Welcome back.
The U.S. and Russia have gone toe to toe over many issues over the decades -- spies, territories, nuclear arms. As far as I know, so far, poultry hasn't been a poultry matter -- that is, until now.
CNN's Matthew Chance is in Moscow.
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Behold the victims of a chicken war raging between these former cold war rivals. Across Russia, thousands of tons of American birds are languishing unsold -- part of a bitter trade dispute threatening relations. The Kremlin says American poultry is unsafe, polluted with chlorine used by farmers to wash the meet.
U.S. Officials are trying to reassure Russia's public. "I'm 100 percent sure chicken and other American products sold in Russia are absolutely harmless," the U.S. ambassador tells this Russian radio station. "I myself buy American chicken here in Russia and give it to my daughter," he says.
But many Russians are proving difficult to convince. The country has been tightening its sanitary standards, introducing strict rules on how chickens can be processed -- effectively banning all imports from the U.S. And it's more than just a few drumsticks at stake. At its peak in 2001, U.S. poultry exports to Russia topped a billion tons. Tighter import rules saw that total shrink to 800 million tons in 2008, then 750 last year.
Russia was still the destination for more than 20 percent of all U.S. poultry exports.
(on camera): Well, here in this Moscow food market, the chickens that have been very carefully put on display here are all 100 percent Russian, I'm told -- reared at farms just outside the city.
But here in Russia, the issue of chicken imports is about far more than health concerns. Chickens are often used as a diplomatic weapon.
(voice-over): For many Russians, American chickens leave a bitter aftertaste. In the chaotic 1990s, amid foot shortages, Russia was flooded with low quality American poultry sent as food aid by the first President Bush. "Bush legs," as they became known, are now seen as a humiliating symbol of the Soviet collapse.
In the aftermath of the Georgia war in 2008, when Russia overwhelmed its tiny U.S.-backed neighbor, Moscow took revenge. Russia's powerful prime minister announcing sanctions on U.S. chicken imports, though denying Washington's support for Georgia was the reason.
VLADIMIR PUTIN, RUSSIAN PRIME MINISTER (through translator): Let me say once again that I would hate these things to be lumped together -- the problems caused by conflict situations, politics, economics, meat. They all have their own dimensions and are unrelated.
CHANCE: But then, as now, the suspicion was otherwise. In Russia, chickens seem to have become inextricably linked with politics and national pride.
Matthew Chance, CNN, Moscow.
(END VIDEO TAPE)
QUEST: It's not a poultry matter. Plenty more puns, I'm sure, if I was to sit and think about them, but that wouldn't be unfair. In fact, it would be quite foul.
All right, the weather forecast now and Guillermo at the World Weather Center -- well, hopefully, foul weather is not foul play, is it?
GUILLERMO ARDUINO, CNN METEOROLOGIST: Depending on the person who will get affected by it.
I thought you were going to ask me about Budapest?
QUEST: Well, yes, you know -- yes, well, I -- I -- I've already got me long johns and me long underwear ready for this trip to Budapest because you've put the -- you've put the fear into me that it's going to be terrifyingly cold and (INAUDIBLE) is that it's snowy.
QUEST: So tell me what's going to happen.
ARDUINO: It is going to snow on Saturday. We keep the same forecast. Now, if you compare that with the rest of Europe, we don't see much snow anymore. Germany, much better; Poland, much better. Some alerts continue to be posted with the snow. But when we think about Hungary here, we see Budapest, probably light snow on Saturday. So, Sunday it appears that things are going to get better. It's going to be cold.
Look, Richard, the Alpine Region in Austria is where the snow is going to fall mostly on and parts of the Balkan Peninsula.
Then here, we see a little bit into your area, where you're going, but, again, light. And the Alpine Region more. So in the higher elevations, there is a little bit of a change. We are focusing our attention on one aspect, particularly, and it's flooding, because now temps go up gradually, with so much snow on the ground in Germany, in Poland, in the Lower Countries, Luxembourg, we may see floods now. That's why we're following that very closely. But, look, not so much.
So, finally, a little bit of a break. Our friends in Germany and in Poland happy because finally, we're not talking about so much snow anymore. Look, only Frankfurt and Munich here, Vienna maybe with some snow. No problems at airports. It appears like things are going to be fine.
Milano, Berlin -- the Alpine Region and Berlin, a little bit of snow again.
Now, Britain -- where's Britain?
We can't see it. Actually, we would need to erase all this. And Spain and Portugal, that storm that came here brought so much rain and wind, it's finally moving away. Some alerts continue to be posted, of course.
Berlin, a sizzling one degree for tomorrow; minus five in Kiev; eight in London. And I'm sure that it's not a matter of whether Richard has been to Bora Bora or Tahiti, but how many times he's been there.
And what about this cyclone that we have right now?
The winds finally are abating for many islands in the area as the system continues to move to the south and intensify, because we will see more intensification. But Bora Bora is finally getting clear in less than a day. Tahiti, a little bit of patience. You're going to get clear, as well. It is not direct impact, but indirect impact.
The system is humongous. It doubled in size in the last 24 hours. It will continue to strengthen and it's moving to the south. There are some islands on its path, though, but they're not -- not huge tourist resorts.
And I called there yesterday, we called there today. There were very concerned about all the action, so we'll keep you posted.
Also, rain coming this weekend to southern parts of the United States and a lot of snow in the Northeast. If you're coming to the States this weekend, New York, Philadelphia, Baltimore, Washington, DC, you are going to see a lot of snow. So pack accordingly. It extends all the way into Chicago, but it's going to be mostly into the northeastern parts of the country.
And if you come to the South, look at the rain. It's there -- Richard, back to London.
QUEST: Many thanks.
That call -- Guillermo at the World Weather Center on the latest, of course, for that.
Now, there's been some dramatic new developments in the case of 10 U.S. missionaries being held in Haiti after trying to leave the country with 33 children. They met with a Haitian prosecutor. I told you a short while ago that nine of the 10 were going to be released. Now it seems that that is not the whole story.
Karl Penhaul joins us now on the line -- Karl, what is the current situation?
KARL PENHAUL, CNN CORRESPONDENT: The current situation does seem to be somewhat confusing. We are driving at high speed right now through downtown Port-au-Prince. We are following the two vehicles where the Americans are being taken. They're the white SUV and a police pickup truck. So we're tailing those vehicles to see where the Americans are being taken.
It looks like now they're being taken toward the area of the airport or maybe even back to the headquarters of the judicial police.
Certainly, when they came out of the prosecutor's office, where they had been meeting for around two hours with a panel of three prosecutors, they gave no comment.
I asked them if they had any message, I asked them what the prosecutors had decided, but they gave no comment.
They were very solemn-faced. There were no tears, no comments from them. And then, when they were loaded into one of the pickup trucks, a group of them quietly began singing hymns.
Certainly, all of them, at that stage, declining comment. And yet we have seen the reports from the Associated Press. The first one we saw cross was that nine of the 10 would be released. And then we saw another one cross saying that 10 of those -- 10 Americans have been charged with kidnapping.
So it's a really fluid situation right now. And as I say, we're chasing -- tailing the vehicle to see if we can get some (INAUDIBLE) there both from the Americans and then also see what the official source is the from the attorney's office, and, also, to see what evidence they feel that they have to charge them -- Richard.
QUEST: All right, Karl.
When there's some more -- drive carefully, obviously. But when there's some more to report, please come back to us. Of course, Karl there isn't doing the driving, but you know what I mean. And we'll bring that right to you when there's more to tell you on what seems to be a developing story in Port-au-Prince at the moment.
I'll be back in just a moment.
QUEST: Welcome back.
Facebook is six years old today.
Many of you are wondering how did we cope before Facebook ever came along?
Well, let me tell you, join me in the library, if you will.
Facebook is a -- is different for all of us who use it in many different ways. For example, this chap, for instance.
Yes, over 40 and uses this to keep in contact with old friends. Aesop (ph), who is our producer tonight, she's a voyeur. She uses it, basically, to nose -- to be a busybody and see what her mate's on.
As -- she's -- no, she's just about over 30.
As for Dave, who's in his 20s, what does he use it for?
Dave uses it just to tell his friends what he's up to.
With so many social networking sites, it can be difficult to keep track.
Sandy Jen is the co-founder of Meebo, an innovative instant messaging service.
She joins me now from San Francisco.
Sandy, way -- the way we all use these sites is very different.
And I'm wondering, we don't have a one size fits all, do we?
SANDY JEN, CO-FOUNDER MEEBO: No. Social media itself is very interesting in that way.
QUEST: With that in mind, can we say a revolution has taken place in social media or are we still feeling our way forward as to what it means?
JEN: I definitely think there is a revolution going on and we still are feeling our way through it. What's interesting is that, in the past, when we think of social networks and social media, we only really thought of social networking, like the sort of small, isolated sites where people could chat and share.
But now, with the advent of all the new technology and the new providers like Meebo, all sorts of sites can actually get in on the game. And so people are still trying to figure out the best way to make their sites social, because it's a relatively new concept for them, but they definitely want in. And it's definitely expanded beyond sort of those small social networks. And it's, you know, sort of proliferate to blogs and content sites and e-commerce sites.
So everybody wants to get in on the game.
QUEST: OK. Finally, the question is does it get bigger or does it implode?
JEN: I really think it's going to get huge. If you think about the number of Web sites out there right now, the billions of sites that people visit every day, and then you think about the number and the percentage of sites right now that have social component, there aren't that many and it's a kind of a new thing.
And so the awesome thing about social media and the way that the current providers are -- are giving these solutions to sites is that anybody can do it. Anybody can make their site social. And so when they can make their site social, that means that anybody visiting the Web...
JEN: ...anybody on the Internet can participate in the social experience. And so everybody can participate. So I think it's going to be huge.
QUEST: All right, Sandy.
It will either be huge or a nuisance to those of us over 40.
Many thanks, indeed.
QUEST: We look forward to having you with us again.
Well, ah, yes, she agreed there.
When I come back, a Profitable Moment.
QUEST: I would have a Profitable Moment for you tonight, forecasting which of the European countries might be the next blood in the water for the sharks of the market. Unfortunately, that's a bit like looking into a crystal ball. All we know is that the markets haven't finished with Spain, Greece, Portugal and beyond.
And that's QUEST MEANS BUSINESS.
I'm Richard Quest in London.
Whatever you're up to, I hope it's profitable.
I'll see you tomorrow.