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QUEST MEANS BUSINESS

BP's Problems; Interview With Warren Buffett

Aired June 3, 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: A share price, a credit rating, and now a chief executive under pressure. BP's problems deepen.

Britain's new business secretary, Vince Cable, talks to me tonight, banks must help, not hinder the economy.

And Warren Buffett tells CNN what he thinks of Europe's economic crisis.

I'm Richard Quest. We have a full hour together, because I mean business.

Good evening.

Two of the three leading credit agencies have lowered their assessment of BP's financial strength. The tide of trouble facing BP has left one of the world's biggest companies badly tarnished. And now there has been a new development as Fitch Ratings was the first to move and cut its ratings on BP from AA plus, to plain just AA. That is the Fitch rating. The downgrade watch, it says may cut again if the situation worsens regarding the clean up bill, the compensation, the fines, and the penalties. Fitch wasn't alone Moody's quickly also downgraded BP's debt, of two company bonds to a lower grade.

And Fitch says the economic and environmental damage from America's worst-ever oil spill is set to continue. It doesn't expect the leak to be plugged anytime soon. That has almost been confirmed by both the U.S. authorities and BP itself. It is estimating that the costs will be between $2 and $3 billion for BP in 2010. And according to Moody's the cost of the clean up, litigation and everything else, will drain BP and put business on hold for many years.

The company itself says it is still one of the strongest companies around and it still has huge cash generation abilities. BP, though, the company itself, is stepping up efforts to limit the damage to its reputation by comments made from the chief executive, who said in a television interview, that the pressures were great and he wanted his life back.

(BEGIN VIDEO CLIP)

TONY HAYWARD, CEO, BP: I'm sorry. We're sorry for the massive disruption that it has caused their lives. And we're-there's no one who wants this thing over more than I do. You know, I'd like my life back.

(END VIDEO CLIP)

QUEST: Comments from Tony Hayward and on U.S. television, on a full- page advert, and on BP's Facebook page, Mr. Hayward has apologized for those comments. You'll remember, of course, 11 people lost their lives when the Deepwater Horizon exploded and then sank in the Gulf of Mexico.

For Tony Hayward, himself, another comment like that merely reinforced several previous, some would say, insensitive comments. It's taken him time, early in the disaster, when hopes were still high, that the leak could be plugged, he said the Gulf of Mexico is a very big ocean and this was a "tiny" spill, relative to it. He said the amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water; one comment that was considered to be ill-judged. And in another television interview he described the environmental damage. The impact he said," very, very modest impact", environmental impact. So, three occasions on which the chief exec of BP has to some extent made comments that are at best insensitive and at worst offensive to people in the region.

Last week the Obama administration said the spill is probably America's worst-ever environmental disaster. Hala Gorani is in Louisiana. Hala joins me now.

The focus, we know that they are getting on with cutting the pipe and putting the cut and cap on. And now, of course, there is this focus on Tony Hayward and his comments.

HALA GORANI, CNN INT'L. CORRESPONDENT: Yes, there is. And when you said that Tony Hayward had come under fire for saying I want my life back, it struck a cord with me because when I speak with local residents in Louisiana, it is exactly the message they want to send as well. That they want their life back and so when they heard Tony Hayward say that it wasn't just with regard to those 11 men who lost their lives, but with regards, as far as they are concerned, to a way of life here in Louisiana, that might very well be put on hold for not just a few weeks but potentially months and even years.

So, yes as you mentioned, the focus now is on that containment cap, that dome. Because cut to that pipe was made in a jagged fashion and it wasn't a clean cut, the cap is going to be hoisted up and lowered, but it won't have the kind of seal that a tighter cap would have had, had that pipe been cut in a very clean fashion, with the diamond saw. So, now the focus is going to be on, OK, you've put the cap on there, how much of the oil is still leaking and everyone's attention is going to be on the relief wells. This is really the key to this entire disaster, in order to stop the leak. It is those relief wells that right now are being dug and at the very earliest will be ready by August, some say potentially mid to late August, Richard.

QUEST: Hala, I read today that the U.S. government and BP have pretty much abandoned all other ways of, if you like, of plugging the leak, and that this containment is the only way forward while that relief well is being drilled. Is that fairly accurate of the situation?

GORANI: Well, if we go by what is being released publicly. It is accurate, because we haven't been given another plan in between the containment cap and the relief wells. We haven't been made aware of anything. So if this containment cap that is going to be fitted, we believe today, let's out a lot more oil than was previously estimated, and not just a smaller leak, then you were really faced with a problem over the next few weeks, of continuing to see up to 20,000 barrels leak into the Gulf of Mexico everyday.

You know, I'm here at the Louisiana State University because scientists are meeting here with the Environmental Protection Agency and other federal agencies to try to survey the damage. But what you hear scientists always say in these situations, as you know, is-you know, we are faced with uncertainty. We don't know. Method A might not work. Method Be might not work. But it seems as though they are running out of methods. Right now it is contain it until you get a more permanent solution. At the best case scenario is if this doesn't work another containment solution will be put into effect. And then we're talking about another several more weeks, Richard.

QUEST: Hala Gorani, who is in Louisiana, with live coverage of this. BP isn't the only one which wants to cut and cap. Governments around the world are hacking away at spending. As part of our week looking at the issue of austerity, I'll be talking to Britain's new business secretary, Vince Cable, who tells me where the ax will strike.

(COMMERCIAL BREAK)

QUEST: Europe's austerity drive has the continent in a state of shock. Budget cuts are sparking strikes, the level of resistance is rattling governments. Europe is trying to clear up the mess of free spending years, dealing with the recession, and of course, cutting massive budget deficits. It is a topic that will be on the minds of the world leaders at the G20 later this month.

Britain's Prime Minister David Cameron has a message for the host country, Canada. He met his Canadian counterpart, Stephen Harper, today at No. 10 Downing Street, where Mr. Cameron made it clear they didn't see eye to eye on a worldwide tax on banks.

(BEGIN VIDEO CLIP)

DAVID CAMERON, PRIME MINISTER OF BRITAIN: There is a difference of emphasis and agreement on this issue, but Canada and the United Kingdom have had a different experience. Our experience was of a very large bailout, by the taxpayer, of the banks. And I think it is quite legitimate for people to say well, in future what we need is a bank levy. To make sure that banks are paying a charge, in respect particularly, of their unsecured lending.

The experience in Canada is different, and I'm not surprised that they take a slightly different view. But that is the clear view we take and we'll be arguing for that in the G20, we think that other countries, many other countries, will want to take a similar approach.

STHEPEHN HARPER, PRIME MINISTER OF CANADA: As David said, the experience of the United Kingdom and Canada are completely different. We did not have a taxpayer bailout of our financial system, of our banks, during this crisis.

(END VIDEO CLIP)

QUEST: Stephen Harper and David Cameron. As we continue to look in more depth at this austerity issue, Britain's new business secretary says he wants to rip up the red tape and reshape the banking system. Vince Cable, on of the most respected members of Parliament, from the Liberal- Democrats' side, the former treasury spokesman for the Lib-Dems, set out his priorities in a speech in London's financial district. He said it is essential to get moving on deficit cuts.

And that is a change to how he had viewed it during the election. Now he says cutting the deficit is just about essential. Action, though, must be balanced, and not so harsh that it stifles growth. Once again, we are hearing this timing and this balancing argument. He wants the U.K. government to get out of the way of business by doing away with unnecessary regulation. And he tells bankers he has three priorities for their industry.

Besides reducing red tape, the priorities are, one he wants to separate retail and investment banking. This is a version of the Volcker rule. There will be the imposition of a levy on banking. The question, of course, becomes whether that money goes to paying up fund for insurances or for paying down deficits. And there, there may be a disagreement with the European Commission proposals on this. And finally of course, he wants there to be a greater commitment on lending and the amount of money that the banks will lend. It was Mr. Cable's first major policy speech since he took office a few weeks ago. Afterwards I asked him how much all these cuts would actually mean and how were they going to hurt in austerity?

(BEGIN VIDEOTAPE)

VINCE CABLE, U.K. SECRETARY OF STATE FOR BUSINESS: Well, it is not going to be easy to cut this enormous deficit. We're talking 12 to 13 percent of GDP, of which half is probably structural. And we know now we've got to get on with this, because of the crisis of confidence around sovereign risk in Europe. So, it is not going to be easy. The task I have working with the chancellor is to make sure that while we're tackling this massive deficit problem while simultaneously trying to stimulate growth, and of course, deregulation, getting bad credit, things that don't involve government money, may help to mitigate some of the impacts of fiscal consolidation.

QUEST: The President of the World Bank Robert Zoellick has been speaking exactly about that and in talking about the necessity of pro- growth, if you like, reforms, as part of the structural reforms of deficit cutting.

CABLE: Well, you've defined my job very well.

(LAUGHTER)

QUEST: But it is easier said than done, isn't it?

CABLE: It is.

QUEST: Because the cutting comes first and it is very difficult to implement that growth strategy, because there is a naturally deflationary policy that is in place.

CABLE: No, it is extremely difficult. And if you are talking about demand management then, of course, the government can't provide further fiscal stimulus given the position f the deficit. We do have a general problem with indebted households. So, they-you know, the growth has got to come from business and particularly from the trading sector, exports. And we have to do what we can to encourage them. But you are quite right, it is not easy.

QUEST: I realize you are not the chancellor, but do you believe that the U.K. will avoid double dip in 2010, 2011?

CABLE: Yes, I think the balance of probability is that we will. But I think, you know, I can't predict the future. I'm no longer even any paid forecaster in industry. And you know, clearly there are risks and we all recognize that. Particularly in view of what is happening in Southern Europe, that we've got to work towards economic growth and not let that happen.

QUEST: And that rebalancing of the economy that you spoke about in your speech, that is medium, long-term, isn't it? Because to rebalance the economy at a time of cut backs is even more difficult.

CABLE: Yes, it is, but it has to happen. And when you talk about rebalancing you are meaning different things, which coincide. We've got an economy that is over dependence on banking, in particular, financial services. We have got to have more emphasis on creative industries, magnify (ph) value of manufacturing. It is also geography. You know, the regions of the U.K. around balance. We are trying to address that problem in the way we deal with RDAs (ph). And it is unbalanced in terms of things like, you know, excessive dependence on carbon energy and efficiency. So, we are talking about rebalancing on different levels.

QUEST: On the banking sector, Secretary of State, on the banking sector there is going to be major reform, both in the United States, in the U.K., and in Europe. What will the banking sector look like when it is all over? Smaller, tighter?

CABLE: Well, certainly safer. It has got to be de-risked. Because we can't afford to have this catastrophe again. I mean, that is the key requirement. And structural reform is not simply for its own sake, but it is actually to take excessive systemic risk away.

(END VIDEOTAPE)

QUEST: That, the U.K.'s new business secretary, Vince Cable, talking to me earlier. Now the former chancellor of the exchequer, Alistair Darling, is worried also about growth versus austerity cuts. With Britain's new government less than a month old, the former chancellor is now on the opposition benches. I asked Mr. Darling what he thinks of the cuts made already, the austerity provisions that are likely to take place, and the way Europe's crisis is starting to bite.

(BEGIN VIDEOTAPE)

ALISTAIR DARLING, FMR. FINANCE MINISTER, U.K.: Firstly, all countries have to take whatever action s appropriate to reduce the amount of their deficit. All countries had to allow borrowing to arise to deal with the consequences of war (ph), with the severest downturn, in you know, many, many generations. The big question, though, that I think Europe has to answer is, how do you ensure that you also have policies in place that will promote growth, because if you don't have growth, then you are not going to get your deficits down. And I am worried that there are too many finance ministries, where they are saying yes, get the deficit down, but they are not also at the same time, making sure that they've got policies where you get growth throughout the European Union in the United Kingdom included.

QUEST: And which countries particularly give you cause for concern?

DARLING: I think the whole business of what is going on in the euro area at the moment concerns me. Obviously countries like Greece, Spain, Portugal, they've got to resolve their problems. But the euro area also has to recognize that they are all part of a single currency, therefore they need to act together to make sure that there are balancing policies, to make sure they've got the growth which will also help get the deficit down.

QUEST: Right.

DARLING: You know, everybody knows that deficits have to come down. But unless you are getting policies at the same time to get growth there, you are simply going to compound the problems that we face.

QUEST: This comes to this whole question, doesn't it? Of whether the euro-and I understand your position, on the euro-but whether the euro is actually doomed by the very nature of their not being fiscal and political union to go with monetary union.

DARLING: No, I don't think that is the case, but you are right, that when the euro was set up, because they didn't have full economic political union, they had this halfway house, the Stability and Growth Pact. Now, of course, they're not going to have the sort of political or economic union that would normally be associated with a single currency.

QUEST: Right.

DARLING: But they do, I think, have to recognize that those countries that are in a stronger position also need to take action to help those countries that are in a weaker position, and so support the currency. I was disappointed that it took so long to get the Greek rescue package in place. Not it is in place now, that is fine, but we have got to make sure and it is in all of Europe's interest, whether you are in the euro or not in the euro, to make sure that all countries act together to make sure there is a stable euro, and also to make sure that we have a stable economy and a growing economy in Europe.

QUEST: Now, with the vantage point now of having been involved and now one step aside from that, it was breathtaking the length of time it took for finance ministers within euro land and in the eco-fin (ph) to recognize the depth of the euro crisis, to deal with it-and even, sir, to come up with the stabilization fund.

DARLING: Well, I think it took far longer than any of us would have wanted. But, indeed, when we met at the IMF meetings in April there were many of us who expressed concern at that time, the euro area, the Greek rescue package was not in place. And that was causing a lot of concern, a lot of instability. What people what to see, markets want to see, countries all over the world want to see, is that when you get a problem like this, you identify it quickly, whether it is a problem in the banking system, or whether it is a problem with a particular country that you identify with and deal with it quickly.

But what is critical in Europe, and in other countries, too, is that we recognize unless you are putting in place policies that will generate growth over the medium and long-term, then you are not going to solve the problem. And I'd say that the fiscal conservatism that can sometimes be the louder and dominant voice at the present time, needs to be balanced by making sure that, yes, we reduce the deficits, but we also put in place that support jobs and growth.

QUEST: If we look at from what the new government, the new British coalition government has said, the rate of spend in the last days of the labor government, the last month, they were saying was 3 billion pounds, $4.5 billion a week. Did spending get out of control?

DARLING: No, it didn't. Look, it's the practice, I think the world over, when you get a new government to blame the last one. Our economy, the British economy is growing, and indeed, it is a modest growth, we have now seen growth over two quarters and the reason for that is because of the action that we took to support our economy. That is the reason that it is growing.

QUEST: Finally, Mr. Darling, if there is one thing that you don't miss, now-I can see looking at you now, you have a bit of a tan. You are perhaps a little bit more relaxed. But if there is one thing you are not missing from your old job, what is it?

DARLING: Well my tan comes from the hot sunshine in Edinburgh I'm pleased to say. So there is an advert for Scotland the world over. I suppose the one thing you don't miss, the ministerial papers that you get every night in which keep you up until the small hours of the morning. But, you know, don't misunderstand me. For any politician who is in the business of doing something, of making change, being government it is much, much better than being in opposition.

(END VIDEOTAPE)

QUEST: The former chancellor of the exchequer, Britain's finance minister, Alistair Darling talking to me.

Now, were getting the first images from Santiago of Joran Vandersloot. He was arrested a short time ago in the Chilean capital. He's been the subject of a manhunt after a young woman was found slain in a Lima, Peru hotel room this week. Peru says it has made arrangements to extradite him. The 22-year-old Vandersloot was previously a suspect in the 2005 disappearance of the U.S. teenager, Natalee Holloway.

Those are short pictures that we have received at CNN. When there is more to bring you on that story, we will, of course, bring those more pictures to you.

In just a moment, easy money, find out why Warren Buffet says there is no such thing. We talk to the chief of Berkshire Hathaway about bubbles, meltdowns, and how to stay clear of both.

(COMMERCIAL BREAK)

QUEST: Welcome back. Where the billionaire investor Warren Buffett is fresh from defending his allies at Moody's rating agency. On Wednesday he addressed a New York hearing on what caused the financial meltdown, where the role of credit agencies was very much up for discussion. Poppy Harlow of CNN Money.com sat down with the Sage of Omaha, the Oracle, indeed. The Oracle is Warren Buffett, by the way, not Poppy Harlow.

Good evening. Well, you are an Oracle in your own right.

(LAUGHTER)

QUEST: I think, when digging a hole it is best just to stop. Poppy, carry on, please.

POPPY HARLOW, CNN MONEY.COM: It was very interesting. I sat for about two and a half hours of testimony from Warren Buffett in front of this congressionally delegated panel, in New York. And he was called to talk all about Moody's, which as you know, Richard, he is the largest individual shareholder. And this is the first time that we have every heard him speak extensively on the rating agencies, and their role in the crisis and are they to blame.

I also spoke to him about the state of the European debt crisis, and what impact the thinks that has on the U.S. Take a listen to part of our interview on both of those key subjects.

(BEGIN VIDEOTAPE)

HARLOW: How concerned are you about the debt crisis in Europe right now?

WARREN BUFFET, CEO, BERKSHIRE HATHAWAY: Well, I think that it is a big problem for Europe. But our economy is improving at a rate that is probably better than most people think. We have 70 some businesses, in all types, all areas of the industry, and starting around March 1 we saw what was before that a very, very spotty recovery. It turned into a more substantial one.

HARLOW: When you said this was disastrous, how the rating agencies and many others, you said, including yourself, missed the housing crisis. Can you chalk it all up to a mistake, Warren?

BUFFETT: When a bubble really gets going, when the Internet bubble was underway, you know, get out of the way, because it was going to run right over you. And you had companies selling for $10s of billions that were valueless. So, when people think they smell easy money, and they've seen rising pricing sort of justify it in the past. And your neighbor, who has 20 points less of IQ than you is getting rich because he's doing these things, it gets very temping to go along with the crowd. I think that Moody's generally-I think they were way off on the real estate bubble. And I think that Congress was, and I think Freddie and Fannie were, and I think the media, and you can go up and down the line; 300 million Americans thought house prices couldn't really collapse. And we were all wrong. And it they were no better than the rest of us.

HARLOW: You were a major advocate and still are, of the government coming in at the height of the financial crisis, bailing out the firms that needed to be bailed out, keeping us all from the brink. Are you a believer in the government stepping in, as Senator Al Franken has proposed, when it comes to the rating agencies, and having the government assign rating agencies two different firms in their products?

BUFFETT: I'm not sure how that would work. I mean, I have no reason to think that would improve the system.

HARLOW: Really?

BUFFETT: No.

HARLOW: Might it get in the way?

BUFFETT: I just don't know. I mean, I'm not sure how-whether you have 20 rating agencies, and somebody in Washington spinning a wheel as to which one gets assigned. I just-I, I-I don't know of any institution I can think of to set up that will rate things better than Moody's and Standard & Poors. I don't use their ratings though. I think I can do a better job in certain, selected cases. Not across the board, just occasionally, I can do something better. You know, in the end, one of the great rating agencies, in a certain sense-the two of them where Freddie and Fannie. They guaranteed 40 percent of the mortgages in the country. And they were rating those mortgages. And there are all kinds of data, so I think finger pointing is-you know, you've got to be a little careful with it.

(END VIDEOTAPE)

HARLOW: As he said, Richard, careful with finger pointing when it comes to the crux (ph) and who caused the crisis. But isn't it interesting, Richard, that he wanted the government to come in and bail out the big banks in the U.S. to prevent an entire disaster. But he doesn't think the government should get involved in the rating agencies, Richard.

QUEST: I also find it-two things I found particularly fascinating, his assessment on how his businesses are doing. That is-

HARLOW: Right.

QUEST: Poppy, that is grassroots reporting on what is happening in U.S. industry, at the moment. But why did he have to be subpoenaed to appear before a panel?

HARLOW: That is a great question. This Financial Crisis Inquiry Commission, is its official title. They wrote him two letters asking him to appear. He politely declined two times. Then they had to subpoena him. The reason he gave for that question yesterday, he said he gets so many demands to appear on these panels, to testify, that he just simply can't do it all and run Berkshire Hathaway.

Makes sense, so, he asked them, you know, if you really need me to testify, subpoena me and I will be there. He said he's happy to do whatever he can on the phone, answer questions on the phone. But when it comes to flying halfway across the country, appearing in front of these panels, he simply can't say yes to everyone. So, I suppose going forward, if you want him to hear from Warren Buffett, on a panel like this, you are going to have to subpoena him, Richard.

QUEST: And we will see how far the QUEST MEANS BUSINESS subpoena goes with the CEO of Berkshire Hathaway.

(LAUGHTER)

Poppy Harlow, we thank you for your time and attention in bringing us one of the greatest businessmen in America.

Tough time for the single currency amid plenty of anxiety for the Euro Zone. The euro is off its lowest levels in four years, but a man with many years of trading the markets and advising governments will tell us whether it is going to continue. QUEST MEANS BUSINESS and the euro is next. Good evening.

(COMMERCIAL BREAK)

QUEST: Hello.

I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN, where the news always comes first.

The authorities say that the fugitive Joran van der Sloot has been arrested in Santiago in Chile. He's been the subject of a manhunt after a young woman was found slain this week in his hotel room in Lima, Peru. The 22-year-old Van der Sloot was previously a suspect in the 2005 disappearance of the U.S. tourist, Natalie Holloway on the island of Aruba.

And detectives are trying to determine what sparked Derrick Bird's shooting rampage in Northern England. Police say his first two victims were his twin brother David and the family solicitor. Bird killed 10 other people and wounded many more before killing himself. It was Britain's worst mass murder since the Dunblane shooting in Scotland in 1996.

The headlines around the world now. And 10,000 people turned out for a mass funeral in Istanbul. They honored victims of Israel's raid on the guerilla -- on the Gaza relief flotilla. All nine were Turks, including one with dual American citizenship. An activist has told CNN a new ship headed for Gaza is delaying its voyage to add video recording and transmission equipment.

And now these six men will spend the next year-and-a-half on a mock mission to mars from the ground in Russia. They're going to enter a sealed capsule for 18 months. There will be no windows. The only radio contact will be -- no with the outside world. It's an experiment to see how humans react to long space voyages.

Those are the news headlines.

Currencies and the European debt crisis are expected to be center stage with G20 finance ministers and central bankers as they gather tonight in South Korea. It's the week when the euro touched a four year low, around $1.21. And there were worries over Europe's efforts to cut budget deficits.

I'm joined by the currencies expert, the economist, Professor Steve Hanke, the co-director of the Institute for Applied Economics and Study of Business Enterprise at John Hopkins.

Steve, many thanks for -- for joining us.

And without being too technical, we know the euro has been under this phenomenal pressure. But what is not entirely clear is whether the currency is destined to be doomed.

STEVE HANKE, INSTITUTE FOR APPLIED ECONOMICS: I think the currency will continue going down. The European Central Bank keeps changing the rules in the middle of the game and this is a disaster, especially when a currency is under pressure. So the euro is going to get -- become weaker and weaker.

However, I would not say that it's doomed, Richard, because the politicos have so much invested in this project that they will stick with it thick or thin.

QUEST: They -- they may -- but I suppose the real question then becomes, in terms of pegged and fixed currencies and single currencies, Steve, do you think they should stick with it through thick and thin?

Or should they start to think of a way of letting countries like Greece gracefully exit?

HANKE: There is no graceful way to exit. It -- it would be an utter chaotic situation. The evaluation of all the assets and liabilities involved in the European banking system would be so huge, you'd have banking chaos, bank runs and -- and so forth.

QUEST: Right.

HANKE: It's -- it's just not a viable option.

QUEST: But when we look back at history -- and let's take Latin America, where you have experience of -- of what happened.

If exit isn't a strategy, default, we believe, would have similar arrangements and catastrophic consequences, then the euro and euro countries are destined to muddle along.

HANKE: Well, I think what they should do -- they've got this whole thing backward. They -- they should go into not a default. That's an end game scenario. They should begin by voluntary private debt restructuring arrangements and rescheduling of that debt right up front, because they're never going to be able to pay. They shouldn't do an Argentina and wait until the end game comes and go into chaotic default...

QUEST: Oh, I...

HANKE: -- that they're still trying to get out of.

QUEST: But hang on a second. A voluntary restructuring is basically a gun to the head of the bond holders. It's the same thing differently expressed. You're saying agree to do it voluntarily or you may end up doing it involuntarily?

HANKE: Well, it -- they -- they've -- exactly. That's just what they did at Dubai World and they've restructured the debt and -- and they're moving ahead. Remember, we had a big crisis in -- in Dubai. And the crisis has abated. The reason it has is because there's been voluntary debt rescheduling.

QUEST: It wasn't voluntary, Steve. They said you're going to have to take a moratorium or you're going to have to take a haircut. There was nothing voluntary about that.

HANKE: I -- I was being polite and diplomatic, Richard.

QUEST: If we take...

(LAUGHTER)

QUEST: I appreciate your diplomacy.

If we take a look, then, at the -- at what some would say is the failure of European politicians to deal with this, are you -- does the -- take your diplo -- diplomat's hat off.

Are you horrified at the way they have dealt with the crisis or do you give them some good marks?

HANKE: I am -- I am horrified but I'm not surprised. The -- the politicos in Europe are not in tune with the markets. That means they're not in tune with the millions of people who buy and sell things in markets. They're out of it -- out -- out to lunch completely.

QUEST: Well, it didn't take you long for diplomacy to get -- to go out the window, along with everything else.

Finally, Steve, where do you believe euro dollar is by year end, do you think?

HANKE: I -- I don't trade the currencies that way. I just look at the direction. And it's going to be weaker than it is now. The level, I - - I really don't know. I -- I don't have any guesstimate on that.

QUEST: Excellent.

All right, many thanks, Steve.

Come back again.

Very good to hear your views on this.

Much appreciate it.

Steve Hanke joining us on the line from the U.S.

A look now at the markets and how they have traded. A quick bell as we look down -- -5.2. You get an indication here -- look at that, just barely changed -- 10244. We'll be at the New York Stock Exchange to get some input on what's going on. But frankly, it doesn't look like a lot, in a moment.

(COMMERCIAL BREAK)

QUEST: OK, Wall Street, the Dow hasn't posted back to back gains since late April. Thursday's session got off to a good start. The Dow -- well, isdn 8 points, just off nearly .10 of 1 percent.

We mustn't get too -- too upset or too excited -- well, excerpt for the fact that Felicia Taylor is joining me from the New York Stock Exchange, which is always room to -- I mean good cause to put out the bunting -- Felicia, I -- I hesitate to say what are the influences on the market today, because I suspect that there aren't too many of them. But we do know that there is a lot of concern on economic grounds and the numbers.

FELICIA TAYLOR, CNN CORRESPONDENT: Yes, absolutely. That's pretty much all there is today. We did open to the up side, Richard, and things look like that we have a -- a pretty nice heavy gain through the -- most of the session. But that really just hasn't been able to hold.

Markets in the U.S. are pretty much back to the business of the economy. We're -- we're more looking at what's happening here as opposed to where we've been in the last couple of weeks, focused on events overseas.

Before today, subdued, pretty much ahead of the big monthly jobs report that we get on Friday. Employment figures show that there are signs of a slow and steady improvement. Payroll processing firm ADP saying today that 55,000 private sector jobs were added in May. That was short of estimates, but it does show job growth. So there's good news there.

In order for the unemployment rate, though, to actually lessen -- keep in mind, it's close to 10 percent here -- we need about 100,000 jobs to be created every month in order to keep up with population growth. Weekly jobless claims dipped by 10,000. That was better than expected and helped prop up the mid -- the markets for a little while.

So, as you can see, this year, there has been steady job creation each month. The biggest jumps were in March and April. If the report on Friday comes in as expected, the number of jobs created and May will increase to more than a half a million. That's nearly double what we saw in April.

However, the confidence in the jobs market is only somewhat evident from the consumer. Retail sales in May have been pretty tepid so far -- Richard.

QUEST: Felicia, we'll keep an -- a lookout and we'll -- that number, half a million, is on the up side. We're going to watch closely to keep an eye on that.

Felicia Taylor joining us from the New York Stock Exchange, where the Dow is just off roughly a fraction or so.

The weather forecast demands attention.

Guillermo is at the World Weather Center.

We're getting to that point where, of course, summer holidays are on the horizon. It is half term. There's a lot of children in London cluttering up the streets and making noise on the subway.

GUILLERMO ARDUINO, CNN METEOROLOGIST: And you'll have them big time Friday and Saturday, because it's going to be gorgeous.

QUEST: Oh.

ARDUINO: Now, on Sunday, you may see some rain. But look at the radar. Nothing. It's wonderful in here. We have sunny skies. It's going to be nice. It's going to be warm all over.

You're not going to get the 34 degrees that Madrid is expecting tomorrow, but it's going to be nice, like 20 something -- 22, 23. I think that's a perfect temperature.

To the north, don't go to Scotland, though it's not going to be that bad.

You see this area?

Boom, moving up, there is a high pressure center here pushing everything away. So it's all about Portugal, Spain, France, here, the Netherlands, also parts of Germany and England.

Scandinavia is not bad. The -- the west is fine. It's warm, actually. A warming trend with the winds here coming from the south. And the east is where we still have the showers and the storms. That low pressure center is around there, so we are likely to see severe weather, even all the way to Moscow, in the Baltics, Belarus and the Ukraine.

The northern parts of Italy here at Lombardi and also a little bit into the Cunierno (ph), a little bit farther to the east, as well, we will see some bad weather.

Again, this is nice. You know, I enjoy reporting good weather news.

Vienna, part of the east, with some winds and rainy conditions. Dublin, mostly fine, but some rain showers.

Rome to the north into Lombardi is where the problems are.

Thirty-four in Madrid, 24 in London.

Updated, so it's much better. Also, quite warm in Athens. Istanbul looking fine. I wonder what is going on there in the Mediterranean Sea. Well, the Aegean Sea doesn't look great. But Al Italia here, in the southern parts of Turkey, fantastic, all the way to Adona (ph), too, but this is, of course, with a more tourist oriented area of Turkey. Very nice, indeed. I've been there. And Cyprus also very nice -- very, very nice.

Richard, we're looking at what's going on with this significant cyclone, record breaking in terms of intensity, in the Arabian Sea, coming so close to the coast of Oman here with a lot of rain because they have seen already a third of what they see in rain in a year, but the thing is that it is going to bring floods in here and then turn into Pakistan, though I must say, it's not such bad news, because they are going through an excruciatingly hot season here. Temperatures marked another record, 53.5 in one locale in Pakistan; Northern India, too.

So these areas may see a relief. And the longer it stays over Oman, it's going to weaken more. So it's not going to be more of a wind event, but a rain event into Pakistan -- Richard.

QUEST: We have our own weather barometer. Guillermo dresses depending on what the weather forecast -- look at that shirt...

ARDUINO: Exactly.

QUEST: -- shirt sleeves, no tie. I can't wait for the depths of winter, when you turn up with a -- with a heavy woolen cardigan and a sweat -- a vest to go on over that.

ARDUINO: I hope this summer doesn't last. If not, you will see some other outfits.

(LAUGHTER)

QUEST: Guillermo at the World Weather Center, many thanks.

ARDUINO: See you.

QUEST: All right. It seems like everyone is finding a new meaning for the initials BP. The oil continues to spew out. The insults against the giant company continue. Jeanne Moos will have some of them.

But how serious is this for the company itself, in a moment?

(COMMERCIAL BREAK)

QUEST: The chief executive of BP, Tony Hayward, has apologized for the comments that he made when he said that he was looking forward to getting back to his life, comments that were deemed to be insensitive in the circumstances of the oil spill in the Gulf of Mexico.

Mr. Hayward also said that the company was committed to long-term repair and renovation of the Gulf Region.

(BEGIN VIDEO CLIP)

TONY HAYWARD, CEO, BRITAIN PETROLEUM: Meet our obligations to all stakeholders. We'll meet our obligations to the Gulf Coast, to restore the environment, to clean up the oil. We'll meet our obligations with respect to restoring confidence and trust in the American people. We'll meet our obligations to all stakeholders.

(END VIDEO CLIP)

QUEST: Meet our obligation to all stakeholders.

Dan McGinn is in the business of analyzing trends and advising companies on communications, the head of TMG Strategies.

Dan is with me from Washington.

It's not easy being a chief exec. It's even more difficult when your company is in crisis. Mark Tony Hayward for me.

DAN MCGINN, CEO, TMG STRATEGIES: Well, look, here's the problem. He was never coached. He was never prepared for this. He never expected to be at the center of a worldwide crisis. And you'd think that might be surprising, but most CEOs are not.

The question that he got where he gave that insensitive remark would be one of the first things you'd review to say because he's feeling enormous pressure, he would like his life back, but it's about the worst thing you could say.

QUEST: That -- he's become the lightning rod for the anger of the country.

From BP's point of view, they -- I mean is there anything that they can do now, do you think?

MCGINN: Well, as I say, they're -- they're fighting a war on three fronts here. There's the technical front -- can they -- can they get this -- this -- this well to stop?

There's the legal and regulatory front, which is just exploding all over the place for them. And now there's the personal front, where people want to know -- do you get it?

Do you have a sense of understanding?

Are you passionate?

Are you putting...

QUEST: But...

MCGINN: -- every resource into it?

So they're fighting all these at the same time right now. And...

QUEST: But...

MCGINN: -- and they're fighting for their lives, literally.

QUEST: Well, yes, you say that, Dan, but how accurate is it when we hear them saying things, for example, like it's British Petroleum, British this, British that?

MCGINN: Well, you know, there -- this is -- this is new territory. This is new ground. You know, we're -- what I -- I do say to people is BP is just no -- they're not just fighting for their reputation. Nothing is going to happen if they can't get that -- if -- get that well to stop. So all they're trying to do is buy some time in the meantime to see if there is going to be any technical solution.

But -- but the other point is, you know, is the world going to be better off without BP?

That's the argument they should be making. Our environment is not going to be better just because we lose BP. The world's energy crisis isn't going to be solved just because...

QUEST: Right.

MCGINN: -- we lose BP. BP has suffered a serious blow here. But they should be making a different kind of argument.

QUEST: Well, hang on. Is it a British -- is there -- I suppose what I'm asking is, is there a xenophobia about the way, for example, President Obama continually talks about British Petroleum, the way the general -- the president -- he talks about they're a British company.

Are they basically saying this wouldn't have happened if it had been an American company?

MCGINN: Well, that's a very good question. I don't think so. Now, look, I'm an American, so you -- you know, I may not have the full sensitivity. It would be different if -- if it were a Russian company in the U.S. It would be different for certain other places.

There -- there's -- there's less of it with Britain. There's probably still some. But if there -- if this had been Exxon, if this had been Mobil, you'd still have the level of outrage, especially if the situation had gone in the same way.

So there's some of that, but it's the magnitude of the problem here that's really defining this.

QUEST: Dan -- all right. We're going to be -- I'm going to be crass. Forgive me.

MCGINN: Please.

QUEST: Mark out of 10 for the P.R. and the way in which the -- BP is handling this.

MCGINN: Give them a score, is what you're saying, from me?

QUEST: Yes. Yes, marks out of 10.

MCGINN: Oh, look, it's -- it's very poor to this point. You know, it's probably a three out of 10.

QUEST: Whoa.

MCGINN: But the -- the reason is, look, if you're 40 some days into this trying to say to people, believe us, we're serious. We're putting our resources in, the rest of the -- the public here is saying, where have you been?

It's the same situation as Obama. They would get a low score right now. Obama is trying to explain to people, this is a top priority.

QUEST: Right.

MCGINN: Well, if you're trying to convince people it's a top priority, it's because you know they don't believe you.

QUEST: Dan, many thanks.

You and I will talk again on this subject as this crisis continues.

We very much appreciate you talking to us.

BP has pretty much become public enemy number one in the U.S.

Jeanne Moos now reports it's providing Americans with a juicy target for humor -- and most of it a bit like the oil. It's pretty black.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): While the oil spews out, so do the insults.

(BEGIN VIDEO CLIP FROM YOUTUBE.COM)

UNIDENTIFIED WOMEN: Halliburton and BP, you suck.

(END VIDEO CLIP)

MOOS: From a group calling itself The Raging Grannies. From comedians ridiculing BP's methods.

(BEGIN VIDEO CLIP FROM "THE DAILY SHOW WITH JON STEWART," COURTESY COMEDY CENTRAL)

UNIDENTIFIED MALE: Let's shoot a pile of garbage and mud into the hole and cover it with a big hat.

What?

What?

(END VIDEO CLIP)

MOOS: And everyone's finding new meaning for the initials BP.

(BEGIN VIDEO CLIP FROM "THE VIEW," COURTESY ABC)

UNIDENTIFIED FEMALE: BP stands for bipolar. They don't know what the hell to do.

(END VIDEO CLIP)

MOOS: The environmental group Greenpeace shot video of its members scaling BP headquarters in London.

(BEGIN VIDEO CLIP FROM YOUTUBE.COM)

UNIDENTIFIED MALE: We've taken their flag and replaced it with our own flag.

(END VIDEO CLIP)

MOOS: Their flag said "British Polluters." BP's real slogan...

(BEGIN VIDEO CLIP FROM BP COMMERCIAL)

UNIDENTIFIED MALE: Beyond Petroleum.

(END VIDEO CLIP)

MOOS: -- may be Beyond Redemption. Greenpeace is running a "redesign the BP logo" contest.

BP has become Boycott Petroleum, Blind Profit, Be Piratey. The company logo has been transformed into eyes crying tears of oil, sardines in oil, bombs with the logo as the lit fuse and oil drips taking on the shape of ghosts. One entry shoved BP's logo up a cat's behind. Meow.

In Manhattan, someone defaced an actual BP sign at a gas station.

(on camera): We're already a couple of days into the spill here at the corner of Crosby and Houston in New York City and still no cleanup.

(voice-over): Will they have to resort to top kill, top hat, junk shot?

BP had no comment when we asked for reaction to the attacks on their logo -- a logo that got pulled off the podium moments before a press conference by President Obama's point man on the disaster. Then they tried to come up with solutions.

UNIDENTIFIED MALE: I'm thinking we're ready here...

MOOS: To plug the hole left by the missing logo.

Someone even rewrote Lady Gaga's hit song as a parody.

(MUSIC)

MOOS: Even SpongeBob was done in by the oil slick in this image floating around the Web.

This Breaux Mart grocery in New Orleans sold several $20 oil spill cakes, showing the Louisiana shore with yellow booms separating the oil, chocolate frosting from the beach.

And the insults seem to be spreading, though maybe not as fast as the oil.

(BEGIN VIDEO CLIP FROM YOUTUBE.COM)

UNIDENTIFIED WOMEN: Take your broken drilling rigs and don't come back no more.

MOOS: Jeanne Moos, CNN...

UNIDENTIFIED WOMEN: Oil, oil, you look greasy.

MOOS: -- New York.

(END VIDEO TAPE)

QUEST: And a Profitable Moment on BP after the break.

(COMMERCIAL BREAK)

QUEST: It can't be easy being Tony Hayward at the moment. The BP chief executive is the lightning rod for all the anger being leveled at the oil company. But Mr. Hayward has given his critics much ammunition with his own comments, saying that he'd like his life back, for which he has, of course, since apologized. And also that there will be very, very modest long-term environmental impact or, for instance, there's a lot of more water in the Gulf than oil -- comments that, never mind with hindsight, but even at the time, those comments seemed inappropriate.

But, I can't decide whether to feel angry at Tony Hayward. After all, he is the chief executive. He leads the company. He makes the decisions.

Or should we cut him some slack?

He's doing the best he can. He's constantly under the spotlight. He's exhausted. He's no super human and he's apologized for his remarks.

Or are chief executives expected to carry the can?

They're paid the big bucks to sort out the problems.

You see, when you look at it and the role of Tony Hayward, do we feel sorry for him or sad for him?

It isn't that easy.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest.

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

"WORLD ONE" starts right now.

END