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QUEST MEANS BUSINESS
As BP's Financials Look More Murky, And The Oil Spill Angers More Americans, The Relief Well Crew Works Diligently To End The Nightmare
Aired June 10, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ADRIAN FINIGHAN, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Under pressure, BP shares take a hit as U.S. anger intensifies.
Talking down the euro, he's been courted by the IMF and the White House, we speak to Euro blogger Edward Hugh.
And South Africa's big kick off just a day away, but will there be a big pay off when the World Cup is over.
Hello, I'm Adrian Finighan in for Richard Quest. This is QUEST MEANS BUSINESS.
Shareholders and lawmakers are turning the screws on BP tonight as America's worst-ever environmental disaster threatens to cause diplomatic difficulties. Despite a massive clean up effort in the Gulf of Mexico, it seems nothing can shift the mud attached to BP's name. A law-a class- action, rather, lawsuit against BP has been filed on behalf of shareholders. It claims that the company misled investors before the spill. It says that BP told them that it had the technology to operate safely in the Gulf of Mexico. It alleges that BP has admitted that it didn't have the technology to stop the leak and the lawsuit says that BP has a history of safety lapses and so-called workplace disasters.
Now many shareholders are pretty worried that BP won't pay out the dividend that is due on June 21. BP dividend is pretty big news here in Britain. It makes up a eighth of dividend payments from companies on the FTSE 100 and is crucial for companies investing on behalf of pension scheme members. But U.S. politicians are also piling on the pressure.
(BEGIN VIDEO CLIP)
REP. STEVE COHEN (D), TENNESEE: They are going to have to change their name. And I hope they don't change it through bankruptcy because that could easily happen. And I'm believing this country should put them into receivership because the amount of damages are so great. And in testimony before the Judiciary Committee they made it clear they would pay what they felt were direct costs.
There are indirect costs that go beyond the $37 billion that we have up here. The indirect costs could be the state of Louisiana's future, the city of New Orleans total existence, and the tourist trade in the Florida Panhandle and the Mississippi Gulf Coast.
BP biggest polluter, get your act together, don't pay your dividends, don't try to improve your name that you have sullied for all time. And receivership, it should be coming.
(END VIDEO CLIP)
FINIGHAN: There are fears that this dispute could even sour relations between the U.K. and the U.S. Boris Johnson, London's mayor, spoke in a radio interview about anti-British rhetoric that he was hearing from the U.S. Now, BP's New York listed stock is rallying in New York at the moment. It follows a gut-wrenching 16 percent plunge on Wednesday during a frenzy of selling. The company issued a statement saying that it was not aware of any reason for that fall. BP's shares were sharply down in London this session, loosing more than 6.5 percent.
Now you are looking at the performance of BP shares, in London, over the past three months. They are now 44 percent down since April 20, when the Deepwater Horizon accident happened. The U.S. listed stock has fallen even further. It halved in value in the past 52 days. The share slump has wiped some $73 billion off BP's market value, according to Bloomberg, that averages out at about $1.4 billion, per day, since the spill began.
Well, even if you don't think you own shares in BP you might well have a stake in the company through your pension. Louise Rouse is the director of investor engagement at Fair Pension. She joins us now to talk more about this.
Louise, welcome to QUEST MEANS BUSINESS. BP shares now at their lowest since-what, 1997? The Gulf spill just the latest in a growing list of environmental, social, and corporate governance crisis that have serious negative impacts on U.K. pension funds.
You are arguing that pensioners should be better protected against the impact of such crisis, is that right?
LOUISE ROUSE, DIR., INVESTOR ENGAGEMENT, FAIR PENSIONS: Absolutely. As you say, most individuals in Britain will be affected by any decisions regarding dividends by BP. So it is very important that pension funds who act on their behalf are taking into account, more fully, environmental and social and governance risks.
FINIGHAN: But surely pension companies, institutional investors can't be expected to predict the circumstances of events like Deepwater Horizon.
ROUSE: While you can't expect them to predict, perhaps, the precise circumstances of Deepwater Horizon, as you said, BP has a history of health and safety breaches, and some environmental issues as well, with regards to Lake Michigan. So, I think that its institutional investors could be expected to scrutinize more carefully the risk assessment procedures that BP are applying .
FINIGHAN: But isn't there an argument that pensioners, themselves, should have exercised more caution when choosing their pension funds. That is, investors, they are shareholders. They are owners of the business. They have got to take some responsibility.
ROUSE: Well, individual pension holders, very often have no say in the funds that their money is invested in. For example, if it is your occupational pensions schemes, the trustees make that decision. We would encourage, however, many individuals to find out where their money is invested and to insist that their pension provider act more responsibly. But that can be difficult because there is very little transparency from institutional investors.
FINIGHAN: So you are a British-based organization?
FINIGHAN: What is it you are calling on the British government to do?
ROUSE: Well, at the moment, institutional pension funds are required to say to what extent, if any, they take environmental, social and governance issues into account when making decisions. But they are not expected to report on how they implement that policy. So there is very little information as to what environmental and social issues they take into account. How they exercise their shareholder rights. So we want the British government to introduce low cost regulation which would require pension funds to actually report on how they implement that policy.
FINIGHAN: Low-cost? That-what you are proposing, to me, sounds expensive. Not only the cost of putting all this regulation into place, this crossing the Ts and dotting the Is, is going to be passed on to pensioners, isn't it?
ROUSE: Well, I think when you look at the 44 percent, I think you said it was, drop in BP's value and the importance of dividend payouts the benefits will far outweigh the costs in terms of protection for pension holders.
FINIGHAN: But it is not just British shareholders, British pensioners, that will be affected if the U.S. government, for instance, forces BP to withhold quarterly dividend payments. Is there anything you can do to help international investors?
ROUSE: Well, I suppose the first thing to note is that one third of BP shareholders are actually based in the U.S. And when we recently had shareholder resolutions, before BP, on risk assessment with respect to Canadian (UNINTELLIGIBLE) we received quite a lot of support from U.S. investors, in contrast to U.K. institutional investors. I think that we would be encouraging everybody, across the globe, to become more interested in where their pension funds are invested and to apply pressure on how they're institutional investors act in their behalf.
FINIGHAN: OK. Great to talk to you, Louise. Many thanks indeed. That is Louise Rouse from Fair Pensions.
Now BP says that it has collected the equivalent of 73,000 barrels of oil since it placed a cap on the broken well. It spent nearly $1.5 billion on the clean up and containment effort. CNN's John Roberts got an exclusive look at the operation with the man in charge of it. He flew over the Deepwater site with BP's Chief Operating Officer Doug Suttles.
DOUG SUTTLES, COO, BP: Yeah, that's the drill ship Enterprise, so that is the vessel that is right over the top of the well. And that is the vessel that is taking the production from the cap assembly up to the surface. And what you can see is that flare is the gas that is with the oil, it is being burned off.
JOHN ROBERTS, CNN CORRESPONDENT (voice over): He has flown over the scene many times. But for BP Chief Operating Office Doug Suttles this was his first opportunity to actually touch down on the rigs attempting to kill his runaway well.
SUTTLES: You are actually looking at something that has never been done before. In fact, we would have never even thought about having this big equipment, this close together, working like this.
ROBERTS: We land on the Development Driller 3, the DD3, a brand new rig sinking the first kill well deep beneath the ocean floor. Immediately we see a stark reminder how we got to this point.
(On camera): As you arrive on the Development Driller 3 you met by this sign. It's a safety sign. Days without lost time injury, days without major events, and you come over there, the number is 52; 52 days since the Deepwater Horizon exploded and sank.
(voice over): But we also get our very fist shipboard look at the first piece of good news since this disaster unfolded.
SUTTLES: First of all, you can kind of see down here in the water. Now, I guess, I can tell you that when I was out here, in the days right after it started, this would have been brown oil. So even though it is horrible to look at, it looks a lot better than what it looked like those first few days. And part of it is what's happening right there. Which is- that is sitting right on top of the well, and of course, there is about- yesterday we got 15,000 barrels of oil up through there. And if that hadn't been there, there would have been oil in the sea.
ROBERTS (voice over): It's clear that the catastrophe aboard the Deepwater Horizon has had a profound affect on this drilling crew. Brian West shows me one of his remarkable ROVs, that serve as the technicians hands and eyes in the crushing depth of the ocean.
(On camera): What can be put on these arms?
BRIAN WEST, TECHNICIAN: Anything you can think of. We put shears, cutters, grinders.
ROBERTS (voice over): But look on the side of the submarine. And there it is again, Horizon 11.
WEST: The industry is changing. Because of this event, it is never going to be the same.
ROBERTS (On camera): How do you think it is going to change the industry?
WEST: There's going to be a lot of safety changes, I'm sure. A lot of procedural changes, everybody is going to look at drilling these wells and doing this operations totally different.
ROBERTS (voice over): One difference? There is now an ROV in the water 24/7, keeping careful watch over the relief well's blow out preventer.
JAMES LUSK, ROV PILOT: That's the ocean floor, down here.
ROBERTS: James Lusk is the ROV's pilot. A native of Slidell, just north of New Orleans, he takes his professional assignment, personally.
LUSK: We all live by the coast. I'm just here to hopefully stop it, Sir.
ROBERTS (On camera): For all the containment domes, the siphon pipe, the top kill operation, the top/cap, what you see behind me on the Discoverer Enterprise is probably as good as it is going to get until the month of August, because the last best chance to kill that well, to stop the oil from coming up from the bottom of the Gulf of Mexico, rests here with the 189 people on board the DD3. And to a person they say, they are committed to make sure the job gets done.
(Voice over): In the driller's shack, where cameras have not been allowed, until now, a highly skilled crew guides a drill down 13,000 feet. They have 5,000 left to go. Their target, a whole smaller than a dinner plate, a seemingly impossible shot. Yet, tool pusher, Ted Stukenborg says it is a point of pride to hit it on the first try.
TED STUKENBORG, TOOL PUSHER: It weighs on my mind. I know it weighs on a lot of people's minds that this is something that we have got to do right. We have to do it safe, and we have got to do it the first time.
ROBERTS: The work, long hours in the searing heat, for the most part has been pretty thankless. Few people are saying anything good about the oil industry at the moment. But they press on, in extreme conditions, to extreme depths.
STUKENBORG: I think a lot of people don't understand. They don't know. And if they understood it, if they knew they probably wouldn't be as hard on us, I think.
ROBERTS: Aboard the Development Driller 3, in the Gulf of Mexico, John Roberts, CNN.
FINIGHAN: Well, a few minutes ago I was telling you about the fears of London Mayor Boris Johnson, who worries that the Gulf oil spill could lead to worsening relations between the U.S. and the U.K. Just a few moments ago, at a press briefing given by Press Secretary Gibbs, at the White House, the White House has said that the Gulf oil spill will not affect relations between the U.S. and its closest ally, Britain.
Now, rates and currencies were on the radar today. As the head of the European Central Banks says don't write off the euro, it still has a lot of fans, we'll tell you more in just a moment.
FINIGHAN: Let's show you what's happening on Wall Street right now. U.S. stocks are soaring on signals that the global recovery is still on track. Helped by a sharp rise in Chinese exports and a strengthening euro, the Dow Jones up by 186 points right now. While stock markets in Europe also rose this session. It was a second successive day of gains for all the major indices. Banking shares got a boost after Spain successfully borrowed fresh funds in the bond market, easing worries about its European sovereign debt problems. Mining stocks did pretty well, too, amid optimism that Australia will revise its proposal for a new tax on miners.
No change in interest rates. After announcements today from London and Frankfurt. The Bank of England did much as expected, kept its benchmark rate at a 0.5 of 1 percent. The European Central Bank also held fire, its rate stays at 1 percent. ECB President Jean-Claude Trichet said that he expected the Euro Zone economy to keep growing at a moderate pace. And he described the euro as a very credible currency.
Well, we just mentioned that Spain had borrowed new funds today, so too, did Italy, to the tune of $10 billion. With austerity measures recently approved by the government it is working to head off any hints of a debt crisis. CNN's Paula Newton is in Rome. She joins us now, live.
What state is the Italian economy in, right now? I mean we hear a lot about Spain, about Greece, Ireland, Portugal. What about Italy?
PAULA NEWTON, CNN INT'L. CORRESPONDENT: Well, it depends on who you ask and on which day. Here Silvio Berlusconi himself has confused even Italians. You know, a few months ago he said, look, there is going to be no debt crisis in Italy. And yet, now, he is pushed through with his government $30 billion in austerity measures over the next two years. Saying, look, we need to look after this.
You know, industrial output, today out here, Adrian, that was up by 1 percent in April, more than expected. That low euro, Adrian, that actually helps countries like Italy. You can see already an uptick in exports. Analysts expect that to go up. Other than that, it is a bit of a mixed bag. There aren't the risks for the social unrest here. But there is that potential. There are calls for a general strike on June 25. But by and large, Italy is proving Claude Trichet right. They are saying, look, we are holding our own here. Our economy will continue to make modest gains and we will pull through this.
The big downer still, though, is consumer spending. You can feel it here. The consumer confidence is quite low, Adrian.
FINIGHAN: I was going to say, I mean, how does it feel there? Is there a feel-good factor? You mentioned that the low euro, at the moment, is pretty good for economies, especially like Italy. But that lack of consumer spending is pretty worrying. I mean, what are people saying on the streets?
NEWTON: Well, not many of them are very impressed with the austerity cuts. Some of them realize that they have to be done. But essentially they are looking around and saying look there isn't that much wrong. The key thing here is that unemployment has remained stable, under 9 percent. You are not having the kinds of conditions that you have in Spain. And that is incredibly helpful. Italians know, and as much of a cliche as it is, la dolce leche (ph) can continue for a little while longer because there are some pockets of those exporting industries here that really are showing a lot of strength, Adrian. And when that euro goes down, while it may mean that their imports are more expensive, they know that will help those engines, those economic engines of the Italian economy.
One thing everyone realizes here, though, Adrian, with anywhere from a quarter to a third of this Italian economy in the black market, not taxed whatsoever, everyone realizes that once and for all, this country has to try to get a hold of that question, Adrian.
FINIGHAN: All right. Paula, many thanks, indeed. Paula Newton live in Rome.
Well, "CONNET THE WORLD" is examining the issue of austerity measures all this week. Seeing how tough times are forcing countries to make tough choices. Tonight, Becky Anderson looks at Britain, the U.K., and the debate over which services should be spared the axe, when a new budget is unveiled. That is "CONNECT THE WORLD" at 2100 hours, 9:00 o'clock here in London, or 2200 hours, in Central Europe.
Now the latest blow to the summer travel season in Greece, tourism workers have said that they will hold a 24 hour strike, to protest against the spending cuts in their country. If you are planning to travel to Greece on either June 16 or June 30, we'd like to hear from you. Go to CNN.com/QMB, and tell us how this strike, potentially, effects you.
Now it is not only about prestige. Countries may vie with one another to host the World Cup. Sometimes the price of that turns out to be very high. We'll look at why it was a less than championship legacy for Japan. We'll be right back.
FINIGHAN: The anticipation is mounting. Kick off less than 24 hours away now. Now tomorrow, as the whistle blows, QUEST MEANS BUSINESS will be looking at the economic potential or countries coming up against each other in South Africa. Join us to see how the world's footballing nations and their key economic players stack up, head to head. As the QMB, economic World Cup kicks off.
Joining me now, in London, to discuss the contenders is Jim Boulden.
I've read you blog. I have to say this is pretty tenuous. There is not a lot in this, surely, or is there? I mean, you made it look as though there was a bit of substance to this.
JIM BOULDEN, CNN INT'L. CORRESPONDENT: You know the banks spend a lot of money researching this. We had some reports out in April, May and June, you it is a lot of fun for the banks. But they do have some-they look at these things and want to make some decisions whether or not they can-two ways. One, can they look at the economy and make any predictions on the World Cup. The other way is can they use the analysis that they put into economies and use that analysis, but the quants (ph), an predict who is going to win the World Cup.
FINIGHAN: So, on the face of it, it does stack up to a certain extent. It is actually the poorer nations who do better at the World Cup, is that right?
BOULDEN: I'll tell you what.
BOULDEN: PricewaterHouseCoopers has actually done a very detailed report. And they say population, for one, has no impact.
BOULDEN: No. 2, GDP has no impact.
BOULDEN: Unlike the Olympics, where those two actually have an enormous impact. So that is why football is different.
BOULDEN: Then they say the host nation actually does better than the indicators would give to that. So, you can look at France, you can look at England, for instance, winning at home.
BOULDEN: So then South Africa should do better than it would with its rankings. And that will give it an economic impact.
FINIGHAN: Right, what about a nation like Brazil? Which has won the World Cup-five times.
BOULDEN: Five times, right.
BOULDEN: And that is where it throws everything in, because you look at Brazil and you talk about it as a developing nation, and the times that it won it wasn't even-you know, it wasn't even a developing nation at the time. So, Brazil does extremely well. So, you talk about poverty and you put poverty into all of this. And how does that affect a team? And if you look at it from a Brazil point of view-or even Argentina, who in the middle of economic crisis won the World Cup twice.
All right, so what about nations like, rich nations, Germany, France, Italy, who won the World Cup. That rule doesn't apply here.
BOULDEN: Exactly. So that is why the banks spent all this time doing all of this.
FINIGHAN: I'll tell you what, you give us, I mean you have got some economic predictions here about who is going to win the World Cup, and tell us who you figure is going win.
BOULDEN: I asked, did I have to come up with one, so I just said Spain.
FINIGHAN: Right. Why?
BOULDEN: If you look at-well, number one, they are second ranked in the world, no doubt about it. And they have preformed very poorly in the World Cup. They have only really been in the top four once, I think it was 1950. They've got the players.
BOULDEN: And if you want to look at it from an economic impact, who could have the best or the best boost, who needs the boost the most?
BOULDEN: Who has a reasonable chance to win?
BOULDEN: And I would say that is Spain.
FINIGHAN: OK, on those grounds I'm going to predict as well, England.
FINIGHAN: Again, because the country needs a boost, economically, Capello (ph), arguably the best manager in the tournament. And look at the team's performance. What it 18 wins in 24 games since Capello has been in charge. I mean, he's been fantastic for England. I feel that this could be their year. And the country, economically, going through a crisis, therefore, according to you theory, at least-
BOULDEN: A theory.
FINIGHAN: A theory, we could do it. I look forward to talking to about it another time. I look forward to talking to you more about this tomorrow night. It is fascinating. I'm not sure about the science behind it. I remain to be convinced, Jim.
BOULDEN: We'll see.
FINIGHAN: Now, all this week QUEST MEANS BUSINESS has been taking stock of the value of hosting the World Cup, as South Africa is right now.
We've been back to some the countries that held the event in recent years and seeing what impact it had on their economies. Now, on Tuesday we heard how the U.S broke new ground by staging the tournament in 1994. On Wednesday we looked at France, the host and the World Cup winners in 1998. But a country where economists still debate the legacy of the competition.
And today, we come forward to 2002, when Japan co-hosted the World Cup with South Korea. As Kyung Lah reports from Japan, the legacy has been tempered by the financial costs involved.
KYUN LAH, CNN INT'L. CORRESPONDENT: 2002, the world descended on Saitama Stadium. More than 200,000 frenzied World Cup fans filled Japan's state of the art, Soccer only stadium. Fast forward to today and that same stadium is unused most of the year, due to the natural grass and the soccer only construction, the field can only be open 60 days a year. Built in a rural part of Japan it is too far away from Tokyo's population center to consistently draw huge crowds. Junko Yajima (ph) lives in shadow of the stadium.
"We have no choice," she says, "It is losing money but it is built already."
(On camera): Saitama Stadium looses about $3 million every single year. But that is not an unusual story. Eight out of the 10 2002 World Cup stadiums built or renovated here in Japan are all money losers, losing anywhere from $2 to $6 million a year each. That is a tab picked up by the taxpayers. The reason why? Once the World Cup leaves town, they are finding that it is very difficult to fill all of these seats.
Economically, was it worth it?
ICHIRO HIROSE, TOTAL SPORTS STRATEGIES: Well, no strategy, no success. They did not have a strategy. No, no.
LAH: Ichiro Hirose was a member of the 2002 World Cup bidding committee. He says lack of planning and foresight back then, resulted in today's financial problems.
For example, Brazilian fans filled Chizuoku (ph), Japan for the 2002 World Cup. But when the fans left?
HIROSE: Just a big, gigantic stadium was built, just for the World Cup. After that, look at that.
HIROSE: Empty, of course.
LAH (voice over): There are benefits that can't be calculated with numbers. South Korea benefited from its international image make over after it strong showing at the games. And Korea/Japan relations improved by co-hosting the event. Not to mention, says Saitama's Parks & Stadium Chief, a sense of local pride.
"We have all the memories of the excitement by hosting the world class game," says Kazuhiko Sasho, "The sentiment is the greatest effect, which can't be valued in dollars. But he admits the year since 2002 have been tough.
"It is hard to maintain and keep the stadium after the World Cup is over," he says. We built a world-class facility. But we have to work hard to balance the budget and it takes a lot of wisdom to make a profit."
Saitama's prefectural government is already working on its pitch be a venue site in 2022. That is the year Japan is bidding to host another World Cup. Lessons learned, Saitama's government believes it can make more money and sustain the initial economic boost. This time around, though, Japan will have to convince not just an international community, but suspicious taxpayers, who live with the legacy of hosting a World Cup.
Kyung Lah, CNN, Saitama, Japan.
FINIGHAN: Well, Wall Street is also trying to learn the lessons from the past. Bear Stearns has been in business for more than a century, before the financial crisis did for it. We'll hear from a former top executive.
FINIGHAN: Hello, live from London.
This is QUEST MEANS BUSINESS.
In for Richard Quest, I'm Adrian Finighan.
More business in just a moment.
But first, let's get a check of the main news headlines this hour.
Britain's new prime minister says that 2010 is the vital year for NATO forces to make progress against the Taliban. David Cameron made an unannounced trip to Afghanistan on Thursday, during a meeting with President Hamid Karzai. He pledged more money for the NATO efforts, specifically to counter the threat from roadside bombs. But he flatly ruled out sending more troops.
Meanwhile, the British Press Association reports Mr. Cameron was forced to cancel a visit to a forward base because of concerns over a possible militant attack.
A U.N. war crimes tribunal has convicted two former Bosnian Serb Army officers of genocide for their roles in the massacre at Srebrenica. They were sentenced to life behind bars, while five other officers convicted of lesser crimes received lighter sentences. More than 7,000 Muslim men and boys were killed in Srebrenica when Bosnian Serb forces overran the U.N. protected enclave in 1995. It was the worst massacre in Europe since World War II.
A major show of support for Pope Benedict. Thousands of priests from around the world have gathered in Rome, as the church continues to deal with the clergy sex abuse scandal. The vigil marks the end of the year of the priest. This year's event has been described as one of the largest in the history of the Vatican.
New footage has been released of Dutch murder suspect, Joran van der Sloot meeting victim, Stephany Flores at a poker table at a casino in Lima, Peru just hours before the 21-year-old Peruvian's death. The images were released as Joran van der Sloot's attorney said that he'll try to get his client's confession thrown out.
Wall Street enjoying a bit of a bumpy day today after reports on the U.S. job market and Chinese exports lifted anxiety about the global economic recovery.
Alison Kosik is at the New York Stock Exchange.
She joins us now to tell us more about this.
So it's actually the economic factors behind this -- this lift in -- in the mood there and not just pre-World Cup euphoria or the fact that the USA think that they're going to beat England on Saturday?
ALISON KOSIK, CNN CORRESPONDENT: You know, Adrian, it could be very well exactly what you're talking about. But, yes, I think it's more of what you said before, that, you know, we got that strong report on China's economy, that export surge in May. And, of course, that deepens fears about Europe's debt problems spreading. And those fears, of course, have been plaguing the market for months. Also, we got that continuing claims number. That number plunged and -- and what that could do is indicate that laid off workers are beginning to find jobs and that the job market is improving. And that's something that Wall Street has really wanted to see. And that could be really driving this -- this rally that we're seeing carry through most of the day so far -- Adrian.
FINIGHAN: Last month, Alison, we saw that -- that flash crash, which amazed and alarmed people around the world.
New safety measures have been put in place today, is that right?
KOSIK: Exactly. Federal regulators approved the new rules on what they call circuit breakers. And here's what they're going to do. U.S. stock exchanges would briefly stop trading stocks that had big swings, meaning stocks that moved 10 percent in either direction in a five minute period.
Now, the idea behind this is that it give the market a chance to figure out a fair price before trading resumes. I don't know if you remember, but on the day of the flash crash, we had stocks trading at $40 one minute and then a penny at the next minute. That really isn't -- it isn't all that realistic.
So the new rules are more uniform, as well. They apply to all the stocks on the S&P 500 Index. That's all U.S. exchanges. And that really was another big issue with the flash crash, that the New York Stock Exchange, it took a breather. But orders at the NASDAQ still went through.
The trading brakes are going to be going into effect as early as Friday and they're going to be tried out for about six months. And after that, officials will see how things go and then make adjustments after that. But most likely, these rules will -- these rules will stick for at least six months -- Adrian.
FINIGHAN: Alison, BP shares under pressure in Europe one -- once again today.
How are they doing in New York right now?
KOSIK: They're surging. They've been surging all day. Right now, BP's shares are up almost 10 percent. You know, it could be that, you know, investors see it as undervalued at this point. I've talked to traders throughout the day. Some say that they think that sure, that that stock was over bought -- or over sold, rather. So, you know, you see people buying into the stock. Others are more worried. You know, some traders say, look, it could be maybe a month before we see that company go bankrupt. Now, these are just rumors, but this is the kind of chatter that we see happening on the floor, you know, because we're hearing of pressure from politicians that BP should suspend its dividend.
So all of these pressures are on that stock. But right now, the stock is up almost 10 percent -- Adrian.
FINIGHAN: Alison, great to talk to you.
Many thanks, indeed.
Alison Kosik at the New York Stock Exchange.
Well, U.S. lawmakers are busy crafting the final version of a sweeping new law on Wall Street reform. Among other things, the new law aims to make sure that no bank can become so big that the government has no choice but to bail it out. Now, in the recent crisis, Bear Stearns was the first major U.S. bank to face that scenario when it looked certain to go under. It was taken over by JP Morgan in a dial brokered by the government.
CNN's Poppy Harlow spoke to Ace Greenberg, who was chair of Bear Stearns' executive committee at that time.
Poppy joins us now live from CNNMoney.com in New York.
What did he have to say -- Poppy?
POPPY HARLOW, ANCHOR, CNNMONEY.COM: You know, it's interesting, fascinating, really, to sit down and have a conversation with Ace Greenberg. As you know, Adrian, he's a legend on Wall Street, certainly, and a legend when it comes to Bear Stearns. This is a man that was at the company for 60 years. He led Bear Stearns for a great deal of time, after joining the company in 1948. And he also watched that company that was such a part of his life fall.
He's written a new book about it, "The Rise and the Fall of Bear Stearns."
We talked to him about many subjects, specifically what he thinks caused the fall of Bear Stearns.
Take a listen to this.
(BEGIN VIDEO CLIP)
HARLOW: so what do you think happened, Ace?
What brought down Bear?
I think there's two schools of thought when you -- when you look at the public. There's the school of thought that there was a clear run on Bear. And there's the school of thought that there was a severe liquidity problem. But Alan Schwartz, you know, the -- the week before, days before the fire sale, said our liquidity position is strong. And I talked to Alan about that. He truly believes that.
ACE GREENBERG, FORMER CHAIR, EXECUTIVE COMMITTEE, BEAR STEARNS: No, he did. And he got his information from the right people. And he was -- they were right. But there wasn't a run when that happened. And what brought Bear Stearns down was, I think, basically, number one, they were high leveraged. And number two, we thought the securities we owned, because they were rated AAA, you really didn't risk much.
What did you risk, 2 or 3 points?
Well, AAA, we found out, wasn't what it used to be.
HARLOW: Were the rating agencies a big part of this, of the collapse of Bear in that sense?
GREENBERG: I'm not blaming them. I'm just saying that maybe we should have done more homework. Maybe we should have realized they weren't AAA. But they weren't. Even though they were rated AAA and even though they had a floating coupon and we thought that risk was under the 2 or 3 points, our risks added up to be 40 or 50 points.
Now, if you're highly leveraged and something goes down 40 percent, you're out of business.
GREENBERG: And the run on Bear Stearns, of course, hastened that. But I'm not accusing short sellers or rumor mongers or anything. There's no question when Alan made that statement on a Thursday or a Wednesday, there was no run on us. There's also no question that 24 hours later, there was a run and the $21 billion that he said we had for such emergencies was down to almost nothing.
HARLOW: Was it a warranted run?
If you were on the other side, would you have -- have pulled out?
GREENBERG: That's a hypothetical question and I'm very weak on hypotheticals.
(END VIDEO CLIP)
HARLOW: Weak on hypotheticals, he says, Adrian. So he -- he won't answer that question. But you clearly heard him say he thought that there was a clear run on Bear Stearns, that they had a sound liquidity position the same week that that bank failed.
It's amazing to look at what happened to Bear. Fourteen months before that fire sale to JP Morgan, its shares were above $170. It was sold to JP Morgan, the first offer, $2 a share; eventually, $10 a share.
But an amazing fall of a historic bank. And to hear from the man who was the head of it for so long -- a lot of insights. And I will tell you, a lot of finger pointing in the fail -- in the failure of Bear Stearns. And he did say that his predecessor, Jimmy Cayne, was not president, was not at a lot of those critical meetings. He partly blames him for the collapse of that firm -- Adrian.
FINIGHAN: All right, Poppy.
Many thanks, indeed.
Poppy Harlow live at CNNMoney.com.
Now, he is 61, retired and lost interest in economics back at university. Now, you might think it's a little late to begin a career as an adviser to the International Monetary Fund. Meet the man from Barcelona whose radical theories are sparking something of a global debate.
FINIGHAN: All right, so let's meet the man who's being hailed around the world as a new economic sage of our times. His name is Edward Hugh. And he describes himself as a Catalan of British extraction.
Mr. Hugh attended the London School of Economics in the '60s, but never really took to the subject until, that is, decades later. Now retired, Mr. Hugh is attracting global attention to his blog posts, which offer radical solutions to Europe's debt crisis.
His central, highly controversial theory, is that Germany should return to the deutschemark, leaving the euro to tumble in value and restore competitiveness to Europe's less well off economies.
Among those who follow his utterings, the International Monetary Fund and the eminent economist and Nobel Prize winner, Paul Krugman.
And Edward Hugh joins me now on the line from home in Spain.
Mr. Hugh, can I -- can I call you Edward?
EDWARD HUGH, BLOGGER: Of course. Of course.
FINIGHAN: Thanks very much...
FINIGHAN: -- for being on the program.
Great to talk to you.
Tell us a little bit more about this theory then that Germany should dump the euro.
What's your reasoning?
HUGH: Well, basically, it's based on the idea that everything else won't work. I mean it's not the ideal first solution. The much better solution would be to find a way for the Eurozone to pull together and resolve its problems without any great traumatic shock.
But this involves the countries in Southern Europe doing something about their competitiveness and something more than simply structural reforms.
I mean both Paul Krugman and I have been advocating the idea of an internal devaluation, which effectively means a reduction in prices and wages by 20 percent. But after two years of trying to argue for this and seeing that virtually nobody, not even the IMF or the European Commission in Brussels, is really interested in this, we're left with very few alternatives and time is ticking away.
So one very swift and easy technical way to take the pressure off the economies in Southern Europe -- because this is the big issue that's worrying the financial markets -- are the countries of Southern Europe going to be able to pay the debt that they're taking on board at the moment?
And the only way they are going to be able to pay them is through economic growth, then something needs to be done.
FINIGHAN: All right, so -- so what would your advice today be to -- to Eurozone -- Eurozone leaders?
HUGH: Well, base -- basically, the -- the -- to take much more seriously the whole idea of doing something about the -- the -- the relative price level of -- of Southern Europe and -- and to really try to put in place, if they want to avoid really what -- I'm not especially recommending that Germany leave and go to the mark. I'm saying it's what will inevitably happen if they don't do something to solve the problems of Southern Europe out more particularly than they are doing at the moment.
FINIGHAN: And one -- one quick question before we let you go.
How do you feel about all the attention that's -- that's suddenly coming your -- your way at the moment?
Has anyone managed to or tried to tempt you out of retirement?
HUGH: Oh, well, first of all, I'm not actually in retirement. But this -- this doesn't -- this isn't really the question at this moment in time. No, I'm -- I'm quite active as a blogger and a writer. But I mean the -- the people have attempted to persuade me to take more lucrative occupations. But, really, I'm quite happy doing what I'm doing, because I feel, in some ways, that I'm taking on some sort of responsibility in trying to argue things that perhaps other people aren't arguing.
How do I feel about all the attention now?
I mean Andy Warhol said this, it's a cliche, isn't it -- you can be famous for about 15 minutes. And I guess that's what's going to happen. But on the one hand, I'll just keep working away. I mean, you know, that's the only thing to do.
FINIGHAN: Edward, I really appreciate you -- you sharing your thoughts with us here on QUEST MEANS BUSINESS.
Many thanks, indeed.
Good to talk to you.
HUGH: Thank you.
FINIGHAN: That's Edward Hugh.
And if you want to find out more, go to CNN.com. You'll find a story there about how Edward came to prominence and more about his thoughts on the future of the euro.
Right. Let's get a weather forecast.
Guillermo is with us at the CNN International Weather Center.
I saw you blowing that World Cup trumpet earlier on.
GUILLERMO ARDUINO, CNN METEOROLOGIST: I want to go in...
FINIGHAN: That's how you might -- my 10-year-old...
Say that again.
FINIGHAN: My 10-year-old daughter is learning to play the trombone and she makes a similar sort of noise.
ARDUINO: I want to go into retirement and play that forever, not to ever have to work again. Now, look at this. Let me...
ARDUINO: Let me ask you, do you have one of these?
Do you know what this is?
FINIGHAN: What is it?
It's a -- it looks like a...
FINIGHAN: -- it's like a ping -- a ping pot bat, isn't it?
No, a wobble board.
ARDUINO: It's a fan.
FINIGHAN: Tie me kangaroo down, sport. Tie me kangaroo down.
ARDUINO: It's a CNN fan.
You know what?
You will need it...
ARDUINO: -- if you're in Germany. Watch out. You will need it if you're in Hungary, as well.
So do you have your CNN fan?
OK. Let me tell you what's going on in Britain.
ARDUINO: No. Fred.
We have OK conditions, no -- no warnings whatsoever. It doesn't mean that it's going to be beautiful. So, sorry, Adrian, but Saturday and Sunday, you can go out with your 10-year-old girl and enjoy your daughter at parks, because it's going to be nice. I think that London will be fine on the weekend.
For the time being, we have to be patient. The weather is going to change on and off. And then we still have the jet stream here, so the bad weather is especially to the west. In France, look at this, low here forming in the Bay of Biscay. It's going to bring high seas and winds in Northern Spain, also here into France. We are having extremely hot conditions. There are warnings posted for Germany. So watch for that. And along with it, the severe weather. Unfortunately, a tornado in Wallendorf and also hail here in Baghd (ph) in France.
Look at Poland. Poland is going through severe floods. On top of that, we got hail. So a hail storm in the area.
Is it severe weather, right?
Well, this is the jet stream. I usually call it a highway where all the storms sit on top of it and then bring the bad weather. Well, look, this is a pattern. The lows are going to extend all the way into the north, but the warm conditions will prevail even in Germany. This is through Friday.
Now, on the weekend, things are fine, especially for Britain. Poland doesn't have such bad weather, but the storms continue to be a threat for that country. And we have the severest of the storms in here, you see, especially in France and Switzerland. And as we go to the north, it's going to be unstable.
Let me go quickly to the temp map. Yes, this is it -- 21 for London for tomorrow; 31, though, in Vienna -- Adrian.
FINIGHAN: It doesn't matter about the weather. We'll be indoors watching the football for the next few weeks.
ARDUINO: Oh, there you go. You're right. I didn't think about it. Yes.
FINIGHAN: Guillermo, many thanks, indeed.
ARDUINO: Good to see you.
FINIGHAN: Now, still -- still ahead, cracking the code -- why an AT&T security breach is creating headaches for Apple and some rich and famous iPad users.
FINIGHAN: Now, dozens of people who fought to be the first to own the Apple iPad have fallen victim to a security breach. Hackers say that they've broken into AT&T's Web site and accessed data on over 100,000 iPad customers, including many high profile figures like White House Chief of Staff Rahm Emanuel, New York City Mayor Michael Bloomberg, news anchor Diane Sawyer and U.S. Air Force Colonel William Eldridge. Some call this an embarrassment for Apple.
CNN's Maggie Lake is with us now with all the details -- Maggie, just how serious a security breach is this?
MAGGIE LAKE, CNN CORRESPONDENT: Well, it was pretty serious, Adrian.
I mean you saw, certainly, the list of people, their e-mail accounts, you know, that private information that you don't want out and, in some cases, is very sensitive, when you're talking about the Department of the Defense.
Thankfully, this was a group of hackers that consider themselves a security group. They immediately -- notified AT&T immediately and, in fact, did not go public with this until the problem was already rectified. So certainly the company's dodging one there.
But still, this is not the kind of headlines that either company wants, especially Apple, which you will remember, has always touted its security and, in fact, poked fun at some rivals in a string of TV commercials you may remember.
Have a look.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Ah-choo. Ah-choo. Ah-choo.
UNIDENTIFIED MALE: Gesundheit.
UNIDENTIFIED MALE: No, I'm not OK. I have that virus that's going around.
UNIDENTIFIED MALE: Oh, yes.
UNIDENTIFIED MALE: I think you'd better -- you'd better stay back. This one is a doozy.
UNIDENTIFIED MALE: That's OK. I'll be fine.
(END VIDEO CLIP)
LAKE: OK, that's, of course, you know, Apple and Mac. And the commercials are talking about viruses in computers.
Now, in this case, Apple moving into mobility and different partners. And that's really what analysts were emphasizing with us today, saying, listen, this was not an Apple security breach, this was an AT&T security breach. That's where the problems lie. It was an important distinction for them to make.
But maybe even more important, Adrian, is the fact that that seems to be how consumers are viewing it, as well.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: It doesn't really necessarily tarnish the Apple. But I'm cautious about my choice on my carrier, because I just switched to AT&T just because of Apple.
UNIDENTIFIED MALE: I -- I wouldn't say that that's Apple's fault in that situation, because it seems like they didn't hack into an Apple product, just the AT&T. And obviously Apple should have their partners, you know, secure with their own e-mail services.
UNIDENTIFIED MALE: This is what hackers do. This is -- we -- this is how we stop them.
(END VIDEO CLIP)
LAKE: So for the moment, Apple's reputation seems to be intact. It's really AT&T that is taking the hit. And, in fact, Adrian, people saying this may even step up more pressure on Apple to get out of that exclusive contract, the exclusive agreement they have with AT&T, because remember, in this country, they're the only carrier with the iPhone. It's not open to the other carriers. So you can imagine that the chorus of people calling for that to change is getting a lot louder today.
FINIGHAN: Maggie, many thanks, indeed.
Maggie Lake live in New York.
Well, Apple's device is by no means the first ever tablet computer. In China, where the iPad still hasn't officially gone on sale yet, CNN's John Vause has been looking at the alternative devices that you can already buy and at a fraction of the price.
JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT: (voice-over): Can't get an iPad?
(on camera): The iRover. Oh, OK.
Do you get the iWeb?
UNIDENTIFIED MALE: IPad.
VAUSE: It's like an iPad?
(voice-over): Apple's iPad, the holy grail of gizmos, which causes a sensation everywhere it's sold, hasn't been released yet in China. But in the sprawling electronic market in the Chinese city of Shenzhen...
(on camera): It looks the same.
UNIDENTIFIED MALE: Yes.
VAUSE: (voice-over): There's no shortage of locally made wannabes.
(on camera): That's pretty good.
Does Apple know about this?
(voice-over): And they're cheap.
(on camera): The best price.
This is what, $140?
And how much is this?
$700 -- $700 R&B.
UNIDENTIFIED MALE: Yes. Very cheap, huh?
VAUSE: This is $100?
(voice-over): All the tablet PCs we saw ran on either Android or Windows.
(on camera): I don't think it's working.
(voice-over): Some better than others.
(on camera): It looks like a great big iPhone.
(voice-over): Wu Yabin (ph) boasts it took just three months for his J10 tablet to hit the market. He says that he hopes to sell a new generation more like an iPad, he says, but with enough differences to avoid an Apple lawsuit.
(on camera): So some people might want to know if you have any -- any moral qualms, any problems with what seems to be kind of a rip-off of an Apple product?
(voice-over): "I'm not copying from them," he says, "I'm only following them and producing something similar."
(on camera): And at this small, run down factory complex in Southern China, the makers of a tablet PC say they, too, have been ripped off, only in this case, the accusations are being leveled at Apple.
(voice-over): Zan Wu (ph) says he's been selling his P88 for more than a year. "This is for grownups," he says. "iPads are for kids."
And Mr. Wu says he's gathering evidence for possible legal action.
"When Apple released its new product, everyone around the world started pointing fingers at us, saying we're the fake version of the iPad. It was devastating," he says.
Apple declined to comment on the accusation, but consider this -- Mr. Wu can make about 300,000 table PCs a year. That's how many iPads were sold on their very first day, making a potential legal case a battle between a giga goliath and a nano David.
John Vause, CNN, Shenzhen, China.
(END VIDEO TAPE)
FINIGHAN: So have you got an iPad yet?
Do you want an iPad?
I've had a play with a couple of them. I'm a big Apple fan.
Do you know, I think I'm going to leave it for a while. I'd rather have an iPhone 4 when that comes onto the market very soon. I'll, you know, save an iPad for somewhere down the line.
Now, after the break, we'll check back on Wall Street. We'll round up the action on the European markets and we'll show you how the euro is getting on right now.
Are you watching Mr. Hugh in Spain?
FINIGHAN: All right, before we go, let me show you quickly what's happening on Wall Street right now.
Stocks soaring at -- on signals that the global recovery is still on track. Helped also by a sharp rise in Chinese exports today and a strengthening euro. The Dow up 230 points. The stock market in Europe also climbed this session. All the major indices now making back to back gains, but that's after a volatile -- volatile trading for several weeks now.
Banking shares got a boost on Thursday after a bond sale by easing some worries about European sovereign debt problems.
The euro also helped to propel those indices higher -- to a higher finish today. The single currency advancing for the third session, topping $1.21. The ECB president, Jean-Claude Trichet, saying today that the euro is a very credible currency.
And that will just about do it for Thursday's QUEST MEANS BUSINESS.
In London, I'm Adrian Finighan.
Richard is on vacation at the moment.
But if he were here, I'm sure he'd say, whatever you're up to in the hours ahead, I do hope it's profitable.
I'm sorry, that was a dreadful impression.
Stay with us on CNN.
"WORLD ONE" starts right now.