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QUEST MEANS BUSINESS

British Banking Scandal; Barclays Memo Implicates Bank of England; UK Financial Secretary Calls for "Age of Responsibility"; IMF Warns US Recovery Tepid; US Stocks Get Holiday Boost; Currencies Steady Ahead of US Holiday; The Millennials: Joe Braidwood Says Goodbye

Aired July 3, 2012 - 14:00:00   ET

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


RICHARD QUEST, CNN INTERNATIONAL HOST: It was a personal decision. Barclays' chairman says Bob Diamond was not pushed out of the bank.

It's bigger than Bob. The UK's city minister tells me tonight it's time to clean up the culture of banking.

(BEGIN VIDEO CLIP)

MARK HOBAN, FINANCIAL SECRETARY, UK TREASURY: I hope what we will see is an age of responsibility in banking.

(END VIDEO CLIP)

QUEST: And the IMF warns the United States today, don't fall over the fiscal cliff.

I'm Richard Quest. We have an hour together, and I mean business.

Good evening. Tonight, we investigate the trail of the scandal, which now appears to lead to the very pinnacle of Britain's financial system.

As Bob Diamond prepares to testify before UK lawmakers on Wednesday, a memo from the former Barclays boss now puts the Bank of England and senior officials in the UK government at the very heart. This is the memo. We'll talk about it in a moment.

After 24 hours of intense public pressure, Mr. Diamond has caved in and resigned. Marcus Agius is the chairman who resigned from Barclays on Monday, will now temporarily run the bank. ITN's Richard Edgar asked him why the buck hadn't stopped with him as he'd first said it would.

(BEGIN VIDEO CLIP)

MARCUS AGIUS, OUTGOING CHAIRMAN, BARCLAYS: I think from my conversation with him that he saw that the intensity of the public interest in this whole area, which I had hoped would might reduce by my resignation, had not reduced.

And I think he also saw, because of the announcement, for example, of the new inquiry, the new process and following through --

RICHARD EDGAR, ITN CORRESPONDENT: It's an extraordinary turnaround, because only that very day, he'd sent an e-mail apologizing and setting out very clearly that he was going to carry on in the role. What was it that changed his mind?

AGIUS: I think it was the fact that this intensity was going to carry on, and he felt he couldn't -- he couldn't do what he needed to do.

EDGAR: Did the governor of the Bank of England call you?

AGIUS: He -- Bob Diamond's was a very personal decision. He made it last night, and we talked about it.

EDGAR: Did he make it after you had called him?

AGIUS: We spoke last night. The banking industry is full of solid, trustworthy people who are full of integrity, and people recognize that, and include --

EDGAR: But --

AGIUS: -- the banking people --

EDGAR: -- there may be some people with integrity, but there's an awful lot of people, it seems, who do not have any integrity at all, as has been proven by these various scandals.

AGIUS: I know many, many bankers, and I know what their integrity is. We need to reassure people about the levels of culture and integrity and in our bank.

And for that reason, we have last week announced we are going to do a thorough root and branch investigation of all of our practices. We're going to take a third party individual, high-standing, to help us with the proceedings so that when we publish what the outcome is --

EDGAR: Do you accept that there has been criminal activity at Barclays?

AGIUS: I'm going to talk about the search that we're going to do. I'm not -- I don't think we should limit the -- or narrow the search in one way or the other of the sort of banker that we're looking for. I think we should have a wide search, and I think we should identify the right person.

This is an important bank. It's an important British bank, and the person who is going to be the next chief executive should be someone of outstanding quality and outstanding integrity, and that's what I'm going to lead the search to find.

(END VIDEO CLIP)

QUEST: That's Marcus Agius, the outgoing -- or now, temporarily running the bank, the chairman.

We've not heard the last of the three key players who have left Barclays. Bob Diamond is out, effective immediately. But he will be before UK lawmakers on Wednesday, and it will shed light on the Bank of England's involvement in libor, and the core question will be that old question, the oldest of all, when -- what did you know and when did you know it?

Crucial to the story is Jerry del Missier, the chief operating officer, who also went. Because what we now know is that after Diamond had a conversation with the Bank of England, he was left in no doubt -- he didn't think that they wanted them to do anything with libor, but Mr. del Missier did.

And so, how did that come about? How did he think he was being given the green light to lower the libor rate?

And finally, the chairman himself, back in for a bit longer. He resigned on Monday. He's now running the bank on Tuesday. As you heard on this program, he's got to find a new chief executive.

The memo that I'm talking about is this. This is the memo from Diamond, and it's sent to the others. It talks about how the Bank of England conversation. So, how significant is this fund? Mr. Tucker stated he was receiving were senior calls.

Jim Boulden is in the city of London for us tonight. Good evening, Jim. This memo that we are seeing, forget the criminality, forget the traders. This is the one that suggests it might have all been official.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Well, official or unofficial pressure, is what I wonder. Because if this memo is about Bob Diamond talking to Mr. Tucker at the Bank of England, and then Bob Diamond sends it down the chain.

And then it gets sent down the chain, it seems to be indicating that the decision was made lower down the chain to, let's lower our libor rates, because pressure's coming from above. We know how that can work, don't we Richard?

QUEST: OK -- yes, but Jim, let me just read you -- this is the submission. This is the Barclays submission. Bob Diamond did not believe he had received any instructions.

Bob Diamond did not believe he had received an instruction from Tucker, but he gave instructions to Jerry del Missier. Del Missier concluded an instruction had been passed down not to keep libor so high. And that's what this is really turning into.

BOULDEN: Yes, and that's the submission of the documents from Barclays that's going to be -- that's been given to the Treasury select committee ahead of Bob Diamond's testimony on Wednesday, and that's where we're going to hear Bob Diamond reiterate, I think, that he did not think he was getting pressure to do this.

But it became very clear, didn't it, Richard, from all the documents we've seen here and coming out of the US last week, that Barclays felt that they were under pressure because the other banks were already doing it and Barclays wasn't. And then, you have a collusion issue, there, as well.

QUEST: We need to talk about the political reaction in the UK, here. Cameron spoke, the chancellor spoke. What did they -- what's the important thing that anyone said today?

BOULDEN: I think what was really important as we led up to today is that Bob Diamond wasn't getting support from anybody. He's very popular in the city of London, he was popular amid the conservatives here, but they weren't going to be backing him.

And then, George Osborne, the Finance Minister, came out immediately after Bob Diamond resigned, and he had this to say in front of the cameras.

(BEGIN VIDEO CLIP)

GEORGE OSBORNE, UK FINANCE MINISTER: I think Bob Diamond's made the right decision for Barclays. Also, the right decision for the country, because we need our banks focused on lending to the economy, not on the scandals of the past.

And I hope this can be the first step towards a new culture of responsibility in British banking, which is what the British public very much want to see.

(END VIDEO CLIP)

BOULDEN: Now, Richard, we've seen people leaving this tower over here, Barclays, in the Canary Wharf area. The question is, who might be leaving some of these other towers? Because we know there are many, many more banks being investigated in this whole libor scandal, Richard.

QUEST: Jim Boulden in, as we said, the city of London, but the wider financial district over in Docklands for us tonight.

The government minister responsible for the city of London echoed George Osborne's comments earlier. The phrase now being used is "the age of responsibility." Mark Hoban is the financial secretary to the British Treasury, and I asked him how he could prove to the world that London was not the global capital of financial corruption.

(BEGIN VIDEOTAPE)

HOBAN: Well, what we need to demonstrate is how the culture of London is changing, and that the government is prepared to take action to restore people's confidence in the integrity of London's financial markets.

And the inquiry we've launched yesterday into setting of libor, accepting more sanctions is a sign of that, because a wide inquiry that we want Parliament to conduct is another aspect of that.

QUEST: This scandal goes to the root of integrity. How do you change that?

HOBAN: Well, here what we needed to demonstrate, and what the financial services sector needs to demonstrate, is how it's changed, how it's responded to these allegations. These were efforts to manipulate libor that took place between 2005 and 2008.

And I think they -- this financial services sector need to demonstrate to the wider world just what's happened. Because we also recognize, Richard, just how important London is to the UK economy.

The financial services and professional services sector employ 2 million people. Many of those jobs are dependent upon London to be a global financial center, and we want to make sure London's reputation is safeguarded.

QUEST: Can London restore its reputation from a scandal like this?

HOBAN: I think it can. I think London has proved itself resilient. We've learned lessons from the financial crisis, where we're radically reforming the regulatory system. We're putting a ring between retail and investment banking.

We demonstrate that we are going to be taking the acts and steps necessary to ensure people have confidence in the resilience and stability of London's financial center, and I think we can demonstrate how reforms can be made by both regulators, by government and, crucially, by the industry to ensure that reputation of integrity is maintained.

QUEST: When Congresswoman in Maloney in New York says that all scandals -- financial scandals seem to at some point have their roots in London, is she right?

HOBAN: No, I don't think that's right at all. I think that we have seen problems in financial markets across the world in the whole range of different products. I don't think this is an issue about London. I think it's an issue about the culture of banking and the age of irresponsibility.

I hope what we will see is an age of responsibility in banking. I hope today isn't -- marks a start of a process where that culture of trust and integrity is restored.

QUEST: You talk about the age of responsibility. How do you do it?

HOBAN: There was a whole series of problems in the financial markets in that run-up to the financial crisis, where you could -- almost anything could go. Anything can happen. Nothing seemed to be banned. And we've seen ways in which we can change the culture.

Just look at bonuses. At that time, bonuses were paid up in cash straightaway. No claw back. No retentions. That culture is changing. And in the UK, now we have a situation where people who -- where there has been a problem can have their bonus called back. Bonuses are paid in shares, now, not just cash, to align interest to shareholders and management.

We've seen at the moment the regulatory changes going through in Parliament that toughens up the regulation of a city. Their new conduct regulator, giving the Bank of England more control over prudential matters.

These are radical changes, and we're taking them to ensure that London is still the place for global financial services businesses to be based.

QUEST: What was your initial feeling when you heard about this? You're the minister responsible for the city of London, one of the UK's most important industries.

HOBAN: That we need to take action to tackle this. That we need to demonstrate to the world that actually London is the right place to do business and that there are too many jobs dependent upon the success of London and the global -- and the financial services center. We need to respond to that and actually to reassure people that business can continue.

Because the crucial part -- and we need to make sure we don't forget this, Richard -- that actually these businesses are there to serve the interests of families and households and business, and that we do need to make sure that they can get back to selling insurance products that people rely upon, to ensuring that capital is there to invest in businesses, and providing a safe place for us -- our savings.

(END VIDEOTAPE)

QUEST: UK's finance minister for the city. That's Mark Hoban talking to me. And later in the program, we will talk more about the age of responsibility.

The IMF tells the United States to raise the temperature on its tepid economic recovery. We'll go through the annual report next, QUEST MEANS BUSINESS, good evening.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Boost now, cut later. It's advice from the IMF to the United States. In its annual report on the US economy, the IMF says recovery is tepid and urges the American government to act swiftly to pep up what needs to be done. Particularly, do not fall over the fiscal cliff.

Felicia Taylor is with me from New York. These Article Four reports, it's a bit like a school report that tells you to eat your greens and have lots of roughage to keep yourself fit and healthy.

FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Absolutely right. This is sort of the check up that every member nation at the IMF must agree to, that they have an annual review by the IMF.

And they go through a series of meetings, and then they issue this consultation as to what the economy looks like. And Christine Lagarde indeed held a number of -- a number of different meetings from the bottom up, specifically last week with Timothy Geithner, the Treasury Secretary, and yesterday with the Federal Reserve chairman, Ben Bernanke, to decide exactly where the United States stands.

You said it, though. The key phrase is "fiscal cliff," and also raising the debt ceiling. She is concerned that if we allow this economy to reach that fiscal cliff, which is about $4 trillion in taxes and government spending cuts, by the end of the year, that growth could slow down significantly.

And also, as you remember in August of last year, we reached this pinnacle of the debt ceiling issue once again. It could happen again this year, between November, which is the ultimate election month, and December, that we reach the $16 trillion debt ceiling. She's calling for that to be raised now and said so in these words.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE: So, avoiding excessive fiscal consolidation and promptly raising the debt ceilings are two policy actions that need to be had. The threat -- only the threat of the delay in raising the debt ceiling and of the fiscal cliff could weaken growth already later this year, and should they materialize because no agreement can be reached, the domestic effects would be severe with negative spillovers to the rest of the world.

(END VIDEO CLIP)

TAYLOR: So clearly, that slowing down of the US economy would be devastating to the rest of the world, in that they've already reduced the amount that the US is expected to grow --

QUEST: All right.

TAYLOR: -- in 2012 to 2 percent and 2013 to 2.25 percent. So, she's pointing her finger, basically saying Washington needs to get its act together before this happens.

QUEST: All right, but as I read the report, or at least the summary of the report, they've got a problem, Felicia. The fiscal cliff is the most immediate crisis, but long-term fiscal consolidation, cutting the deficit, in the language that you and I would understand, long-term fiscal consolidation has to be on the agenda as well, and there, they've failed.

TAYLOR: And there's what?

QUEST: And there, they have failed.

TAYLOR: Absolutely. But that -- she's talking about immediate steps that need to be taken before the end of the year. But long-term, there's no question about it.

And she was -- she actually pointed the finger once again at the Federal Reserve and said there's room for them to ease if these measures aren't taken, which I thought was very significant.

She was also very specific about the housing market, and that we should take foreclosed properties and actually make them into rental units.

These are little steps that the officials could be taking to improve situations longer term down the road and allow homeowners to refinance their mortgages. That seems like an obvious thing. So clearly, there are longer-term problems for the US economy, not just these short-term fixes.

QUEST: Felicia Taylor is in New York tonight. Many thanks, Felicia. To the Dow Jones, which closed up --

(RINGS BELL)

QUEST: -- just 72 points. I say up half a percentage point. Couldn't quite make 13,000. It was an early close on the -- today, because of course tomorrow is Independence Day, celebration is July the 4th, when all markets -- all US markets and government offices are closed.

There were strong auto sales with increase in May US auditory -- May US factory orders. I will get that right. Anyway, up 72 for the Dow Jones.

So, to our Currency Conundrum for you tonight. How many banks are authorized to issue notes in the United Kingdom? Oh, I like this one. One, four, or eight? How many banks can issue bank notes in the UK? We'll have the answer later in the program, time to see if you can name them.

On the market, currencies are quiet ahead of Independence Day. The dollar eases as the euro -- traders took long holidays. Otherwise, those are the rates --

(RINGS BELL)

QUEST: -- and this is the break.

(COMMERCIAL BREAK)

QUEST: So, the time has come to say goodbye to the first of our original Millennials. He is Joe Braidwood, the chief marketing officer at SwiftKey. Over the last few months, we've seen Joe develop his skills and his talents and the challenges he's faced.

There was the triumph at the Global Mobile Awards, winning the most innovative mobile app, a major achievement for a small company. And then, we've seen him take his ambitions global, pitching his product at the CES in Las Vegas.

So, we need to take one last look at the man himself, this Millennial that we've been following for several months, and to find out what he told me about being Millennial.

(BEGIN VIDEOTAPE)

UNIDENTIFIED CORRESPONDENT (voice-over): As he stepped onto London's Millennium Bridge for his first close-up, 26-year-old Joe Braidwood oozed confidence. Over the five months that followed, he showed us the extent of his self-assuredness.

JOE BRAIDWOOD, CHIEF MARKETING OFFICER, SWIFTKEY: I wouldn't say necessarily that I work harder, but I think that I'm more dynamic.

UNIDENTIFIED CORRESPONDENT: And his tenacious ambition.

BRAIDWOOD: Should we talk about creative campaign ideas? I think it's really true that we are an empowered bunch, and we want to do things, and we want to do them well. Thinking ambitiously, I don't think, is a bad thing.

UNIDENTIFIED CORRESPONDENT: In no time, Joe opened up, revealing his fears.

BRAIDWOOD: I think everyone sometimes feels slightly stressed that they're going to be outperformed by others.

UNIDENTIFIED CORRESPONDENT: And in true Millennial style, his go- getting spirit.

BRAIDWOOD: I wanted to show you our latest build.

I think it's really silly for people to think that they can't achieve things just because someone tells them that they can't. There's nothing worse than the feeling that you can't do something without trying.

UNIDENTIFIED CORRESPONDENT: Today, a year older but still just as hungry for success, Joe Braidwood bids farewell to The Millennials. But first, he managed to find time to speak to Richard Quest.

QUEST: Before we came along, Joe, had you -- had you heard about or knew anything about this concept of being a Millennial?

BRAIDWOOD: Certainly, I demonstrate some of the behaviors that are termed Millennial traits, but I think that it's more than that. I think that our generation isn't necessarily this kind of incredibly entitled, very difficult, very stern, sort of motivated but slightly arrogant group of individuals.

I think that we -- we are very driven, but I think we're driven for a reason that finds itself in merit, not in prize.

(BEGIN VIDEO CLIP)

BRAIDWOOD AS A CHILD: You get quite a lot of homework at the school I am at at the moment, but I like it.

(END VIDEO CLIP)

QUEST: When you were -- we saw some fascinating pictures and anecdotes of when you were growing up. Did you cringe?

BRAIDWOOD: I think I was a difficult child. I look back and I think, I'm amazed that my parents put up with me the way that they did and showed me such sustained affection, because I was a brat. I was very, very sure I was right a lot of the time as a kid, when actually I wasn't.

And it's only, I think, now that I've had 27 years to soak it all up that I can turn back and say, OK, I was driven, but I was annoying, and this is why.

So, this is the central hall at the Las Vegas Convention Center. Sort of nerve center to this year's CES, where --

QUEST: You've taken on a lot. And you've certainly pushed yourself, haven't you?

BRAIDWOOD: Yes.

QUEST: Quite often to the limits of -- of the boundaries, haven't you?

BRAIDWOOD: Well, that was exactly the conversation I had with a friend of mine who is now the boss of our company, the CEO, when I joined. It's -- it was about trying to do something with 100 percent enthusiasm and really diving in at the deep end.

And I said to him -- because I'd been helping him for a few months before I joined the business, and I said, look, I really want to get involved in this. I really want to get my hands dirty. Either I can give you everything I've got, or I can give you my spare time. Which would you like?

UNIDENTIFIED MALE: For the winner, the judges have clever technology, a much-needed innovation that will make typing on SmartPhones that --

BRAIDWOOD: Oh!

UNIDENTIFIED MALE: -- much more easier. So, that's giving it away. The winner is SwiftKey.

(APPLAUSE)

BRAIDWOOD: That is awesome!

QUEST: Did you have any doubts that you could do it?

BRAIDWOOD: Of course, of course. When I started, I didn't know if we would still be existing in six months time?

QUEST: No, no, no. Not whether the company would, but whether you could.

BRAIDWOOD: Well, I think its synonymous for me, because I worked -- I put everything I had into the company, and for me, the success of the company depended on everyone in the team, especially me. So, it was -- I had self-doubt, yes.

There are these windows where I know I'm going to get home this day and probably be around for maybe a week, or maybe two. And so, one of the first things I do is figure out when I can see my family, and then, my closest friends, and try and make sure that I've got a plan to see them.

QUEST: What cost has there been to you to get where you are and to achieve the level of success?

BRAIDWOOD: An enormous cost, I think, in terms of -- if you focus entirely on one thing, other things in your life suffer. So, for example, I probably haven't spent as much time with my family and friends as I should have done, because I've been either sitting in airport waiting rooms or in the office late.

I haven't spent as much time as I want to on my personal fitness and focusing on things like health. Instead, what I do is I say, well, I'll deal with that later. But so long as the thing that you're focusing on is succeeding, that's OK.

And I think that having complete focus on one thing does create that kind of -- that kind of balancing act, that you then have to have a period where you sort of recalibrate.

QUEST: Finally, what have you learned in the few months that we've been following you, about being a Millennial?

BRAIDWOOD: For me, what it is to be a Millennial is to be someone that's focused on merit -- meritocratic ways of doing things, to focus on merit rather than on a sense of entitlement. And I've learned that there are a lot of people out there that think that my generation perhaps achieves more than they deserve to.

And from what I am trying to bring to that, it's about trying to define what we bring to it based on the things that we deserve because we - - we work hard, we play hard, but ultimately we achieve because we're good at what we're doing.

UNIDENTIFIED CORRESPONDENT: Next week on the show, we say hello to two new faces.

HARRY PARK (ph), MILLENNIAL: This is Stan Bumpus (ph). He's 28.

STAN BUMPUS, MILLENNIAL: This Harry Park, he's 29.

UNIDENTIFIED CORRESPONDENT: Join us as we introduce you to our next Millennials only on CNN.

(END VIDEOTAPE)

QUEST: They are our new Millennials, and you can join the Millennial conversation or apply to be one of them. Just tweet us with the hash tag #cnnmills or get in touch with @RichardQuest.

And as always, if you're interested, wherever you are in the world, in being one of our Millennials, and you think you have got those -- oh, I don't know -- those attributes of ambition tempered with caring and consensus, but determination to make it. If you're a Millennial, 21 to 30, quest@cnn.com, and you can leave the rest to us.

When we come back in a moment, they though it was a golden age for the world's financial system. With hindsight, it's now called the Age of Irresponsibility. The connections between the banking scandals of the last 15 years, QUEST MEANS BUSINESS, good evening to you.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, the news always comes first.

The acting head of Barclays says Bob Diamond stepped down as chief executive of his own accord.

(BEGIN VIDEO CLIP)

QUEST (voice-over): The bank's outgoing chairman, Marcus Agius, says Diamond's decision to resign was a personal one. Diamond is to testify before British lawmakers on Wednesday and expand on notes that suggest the Bank of England may have advised Barclays on how to set key interest rates known as LIBOR.

Syria's president has told a Turkish newspaper that he regrets the shooting down of a Turkish jet last month. Bashar al-Assad says the Syrian military thought the plane was from Israel. According to newspaper, he also said that he does not see Turkey as an enemy.

Some of Syria's main opposition groups are meeting in Cairo right now. They're trying to map out a strategy for a post-Assad Syria. So far, they can't agree on a text document. And one key group has already walked out of the meeting.

A powerful blast has ripped through a crowded produce market in central Iraq. It killed at least 30 people. A hundred more were wounded. Police in the city of Diwaniya blame a suicide bomber disguised as a watermelon merchant. Other bombings across Iraq today also killed at least six other people.

The commander of NATO forces in Afghanistan is welcoming Pakistan's decision to reopen critical supply routes along the Afghan border. Pakistan closed the routes after NATO accidentally killed 24 Pakistani soldiers last November at a remote border post. The U.S. has offered its deepest regrets for that attack.

(MUSIC PLAYING)

QUEST: One of Britain's top regulators is calling for a purge of the British banking sector. Adair Turner is the chairman of the FSA, the main regulator for the financial industry. And he said the industry's cynical self-serving culture must be completely eradicated.

(BEGIN VIDEO CLIP)

ADAIR TURNER, CHAIRMAN, U.K. FINANCIAL SERVICES AUTHORITY: There is, therefore, I believe, a very major challenge for the F investment and wholesale banking industry and related areas of finance, which is how to rededicate their business to a focus on fundamental economic functions, to raising capital for companies creating real worth, managing customer risks rather than creating new risks to bet against, and how to purge the industry of the culture of cynical entitlement.

(END VIDEO CLIP)

QUEST: Lord Adair Turner.

When it comes to the so-called "age of irresponsibility," that everybody is now talking about, this scandal of LIBOR is just part of the puzzle. And if you join me at the superscreen, you'll see what I mean.

The "age of irresponsibility" is an entire picture. It is a jigsaw of different parts that only, when they come together, do you fully appreciate.

Let's start with the subprime crisis, which goes back to the beginning of this century, where homes and banks were lending money to people who had no hope of ever repaying it. The question and concept of risk went out the window. We saw that with Lehman Brothers and AIG. They were lending money and were creating derivative products that had no rationality or reason.

And then we have the question of conflict of interest, with things like Goldman Sachs and Abacus (ph). When that came along, the picture started to be clear. You put yourself, in some cases -- they deny it -- but you put yourself before the client.

There was downright criminality of the sort of Raj Rajaratnam, who has sit from (ph) Galleon, who has since been convicted of insider trading and fraud. And then money counts, money and greed. We had the bankers' bonus crisis, which proved they were paying themselves.

It is only into this maelstrom, this entire picture, this jigsaw, that you can really appreciate putting the LIBOR crisis. Once you put that in, you start to see why people are calling it the "era of irresponsibility." No one piece of the jigsaw makes it up. Collectively, we end up with the mess that we are in.

James Bevan is the chief investment officer of CCLA, the asset manager for the churches and charities which holds a stake in Barclays. He told me cared hugely about what happened.

(BEGIN VIDEOTAPE)

JAMES BEVAN, CIO, CCLA INVESTMENT MANAGEMENT: I think the banks always have been major participants in whatever is going on in the financial world, and that's very clear to see. And we had a very long period of excess in which these problems grew and built.

QUEST: On that point, you make the valid point. We can't divorce the events of LIBOR or in hedge -- interest rate hedge selling and all these things. We can't divorce that from the subprime, because they were all happening at the same time, weren't they?

BEVAN: They were all part and parcel of the same overall problem for banking sector.

QUEST: So what needs to take place?

BEVAN: Well, I do think that this will give a lot of support for those who want to endorse the Vickers report, a separation of retail banking from investment banking. I rather suspect that that will be brought forward and done earlier.

QUEST: Even if Vickers is introduced in all its extremity, that's a bit like putting a bigger gamekeeper, isn't it? That's like changing the horse (ph). But that doesn't address the problem of why these people thought it was right to do what they did.

BEVAN: Yes, I'm not sure they ever thought it was right. I think that you were dealing with --

(CROSSTALK)

QUEST: They didn't care.

BEVAN: They were dealing very competitive people, all who wanted to be number one, in a global marketplace where everybody was doing it. And that sort of contagious, not apparent (ph) to accept the moral dimension of what you do absolutely happens in the peak of market extremes.

QUEST: So if I take your point, the only way to solve that problem is basically handcuffs and potential penalties.

BEVAN: We need carrots; we need sticks. We need people with integrity to be engaged in business at all levels, and we need society right maxes (ph) where making money is not the be-all and the end-all.

QUEST: Finally, back to Bob Diamond, we can't ignore the fact he was head of Bar Cap (ph) throughout all of this, can we? He was the man at the top who helped lead that culture.

BEVAN: The populist view is that if he knew, then, clearly he should go. If he didn't know, he should have known and he should go. I think the hard reality is that banks are very large, complex organizations, very difficult for any institution to know entirely what goes on. And this, I think, again, is support for the Vickers report that says smaller is probably better.

(END VIDEO CLIP)

QUEST: And you will remember, of course, that we bought Barclays shares. I bought them on behalf of this program. And down at the lowest point of the crisis in 2009, Barclays share put -- I paid 66 pence, I think.

But Barclays share price, if you look at the way the price surged briefly today after Bob Diamond's resignation, then fell back to at the better part of 1 percent. And you can see (inaudible) Barclays since LIBOR scandal hits last Wednesday, the share price had fallen nearly 15 percent in the space of a week.

When we return, united we fall. Why the U.K. prime minister doesn't want Europe getting too close. And some of his party members want to keep them as far away as possible.

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QUEST: The British prime minister, David Cameron, has told a parliamentary committee the U.K.'s position with Europe is unacceptable. He wants to bring back some of the country's powers. Mr. Cameron says he's not afraid to veto future measures which knit the countries of the union closer together, pretty much as he did back in December, or at least threatened to do.

He said he'll block anything that threatens Britain's vital financial sector.

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DAVID CAMERON, PRIME MINISTER, U.K: Britain has something like 40 percent of Europe's financial services industry. It's a vital -- a vital business for Britain, but also for the whole of Europe. They're 40 percent of that industry, but only, you know, 14 percent of the votes around the table in the E.U.

And so it is important if you're going to see the Eurozone integrate and you're going to see those 17 countries start doing more things together, we do have to think, are we adequately protected from those 17 sort of caucusing together and legislating in a way that could damage a vital industry for Britain?

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QUEST: David Cameron hasn't ruled out a referendum but there's no question and no date.

John Baron is a member of Parliament from Cameron's Tory Party. He wants a commitment in law to hold a referendum after the next U.K. election. European Commission President Jose, Manuel Barroso says it will be a complete mistake to try and divide the Eurozone from the rest of the union.

I asked Mr. Baron why he's so keen to make it an option.

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JOHN BARON, CONSERVATIVE MEMBER OF PARLIAMENT: Well, let's establish a few facts, first of all. We're not calling for a referendum now. What we're saying is let's legislate now for a referendum in the next Parliament. So I think that's important to establish. This is not about an inapt (ph) referendum now. This is about legislating in this Parliament for a referendum in the next Parliament, which would give us time to have an informed debate as to what the question should be on the referendum --

QUEST: Right. Ultimately, what sort of relationship would you like between the U.K. and the European Union? Are -- I suppose the core question is are you looking for a Norway-Switzerland option?

BARON: Well, that would be my preference. Relationship based on trade and not ever-closer political union. But that is my personal view.

What the letter that I've organized calls for, signed by 100 parliamentary colleagues, in to the prime minister, has called for this legislation now to put a referendum in the frame in the next Parliament. And that gives us time to have an informed debate as to what the question should be.

QUEST: I hear what you say, but if you legislate now, you will effectively be putting your party into the sort of position of turmoil that it was in the last time it was on European questions. And more importantly, you will be enmeshing the country, the U.K., into a bitter debate, which it does need to have now.

BARON: Well, I think that's your interpretation. And if you don't mind me suggesting, I don't agree with it and neither does the majority of the party. We've put forward a suggestion to the prime minister. He is edging towards that view. And we are going to try and raise this issue further with him. But it doesn't necessarily mean that we are going to be causing problems between us and the electorate. What you mustn't forget is the vast majority of the electorate want a say -- want a referendum on the E.U.

QUEST: Except in Norway and Switzerland are individual cases, where they have to eat a lot European legislation they don't particularly like, but it comes their way anyway.

Do you ever think that Europe would give the U.K. that same sort of or lesser relationship?

BARON: Well, at the end of the day, it would be in their interest to do so, because the balance of trade favors them enormously. They are a net exporter in a big way to the U.K. I cannot see them cutting off their noses to spite their face by saying, no, Britain, you cannot have a sort of free trade arrangement.

And don't forget, the actual treaty, the actual constitution itself says that if a member state was to suggest leaving, they would be obliged to actually negotiate a free trade agreement. So it's there in the legislation. It's there in the political will and, most importantly, it's what people want, I think, more of the free trade arrangement rather than ever-closer political union.

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QUEST: So (inaudible) for one moment, the weather forecast, well, we're come back to Europe with the weather. (Inaudible), Jenny Harrison is at the World Weather Center.

Jenny, these temperatures that you are experiencing in the United States, is absolutely -- they're breathtaking.

JENNY HARRISON, CNN METEOROLOGIST: They really are. I mean, they literally do take your breath away, actually, Richard. Certainly over the weekend here, but the heat is actually now migrated up towards the upper Midwest, the northern Plains states. So it's feeling a bit better across the Southeast. But look at what the heat did over the weekend.

As you can see here in West Virginia, and of course this one of those transmission towers or (inaudible), depending on where you live in the world. The interesting thing here, they're made from steel, but apparently the melting point of steel will change based on the alloy element. So whether that had anything to do with it. But even so, just gives you an idea just how hot it has been.

And of course when a tower like that goes down, it means more than likely no power. So of course, in heat like this, as well as the storms, we really have to try and contend with the heat without any air conditioning. But look at this on Monday, 38 Celsius in St. Louis and, in fact, in Chicago, 37. So getting on for 12 degrees above average.

And just so that you know ,the last few days in particular, the number of records -- high temperature records that have been broken is just staggering. And in fact, now 190 all-time records, 43 Celsius in Columbia, South Carolina; Nashville, Tennessee, that's 109 degrees Fahrenheit. And in Atlanta, Georgia, 41. And that is 106.

But I will say the heat now is on across the central and northern Plains. That's where we've got these temperatures, 10 or more degrees above average, still hot in the Southeast, but whole lot better than it was. But look at all these warnings still in place, advisories or actual warnings. In fact, that now encompasses 17 states.

But because of the storms as well that came through over the weekend on Saturday, there's still 1.3 million people across 10 states that haven't got any power. So big concerns, obviously, with the heat still place. And I've got some thunderstorms coming through, Chicago, but even that is not going to alleviate the heat. It'll just make it feel very humid. St. Louis, the next couple of days, 40 Celsius.

Remember, it's really above average temperature that is what is so significant, 40 Celsius if you're in the Middle East, well, you know, that is what you get used to. But not in other parts of the world. We've got some puppet (ph) showers and thunderstorms over the next couple days, but as I say, not really bringing the temperature down, 33 in Atlanta on Wednesday. So as I say, a lot better than it was.

Now look at the temperatures in Europe on Tuesday, 36, Budapest, Vienna, that in Vienna is 12 degrees above average. It's because of high pressure. You can see it quite clearly here, because that's where the skies are clear. Storms to the west of there and slightly cooler air, and then that hot air will stay in place really across much of central and eastern Europe.

We've got those scattered showers in the northwest. They'll grade for the next few days again, 11 degrees or so above average. But even in Warsaw, where we've got the thunderstorms and the rain, it just doesn't help, still well above average.

Wimbledon, for the next few days, guess what, Richard, you know this, few more showers in the forecast, temperatures not too bad, though. You will get some of that warm air, 22 on Thursday is the high temperature, Richard.

QUEST: Just remind me, Ms. Harrison, what is 40 degrees in old money?

HARRISON: Well, 41's 106. Forty would be 104.

QUEST: Thank you. Thank you very much, 104.

Coming up next, the rise and fall of a risk-taker.

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QUEST (voice-over): The answer to the "Currency Conundrum," how many banks are authorized to issue banknotes in the U.K.? And not just the Bank of England, the answer is C, seven commercial banks in Scotland and northern Ireland are authorized to issue notes, and that includes the Royal Bank of Scotland. They do so, of course, with the supervision that the (inaudible) from the Bank of England.

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QUEST: Within a space of a week, Bob Diamond's glittering career has well and truly not just lost its sparkle. It seems to have gone rusty. Indisputably successful in his achievements, controversial in his actions. CNN's Matthew Chance reports.

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MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Even in resignation, Bob Diamond was unapologetic. It was external pressure, he said, that forced him out, not a hint of acceptance, but as head of Barclays Capital, he was ultimately responsible for the misdeed that took place there. He maintains he had no knowledge staff attempted to manipulate a benchmark interest rate.

BOB DIAMOND, FORMER BARCLAYS BANK CHIEF: I'm running up --

CHANCE (voice-over): That's characteristic, say former colleagues, of a man derided by one British peer as the unacceptable face of banking.

JUSTIN URQUHART-STEWART, MANAGER, SEVEN INVESTMENT: This is a very bright, focused man, but absolutely driven and will not suffer fools gladly at all. And so when (inaudible) concerned, when he's worked up a business strategy, he will actually see that through, and surround himself with very good people.

But don't think you're going to be having a fair and reasonable conversation to actually have a nice group meeting and a group hug as to what you're going to be doing. No, I'm afraid we're going in that direction and you're either with me or you're against me.

CHANCE (voice-over): But that single-mindedness was enormously successful. He built the investment arm of Barclays Bank virtually from scratch after accused of taking too much risk in the process. It made Barclays Capital a global player, and Diamond extremely wealthy. There are disputed reports he was paid nearly $100 million in one year alone.

In 2011, he riled British lawmakers by appearing unrepentant during testimony in the financial crisis.

DIAMOND: But if you recall, Richard, what the comment was is that the time for apology and remorse needs to be over. All banks made mistakes. We made mistakes, and I made mistakes. But today, what's important is jobs and economic growth.

CHANCE: With the resignation of Bob Diamond, is the bank more than one person? For many, he represents a culture of banking that's seen scandal after scandal and has to end. In Britain, it's provoked renewed calls for tighter banking regulation, even a public inquiry into the practices of the entire banking system.

CHANCE: Is it a sign that the culture of banking may have to change?

URQUHART-STEWART: I think this is a catalyst and it is one of those key signposts, which will show -- will look back and actually say, maybe it was that moment when banks realized that actually they had to look at their missions statements and start including two words: "clients" and "service," and make sure that's actually primary in what they're doing and not "profit" and "shareholder."

CHANCE (voice-over): Supporters say Diamond was made a scapegoat, that other banks are just as deeply involved in wrongdoing. But as attitudes harden towards the banking industry, it may have been inevitable for so-called unacceptable face of banking should fall on his sword -- Matthew Chance, CNN, London.

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QUEST: Tonight's "Profitable Moment," the banking sector scandal is moving at alarming speed. We've heard the U.K. government's condemnation. We've had the FSA report. We've had the chairman and the chief executive all going under chief operating officer. And tomorrow, we will find out exactly how high this scandal went.

For all the criticism -- and Lord knows, there's been a lot today -- it's taken -- I prefer to give Barclays some credit tonight. Barclays was the first bank to put its head above the parapet and as it says, it has reviewed 22 million documents, over a million audio files, 75 interviews and spent $100 million. It'll be many days or weeks before the arrows stop flying. But now it's the turn of the other banks to come clean.

Those across the world who are being investigated -- and some don't even own up to that -- the events of this week show there's only as long as they can hide. The financial sector isn't the first industry that's been forced to clean up its act. But it may be the most important. It's time the banks showed us where the blame really lies.

And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest. whatever you're up to in the hours ahead, I hope it's profitable.

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QUEST: The headlines at this hour, the acting head of Barclays says Bob Diamond stepped down as chief executive of his own accord. Marcus Agius said Bob Diamond's decision to resign was a personal one. Diamond is to testify before British lawmakers on Wednesday, when he'll expand on notes suggesting the Bank of England may have advised the bank on how to set key rates.

The commander of NATO forces in Afghanistan is welcoming Pakistan's decision to reopen critical supply routes along the border. Pakistan closed the routes after NATO accidentally killed 24 Pakistani soldiers last November at a remote border post. The U.S. has offered its deepest regrets for the attack.

A powerful blast has ripped through a crowded produce market in central Iraq. At least 30 people were killed. A hundred more were wounded. Police say the city of Diwaniya blame a suicide bomber disguised as a watermelon merchant.

Syria's president told a Turkish newspaper he regrets the shooting down of a Turkish jet last month. Bashar al-Assad says the Syrian military thought the plane was from Israel. He also said that he does not see Turkey as an enemy.

You are up to date. Those are the headlines. Now, live on CNN from New York, "AMANPOUR."

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