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QUEST MEANS BUSINESS

Standard Chartered Scandal; Following the Money; Sanctions Against Iran; Standard Chartered Shares Tumble; US and European Markets Up; Quest- athlon; Olympic Medal Count; Olympic Currency; Euro and Pound Make Gains; The Millennials: Ready for Risk; Instagram Economy

Aired August 7, 2012 - 14:00   ET

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


RICHARD QUEST, HOST: Tonight, following the money. The how and why of Standard Chartered's fall from grace.

While the bank robustly defends its reputation, investors punish the bank on three exchanges.

And to the Olympic trading floor, where medals will get you absolutely nowhere.

I'm Richard Quest. I mean business.

Good evening. The Standard Chartered scandal deepens and widens tonight, as the bank shares are worth 16 percent less than they were this time yesterday.

Investigations have begun in New York and now Hong Kong over Standard Chartered's dealings with Iranian banks. The bank's license to do business in the US is in question, and tonight we're going to show you how and why it has run into so much trouble. We're to follow the money. Follow me across to the CNN super screen.

The big transaction that they're talking about is known as the dollars transactions funneled through New York. It is the U-turn, and this is how it works. If anybody in the world wants to send dollars from one part of the world to another, at some point, it has to go through the United States. And the U-turn allowed US banks to get through.

So, let's say the Iranians are using German or British banks, in this case, to send money, for argument's sake, to Africa or to Latin America. The money must go through the United States at some point. And what, of course, happens is, that is the classic U-turn.

Now, before 2008, even though sanctions were in place for Iran, this was not illegal, providing it wasn't Iran or any other sanctioned country that actually wanted to do the transaction. It had to go through a non-US institution or a non-sanctioned institution. That's the way it worked, the classic U-turn that has now put Standard Chartered --

Standard says 99.9 percent of its U-turns did comport with the rules. Just about a couple of million, actually, fell foul of it. The regulators believe there is something smelly in the plumbing system of the international banking system.

George Thomas is the principal of Radix Consulting. He has worked with the US wire transfer, with the Fedwire and CHIPS, the very backbone of the international payment system, and he explained to me how it works.

(BEGIN VIDEOTAPE)

GEORGE THOMAS, PRINCIPAL, RADIX CONSULTING: All dollar transactions eventually have to settle in the United States. The -- New York being the financial center, may of the foreign banks and the large domestic banks have offices in New York and they're connected to the CHIPS system or the Fedwire system.

And many of these banks act as correspondent banks. So, if you look at the CHIPS system, it's probably 45 banks in total there, but there's a large correspondent banking network where you instruct your correspondent bank to make the dollar clearing payments on your behalf.

QUEST: So, even if you and I do a transaction in London in dollars, eventually it will wash up on the shores of the United States in some larger correspondent transaction?

THOMAS: That's correct, Richard.

QUEST: If we take the whole payment system and what we are now learning, not only here, but obviously with the HSBC case, these are vast sums of money that move around the world. How -- how close are we to understanding and being able to follow that money, do you think?

THOMAS: Well, just to give you an idea, there's probably between Fedwire and CHIPS close to $4 trillion a day that moves through these two systems. So, there's vast sums of money, the transactions take place in microseconds, and screening and tracking those payments is a difficult task.

As you know, the banks that are on these systems are obligated to screen the transactions before they're sent into the system for OFAC compliance, which means that the Office of Foreign Assets Control has --

QUEST: Right.

THOMAS: -- designated certain countries, individuals, and the like as entities that the banks are not supposed to facilitate transactions for.

QUEST: Finally, George, the -- at the end of the day, if you were doing such a transaction, which involved a potentially spurious or sanctioned country, why would you send it via New York if you could send it or settle your transaction in another part of the world that does not involve going through the US system?

THOMAS: I think the -- the systems are already established. You could probably try to do it in an offshore clearing system, where the scrutiny wouldn't be as intense, but the vast majority of these payments that are settled instantaneously with what they call final funds in central bank money. So, the only way you can get that finality of payment is through the clearing systems in the United States.

(END VIDEOTAPE)

QUEST: So now, a closer look at the rules which regulators say Standard Chartered broke, and Patrick Clawson is director of research of the Washington Institute, an expert on US sanctions on Iran. Good to have you with us to help us understand this very complicated arrangement.

As I can guess the way Standard Chartered's going to say it, looking at my diagram here, they're going to basically say from 2006 until 08 or whatever, they were just doing the U-turn that was allowed by the regulators.

PATRICK CLAWSON, DIRECTOR OF RESEARCH, WASHINGTON INSTITUTE: But the question is whether they stripped out information from these transfers that hid the Iranian role.

There are rules that have been agreed to by all the major industrial countries to stop money laundering and the financing of terrorism about certain information that has to be collected with all of these kinds of transfers.

And if Standard Chartered did what a number of other major banks did, namely to strip that information out of many of these transfers, then they were engaging in deceptive financial practices with something which the Iranians have strongly encouraged these major banks to do.

QUEST: But the core issue of -- handling a transfer. I realize we're in the thick weeds of sanctions legislation, now, and regulations, but the core issue of doing a transaction for an Iranian bank, is that of itself against legislation?

CLAWSON: Well, if an American company were doing it, yes. But the issue here -- or at least the issue with all the other banks that have been charged -- has been these deceptive financial practices, which all the major industrial countries agreed would no longer be tolerated after 9/11, when we all agreed on rules through a financial action task force that monitors this, a process of stopping money laundering and the financing of terrorism.

QUEST: How much trouble is Standard Chartered in today? Here two points of view. Some say, actually, there's no way the New York regulators will actually take away their dollar clearing license or their banking license. Others say this could be the end of Standard Chartered. Where do you sit on that?

CLAWSON: Well, if the bank agrees to change its procedures, and if the bank appears contrite for its past errors, then I would say that there's little chance that its charter will be taken away. But the bank is taking a very tough stance about "we did no wrong." And that's a very high-risk approach.

I think it'd be wiser for the bank to say, "Look, we may have aired in the past. Help us to improve for the future."

QUEST: Finally, how much else is out here. How many other countries' banks are at risk of this U-turn suddenly becoming a lot more exposed from their previous deeds?

CLAWSON: Well, US Treasury Department has spend the last few years going around the world and saying to bankers that "You may think there's a profit opportunity here by playing fast and loose with the rule, but you're wrong, and you're going to pay a high price if you try to do that."

And I think that message is getting through now that the US government has collected something over a billion dollars -- close to $2 billion, now, in fact -- in fines from banks trying to evade these rules.

QUEST: Good to have you on the program, Patrick, helping us understand these difficult issues. See you again to talk more about it as this case develops. Many thanks for joining us.

Standard and Chartered shares plunged, and we don't use that word lightly tonight. I know it's one of the most overused words in business broadcasting, but when you look, it fell more than 16 percent in a ten- month low. It follows off of a 6 percent fall on Monday.

Not everybody's writing off the bank yet. Some brokers say the sell- off's overblown, and they've actually put a buy rating on the stock. You know the old thing, buy when it's kicked down and you never know where it's going next.

Standard's plunge is something of an exception. If you take a look at the Dow Jones tonight, we're up 84 points, gaining over half a percent, 13,202. The market is on fire. It follows on from gains in Europe, where commodity shares rallied, and it was Anglo-American, for example, up nearly 4 percent in the London market. ArcelorMittal 4, nearly 5.

Milan -- now, this is interesting. Some are saying that the whole -- buoyancy of both Spain's market and Italy's market is overdone now, too many people are reading into the comments both of Monti, saying he will -- comments and Rajoy's comments saying that he will think about a bailout, and Draghi's comments saying he will do enough.

And some people are now suggesting that actually, these markets are, perhaps, a little frothy. Especially when you bear in mind Italy's GDP was down seven tenths of a percent quarter-on-quarter.

QUEST MEANS BUSINESS this evening. Coming up, we take an unofficial currency of the Olympic Games, and we hear from Pin Man, how many pins and badges he has.

(COMMERCIAL BREAK)

QUEST: As athletes from around the world compete in the final days of the London 2012 Olympics, the world's top economies are in for a much harder and longer race. On this very program, a warm welcome to day two of the Quest-athlon.

(BEGIN VIDEO CLIP)

(CROWD CHEERS)

(END VIDEO CLIP)

QUEST: And in the athlon, we are looking at the competitors. We've got Great Britain, the host country. Brazil, the next one for 16. China, the world's fastest-growing economy. Germany, the eurozone, of course, powerhouse. And the United States, the largest economy in the world.

They're competing over five economic indicators. Already on event one, the growth forecast, China won that handily with 8 percent growth. But today is day two, and it is the stock market long jump.

(BEGIN VIDEO CLIP)

(CROWD CHEERS)

(END VIDEO CLIP)

QUEST: So, how are the major benchmarks doing so far? Let's start with China. China, it's a false start, because the Shanghai is actually down 2 percent. The Brazil Bovespa index, that is up around 2.8 percent.

Germany has smashed the Quest-athlon record. It is up -- oops, we've -- Germany has smashed the Quest-athlon. It is up -- if somebody can repair that. It is up more than 18 percent. Meanwhile, Great Britain is up just some 4 percent so far. And the United States is up 7 percent.

So, as we come to the end of day two with the leaderboard, you can see. Now, with the most points, Germany has 7 points.

(BEGIN VIDEO CLIP)

(CROWD CHEERS)

(END VIDEO CLIP)

QUEST: The United States has 7 points, Brazil has 6 points, China has 6 points, and Great Britain is languishing over on 4 points. That's the way the athlon's working so far. In the official Olympics, China is in the clear lead tonight: 34 golds and 71 medals in total.

A medal isn't the only badge of honor that's being sought here. People everywhere are buying, selling, and swapping pins. Pin badges. Erin McLaughlin reports.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Something you like? Would you trade the yellow submarine?

JAKE DUHAIME, PIN TRADER: I would.

ERIN MCLAUGHLIN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Call it the unofficial currency of London 2012.

UNIDENTIFIED FEMALE: Now, we'll swap. Thank you!

DUHAIME: Perfect!

UNIDENTIFIED FEMALE: And then we can shake on it, like in pin traders do. Awesome.

DUHAIME: Everyone has pounds, everyone has dollars. But pins are also valuable, where you may be outside a house or outside an event and you have a pin that a security guard might like or a volunteer might like, and they may move you down a couple rows or they may give you a free soda. You can get things with pins.

MCLAUGHLIN (on camera): How many pins do you have?

SYDNEY HOPKINS, "THE PIN MAN": I have about 7,000. And they dubbed me the "Pin Man," so I've been using that name ever since.

MCLAUGHLIN: You're the Pin Man?

HOPKINS: Yes.

MCLAUGHLIN (voice-over): Pin traders around the world have come to London to trade their Olympic pins. Many have been doing it for decades.

UNIDENTIFIED MALE: It -- for me, it's just a pleasure. No money.

UNIDENTIFIED MALE: I have pin from a new country, Czechoslovakia.

MCLAUGHLIN (on camera): Czechoslovakia?

UNIDENTIFIED MALE: Czechoslovakia.

MCLAUGHLIN: Is pin trading big in Poland?

UNIDENTIFIED MALE: Actually, it's getting bigger and bigger, because people are getting fascinated with all -- all the pins that are with the collections. It's like a passion.

MCLAUGHLIN (voice-over): It's also a powerful marketing tool.

DUHAIME: Most of the US sees sponsors, like the US Olympic team sponsors have activated through pins. Like this is the Deloitte right here. This is the United, which was proudly flying Team USA. And it's a great way, because people are starting to talk about your product. Like at Deloitte, when they're trading your pin, because they think your pin is really cool.

MCLAUGHLIN (on camera): Which sponsors have the best pins?

HOPKINS: OK. The media pins, like CNN or NBC pins.

MCLAUGHLIN: Everyone is saying that, the media pins.

HOPKINS: Media pins are always good.

MCLAUGHLIN: I need to see if CNN has any pins.

HOPKINS: Yes, you do.

MCLAUGHLIN: So, if I came back here with some CNN pins, I'd be a very popular woman.

HOPKINS: You'd be a popular woman, and you should come see me first, OK?

(LAUGHTER)

MCLAUGHLIN (voice-over): Erin McLaughlin, CNN, London.

(END VIDEOTAPE)

QUEST: Now, tonight's Currency Conundrum. Pin trading reached a peak during the Los Angeles Olympic Games. How many pins do you think were traded as currency? 40,000, 700,000, 17 million? The answer later in the program.

The euro's making gains against the dollar. The pound's higher after the UK released better than expected industrial numbers. Those are the rates --

(RINGS BELL)

QUEST: -- this is the break.

(COMMERCIAL BREAK)

QUEST: Now, time for the latest episode of The Millennials. Our two Generation Y jelly entrepreneurs, Sam Bompas and Harry Parr, embark on a hard sell with a big-name client. The pair enlists some extra help for the challenge, and they're feeling prepared, bold, and ready to take a risk.

(BEGIN VIDEOTAPE)

UNIDENTIFIED CORRESPONDENT (voice-over): Previously on The Millennials. In London, two new faces who really gel. We introduced you to Sam Bompas and Harry Parr.

HARRY PARR, FOUNDER, BOMPAS & PARR: I tend to do things that have to do with design and getting things built and trying to solve problems.

UNIDENTIFIED CORRESPONDENT: South London, and a quiet afternoon in the pub. For jelly entrepreneurs Sam and Harry, though, this is no social visit.

PARR: Hi, how are you?

UNIDENTIFIED CORRESPONDENT: Along with their designer, Charlotte, they'll be putting their pitching skills to the test with a big-name client.

SAM BOMPAS, FOUNDER, BOMPAS & PARR: Today, we've got our kickoff meeting with Team Mercedes. We've been working very hard, literally through the night, in Charlotte's case, to put together a graphic design for the installation we're building. And yes, hopefully they'll like it.

We've been looking at doing some -- yes --

UNIDENTIFIED FEMALE: Catch them often.

UNIDENTIFIED CORRESPONDENT: There's a lot riding on this, and Sam and Harry know they must hold their nerve.

BOMPAS: This is like when you've dreamed the perfect project, you want to do it right.

PARR: It's really key that when we go into this meeting, we really sell our ideas, because if we have to go back to the drawing board at this stage, it'd be a disaster.

UNIDENTIFIED MALE: You intend to put some description on that packaging.

UNIDENTIFIED CORRESPONDENT: The atmosphere is friendly. The challenge, daunting. Sam and Harry have to design a food installation to be part of a Mercedes promotion called the Avante Garde Diaries. And in true Millennial style, they've taken a risk.

BOMPAS: This is the link between modern food, when taste is in the fashion of all the rest, and models and materials, where taste is visual appeal.

When we do stuff, we normally like to put together one idea, one really strong idea. Because if you give people lots and lots of different ideas and give them a choice, they typically -- in my experience, they typically choose the one that you least want to do.

So, with this, we're pinning our colors to the mast, we're doing our best idea, and with the wind behind us, they'll go for it.

UNIDENTIFIED FEMALE: We're going to have to what actually food we're making --

UNIDENTIFIED CORRESPONDENT: With Charlotte's help and confidence in their model theme, Sam and Harry have come prepared. Mock-ups of food packaging.

BOMPAS: That's the main course. Main course, your starter. OK? And --

UNIDENTIFIED FEMALE: Condiments.

BOMPAS: Of course, condiments.

UNIDENTIFIED CORRESPONDENT: A promotional photo.

UNIDENTIFIED FEMALE: This is like a potential press photo.

UNIDENTIFIED CORRESPONDENT: And a graphic presentation. They have literally put all their eggs in one basket.

UNIDENTIFIED FEMALE: They made some marble eggs, as well.

UNIDENTIFIED CORRESPONDENT: There are some tweaks to iron out.

UNIDENTIFIED MALE: Maybe it's this whole era of Instagram and old photos, and this is just very retro, soft, kind of faded. It's not super - - like, the logo is very faded, and everything is transparent and cloudy.

BOMPAS: I think maybe playing around with a different model, a different color wash behind it, and whether it's --

(CROSSTALK)

UNIDENTIFIED FEMALE: And also the type, obviously.

UNIDENTIFIED CORRESPONDENT: Gradually, though, the client seems to be coming around to the idea.

UNIDENTIFIED MALE: Yes, it was an amazing concept. Very impressive.

UNIDENTIFIED CORRESPONDENT: It's a success for Sam and Harry, but the hard work is not over yet. With two months left until the project launches, these Millennials know, now is the time to deliver.

BOMPAS: I might have been a bit bold, a bit too aggressive in the initial design. But it's just a work in progress. If we -- we've still got two months. We're going to tweak things, mold them a little, see if we can come up with something awesome.

PARR: Actually, the best thing about it is everyone was so excited about what we presented that we were actually just itching to get back into the studio.

UNIDENTIFIED CORRESPONDENT: Next week on The Millennials.

UNIDENTIFIED FEMALE: I'm sure the neighbors were shocked when he went off to college, because the show tunes weren't blasting from his room every day.

UNIDENTIFIED CORRESPONDENT: The boy who dreamed of Broadway. We look back at Michael Burbach, the earlier years.

(END VIDEOTAPE)

QUEST: You heard there the Millennial's pitch being criticized as too retro, too faded, too Instagram. Some would say that's not such a bad thing to embrace. The photo-sharing website has been so successful, it spawned a stack of offshoot businesses. Some might even go on to say that it is now a cottage industry in its own right, Instacanvas and things like that.

Joining me now from New York, CNN's Samuel Burke. The whole nature of Instagram and the way these relatively small companies have now developed something new.

SAMUEL BURKE, CNN CORRESPONDENT: That's right. It's creating a parasitic industry, you could call it. Small businesses, online businesses, finding success off the back of Instagram's success. Companies like Instacanvas. This company just raised $1.7 million in seed funding, Richard. It allows you to print pictures on canvasses.

But the other side, which is really interesting to me, is it allows users to sell their pictures to other users so that they can print them, and it gives you 20 percent of each sale. So, an opportunity for some of the QMB viewers to make some money.

QUEST: OK, but how -- how wide and how realistic and what other ones are out there? Do these companies merely survive just on Instagram and being parasitic upon it?

BURKE: No, I think the answer's definitely no. They have to come up with new technologies. CanvasPop, for instance, is a site that has image upsizing technology, which is very interesting. They had to invent this so that those small pictures can become big and don't look pixelated.

They invented an algorithm which goes through each picture so that there aren't pixelated edges when you blow up these small Instagram pictures into these big canvases. They also use a special type of canvas, which allows it to hide any imperfections in the photo. So, you see, these companies are having to innovate to take Instagram pictures to the next level.

QUEST: Yes, but come on, come on. You and I have argued many times about whether these are fads, whether they have staying power, whether they -- I mean, Instagram itself got a billion -- or transaction was $1 billion for Instagram from Facebook. Do they have -- I see you've already -- you've anticipated my movement and already moved to -- what on Earth is Foap, Fop, Fip? What is it?

BURKE: I had a feeling you'd want to know about the business side. There are some companies that are actually looking to go head on with the bigger, traditional companies that we know. Foap is a Swedish company that wants to take on the stock image companies.

They have a free application which allows anybody in the world to upload a photo and then sell it to anybody in the world, anybody willing to pay $10, and then they'll give you, the person who took the picture, $5 a pop.

It's a new company, they're looking to grow, they're expanding to Android. They only have an app on iPhone. But they're actually hoping to take on some of the bigger stock image companies. So, we have to wait and see, but they're finding success, and people don't mind being paid $5 for an Instagram photo.

QUEST: Our very own Millennial. Samuel Burke in New York. Many thanks, Samuel. Talk to you in the future.

Now, after the break, it's all eyes on London, and we don't mean for the Olympics. Standard Chartered is the latest British bank in trouble, and we'll ask why at the unofficial home of irresponsible banking.

(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.

A Syrian opposition group now says at least 140 people have been killed across the country on Tuesday. Video posted online appears to show rebel fighters in Idlib province. CNN cannot confirm the authenticity of the images or the information.

In the Syrian capital, President Bashar al-Assad made a rare appearance on state TV to welcome a top aide to Iran's Supreme Leader. Saeed Jalili called on Syrians to begin a national dialogue to fix their country's problems. He also stated Iran's alliance with Syria will not be broken.

Days of rain have triggered multiple tragedies in Manila, as authorities say nine member of the same family were killed in a rain-driven landslide. Three of those killed were children. Four other people have been injured. More than a half a meter of rain has drenched the Philippine capital and forced tens of thousands of people to evacuate entire districts.

Egypt has held funerals for 16 soldiers killed in a militant attack on their border post in the Sinai. Top Egyptian officials were there but not President Mohammed Morsi. Many mourners blame Mr. Morsi's relaxed restrictions on Gaza for allowing the attack to happen, and Egypt is now trying to boost security in Sinai.

The bank Standard Chartered saw its shares fall more than 16 percent in London to a 10-month low. The bank's denying accusations from U.S. regulators that it helped conceal a quarter of a trillion dollars' worth of transactions to avoid economic sanctions.

(MUSIC PLAYING)

QUEST: Regulators in Hong Kong have now joined their New York counterparts in investigating Standard Chartered. It's the third London based bank scandal in a matter of months to raise questions about this so- called age of irresponsibility. If you join me in the library, you'll see what I mean.

Barclays, where we had, of course, the LIBOR scandal with traders offering bottles of Bollinger champagne for getting LIBOR fix swindles. Bob Diamond, the chief exec, quit. Also the chairman quit. Both are waiting to be replaced as the U.K. parliamentary inquiry into the Bollinger LIBOR bonanza.

HSBC, the -- one of the world's largest banks is of course money laundering scandal, disregarded things with terrorism and drug cartels. In a U.S. Senate investigation, HSBC paid a fine. Barclays also did as well.

And we're waiting to see how many more will follow on from that. Barclays, HSBC, now Standard Chartered. There are foul-mouthed emails, alleged Iranian transactions, falsifying document validations, you name it, it all seems to be happening. It raised the question why London and why the banking crisis (ph)?

Jeffrey Robinson is a financial journalist and author of "The Laundrymen," an expose on global money laundering. He joins me now live from New York.

Are we being too critical when we draw the strands together through London?

JEFFREY ROBINSON, AUTHOR AND JOURNALIST: Too critical? I mean, it's deja vu all over again. You know, why do all these things happen in London? JPMorgan happened here in London. Wachovia, all of these banks, ING got fined for money laundering. Why are they happening in London? Very simply, because there's no regulator in London to stop it.

Now there is something called the FSA, the Financial Services Authority. They've been comatose for the last 10 years. And you know, they're funded by the banks. Most people don't realize that. The gamekeeper is funded by the poachers. That's where there are no chickens left in the chicken house.

QUEST: All right. Let's listen to Congresswoman Carolyn Maloney, who basically made the point -- and pick up from this, because what she said bears out what we're seeing.

(BEGIN VIDEO CLIP)

REP. CAROLYN MALONEY (D): What is it about the regulatory regime in the United Kingdom that encourages such a large portion of these activities to take place in London as opposed to the United States? And I would also say that a large portion of the credit disasters have taken place in London.

(END VIDEO CLIP)

QUEST: So now London has to decide how to repair its reputation, if that is possible.

ROBINSON: Oh, absolutely it's possible. It's very simple. You disband the FSA before 8 o'clock tonight, and you then move it to the Bank of England, where it's being moved in any case. And in the Bank of England, you have a chief investigative officer, who's a former national crime squad detective and a money laundering expert, a guy who really known financial crimes.

QUEST: All right. So are you saying -- well, Jeffrey, I know. Are you saying then that the previous -- I think I know the answer to this and it's almost a naive, stupid question, but I'm going to float it up the flagpole anyway.

The tripartite agreement that the labor government introduced at treasury, Bank of England and FSA, has been an unmitigated failure. And you're saying that is the -- and that is the reason for these scandals that we're now seeing now?

ROBINSON: The proof is in the pudding. Why has this happened six times this year? I mean, this is crazy. You get the police involved and you let them investigate it as a criminal offense, and you bring in people with handcuffs.

And if bankers have misbehaved, you put them in an orange jumpsuit and you lock them in a 6' x 4' cell with a guy named Marvin, who's got two fang tattoos on the side of his neck, and things will change very quickly.

QUEST: That's not going to happen.

ROBINSON: Well, it may not happen in Britain, but it may happen in America. What you've got with the Standard Chartered problem, this is the banking regulator in the State of New York. He has the authority to lift the license of Standard Chartered.

There are money laundering offenses that may have been committed in the state of New York. That brings in the district attorney. Now wait a minute. We haven't even gotten to the Feds, because if the Feds convene a grand jury on money laundering and sanction busting, you've got the FBI. And people will go to jail.

QUEST: But Jeffrey, what is so wrong with the banking culture that you're basically saying only when the policeman is waiting with the handcuffs to lock you up, do you have a moral compass? I mean, where is the moral compass in banking now?

ROBINSON: Well, it has absolutely flown out the window, because there is a culture of entitlement and greed. And that's been going on for 10 years, simply because they could get away with it, because there has been no regulator.

Under the George Bush administration, they pretty much neutered these Securities and Exchange Commission and some of the regulatory laws like Dodd-Frank. You know, once you -- or, no, what's the other one? Not Dodd- Frank. The -- yes, Glass-Steagall. Once you've gotten rid of that, it's open season on cheating and greed. That's what's happened. This culture of entitlement has simply grown too big.

QUEST: Jeffrey, we look forward to talking with you more about the age of responsibility that everybody says now needs to come back. Jeffrey in New York, joining me there.

Talking of the culture of greed, how about a bit of money from the casino? The casino chain that's putting its chips in China, after the break, the chief exec of MGM Resorts International tells us if the Macao bet is paying off live (inaudible).

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

(BEGIN VIDEO CLIP)

QUEST (voice-over): The answer to the "Currency Conundrum," how many pins were traded during the Los Angeles Olympic Games in '84 when pin trading reached its peak? The answer, 17 million. It's C. Every day thousands of speculators swarmed to a designated pin swapping area across from the L.A. coliseum. Get a life.

Some people even tried to cash in on the pin craze. Large numbers of counterfeit pins emerged (inaudible) currency (inaudible).

(END VIDEO CLIP)

QUEST: Shares in MGM Resorts International are up by 10 percent in New York. Now after the casino operator posted a narrower than expected quarterly loss, $145.5 million in the (inaudible) Q2 swinging from a $3.5 billion net profit in the same period last year.

James Murren is with me, the CEO of MGM Resorts joins me now live from Las Vegas.

I found your results fascinating because they bring into the question, James, the role of your overseas assets, China, Macao and whether or not and how that is going to be the growth area in the future.

JAMES MURREN, CEO, MGM RESORTS INTERNATIONAL: We're very excited about our future, Richard.

QUEST: Where do you grow that asset base, because you don't want to - - you don't want a sort of an unbalanced company that has to rely on Asia to make the bulk of the money. So how do you balance that out?

MURREN: So right now over 80 percent of our profits are earned here in the United States. And the China operation in Macao is very, very profitable and growing rapidly. But still a minority portion of our overall earnings, we had a record quarter in the second quarter in Macao. And we're off to a great start here in 2012.

And we're very excited there to build yet another resort, a much larger resort than we currently have. We hope to break ground on that this year. But if you add the entire picture of China for us as a company, unlike some of the other U.S. gaming companies, the majority of our profits are here in the United States.

QUEST: And what are you going to do to ensure that that profit base remains solid, particularly at a time of difficult economic times, isn't it? It's very challenging to try and keep that profit level maintained.

MURREN: So you're exactly right. It's been a challenging economic market here in the U.S. and globally. And that accrues, we believe, to the benefit of Las Vegas because of its value proposition. I think that's what pleasantly surprised investors today.

We did better than people had thought we could do, given the economic backdrop in Las Vegas. Our revenues are growing here in this town. Our costs are in check and our profits are expanding.

QUEST: Away from the numbers -- the numbers can be so dry -- I need you to tell me, James, what's the trend in gaming, in gambling, in shows, in big casinos? What do the punters want?

MURREN: This is very much an experiential business. What they don't want is just another slot machine, another table. You can really do that in so many different locations around the world. They want a unique experience. We're very good at that.

So when we create new entertainment experiences, new shows, new restaurants, new night clubs, new day clubs, cutting-edge technology in rooms, they're very discerning right now. Our customers are more global. They travel around the world and they want to see something they haven't seen before.

That's the bleeding edge, if you -- so to speak, in consumer behavior and that's why we're building our market share here and taking more share than our competitors.

QUEST: And to those that would say what happens in Las Vegas, stays in Las Vegas and Las Vegas' days are over, it's passe, it's gone, it's a remnant of a bygone era?

MURREN: Well, I would say we're going to have an all-time record this year in 2012 in terms of visitors to Las Vegas. Over 40 million people will visit for the first time ever. The most recent major resort that was opened here we opened City Center and it just finished a record quarter in the second quarter. So I think they're a bit off track on that perspective.

QUEST: We looking forward to interviewing you again, James. This next time, it'll be in Las Vegas. I'll be there. And (inaudible) have a small bet and see if we can make the airfare home. Many thanks for joining us, James at MGM, joining us from Las Vegas tonight.

The weather forecast now and Tom, things all right? We've had a bit of rain in London and things have been a little bit dicey once or twice, but we can't complain. But I know that there are some really serious issues elsewhere in the world tonight.

TOM SATER, AMS METEOROLOGIST: Yes, that's right, Richard. In fact, Manila is home to 10 million people. They're in a very low-lying area. They are prone to flooding.

But the water and the amount of rainfall that they have seen in the last 24-48 hours are staggering. The amounts of rain and the flooding coming in from all directions right now is pretty much -- could be some of the worst they've seen, 40, maybe 50 years. And the reason we say that, the last time they had hundreds of fatalities was in 2009.

It was Tropical Storm Ketsana -- the locals called it Ondoy. Hundreds died from that. But rainfall totals in the last two days have surpassed that event. Devastating event. Look at August. It's typically the wettest month, just under 500 millimeters of rainfall, and they've already picked that up in the last two days.

But let's break it down. The main highway in Manila northward is submerged right now, closed to traffic, hundreds stranded to the north. This is satellite derived. It stops at the color of white. It's 300 millimeters. They've had much more than that.

But here, the topography, let's talk about what's happening. Manila Bay right now is at high tide. They're getting heavy flooding coming in from the west. Laguna de Bay, a very large lake, is overflooding communities from the south. They've got mountains off to the east and to the northeast, flash flooding and landslides occurring in this area.

So rainfall coming down sloping in that direction. You get a little bit closer here, and you see Quezon City, one of the harder hit areas. But to the north, this is La Mesa Reservoir. La Mesa here is the drinking water for Manila. It is highly contaminated now. It's been spilling over; they had to open up floodgates. That's flooding the city from areas from the north.

There are a number of reservoirs for the north that they had to open the gates. So they're being flooded from the south. They're being -- landslides and water coming down the high terrain from the east. They've got the ocean to the west.

From every direction, the amounts of rainfall here are unbelievable. In two days' time period, 536 -- remember, the average for the month is just under 500. And we're only in the first week. The amounts are getting 33 millimeters of rainfall an hour. They cannot handle that.

Thousands and thousands have been evacuated. We have pictures. But the amount of rescue workers right now that they're dealing with, the electrocution of possibilities with downed wires everywhere. Quezon City here, big problems with landslides.

This is what we had, a number of fatalities, still several are missing. So the rescue workers are stretched. They're trying to find floating devices. They're picking people off of roofs. And it looks like it could continue.

Haikui here is another story. It's only 50 kilometers from making landfall. The third system in five days in China, but the engine with that continues to have these flows come across in the monsoon flow. Rainfall continues to fall and most likely will be about 100 millimeters a day for the next few days. We're watching this just south of Shanghai now.

There's a southern metropolitan community called Zhouzhuang, which could probably get a direct hit. Right now we're looking at high seas, about 8.5 meters. The winds will be near 200 kilometers per hour in some cases. They're already seeing about 100 millimeters of rainfall, and we're going to continue to watch this as it will make landfall near Shanghai in the next couple of hours. A lot going on, Richard.

QUEST: Good grief. You have got a busy time ahead of you. Many thanks.

When we come back here on QUEST MEANS BUSINESS, where the Great British Beer Festival. In classic style, we sent a young reporter to sample the ale (ph).

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QUEST: Forget the Olympics. The Great British Beer Festival has kicked off with 800 ales, ciders and foreign beers on offer. At a time when people's budgets are small, the brewers say, well, we are willing to spend big for a quality drop. Isa Soares, who'd probably like a small Madeira sherry -- but anyway, she went to do a bit of tasting on her own.

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ISA SOARES, CNN CORRESPONDENT: What shall we -- what shall we try?

UNIDENTIFIED MALE: (Inaudible)?

SOARES: Yes.

UNIDENTIFIED MALE: We'll try some well back (inaudible) brewery. (Inaudible).

SOARES: Cheers!

MIKE BENNER, CHIEF EXECUTIVE, CAMPAIGN FOR REAL ALE: The overall beer market in the U.K. is in decline and has been for several years. So we are seeing unprecedented levels of pub closures as people's habits change. But the good news is that we're seeing enormous growth in the number of small craft breweries around the country. And so real ale is booming.

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SOARES: You've got some of the big names also (inaudible) smaller (inaudible).

BENNER: Increasingly people are getting fed up with having huge global brands shoved down their necks, and they're turning to products that are local and natural that make them feel good about themselves. And they know they're supporting a local industry. I think that's very important to British consumers these days. And one of the reasons we're seeing such good growth.

ALEX BRODIE, HAWKSHEAD BREWERY: What's happening now I think is nothing less than a revolution in British brewing. There are now more than 900 breweries in the country. When I started my brewery 10 years ago, there were about 300.

People are choosing quality rather than quantity. So they may be drinking a bit less beer, but they're choosing high-quality products. So real ale is doing very well because of that.

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SOARES: In terms of looking ahead in the industry, I know I shouldn't read (inaudible) glass half-empty or half-full?

UNIDENTIFIED MALE: I think it's half-full. I mean, on the pub side we're facing serious problems. You drink beer. You drink real ale in pubs. And so it's important that we keep pubs going as much as possible. But real ale itself is booming, you know, increasingly we're seeing more young people, more women turning to real ale, which is fantastic news for the industry.

SOARES: Well, here's to --

UNIDENTIFIED MALE: (Inaudible).

SOARES: (Inaudible), to British beer industry. Cheers!

UNIDENTIFIED MALE: Cheers!

SOARES: I do like this one.

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QUEST: I was wrong. Isa Soares will happily have whatever's being offered at the bar, providing somebody else is paying.

Now what's your tipple? Is the age of the megabrewery now upon us and we should all be looking for microbreweries? Have you got a thought and a question, a comment or a criticism, @richardquest. And you and I can follow each other. Then we can have a discussion of what's happening in the world via Twitter as well as here as well.

When we come back, there's a stench in the air. It's my "Profitable Moment."

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QUEST: Tonight's "Unprofitable Moment," back in the days of Queen Victoria, London had a very peculiar and pressing problem. There was literally -- excuse me -- a foul smell in the air, the sewage system was failing. And the miasmas became so bad it forced the government into action to stop the stench.

Today, London's financial sector seems to be facing a similar problem. We had a first whiff of corruption with Barclays. HSBC only made it worse. And now Standard Chartered is accused of being another rotten British bank.

All right. All right. You can't tar everybody with the same brush. But when Congresswoman Maloney in the U.S. says that all these scandals seem to be in London, well, there is something very smelly in the air, and it does seem to be coming from the financial system of London, which was allowed to run rack and ruin.

There are more banks who may face investigations down the line when we get the drains up, because that's what must happen. And potentially more reasons to hold our noses when we think about the world of finance. We must finally tackle the square-mile stench. And that's QUEST MEANS BUSINESS. 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 the top of the hour: a Syrian opposition group now says at least 140 people have been killed across the country on Tuesday. Video posted online appears to show rebel fighters in Idlib province. CNN cannot confirm the authenticity of the images or the information.

In the Syrian capital, President Bashar al-Assad made a rare appearance on state TV to welcome a top aide to Iran's Supreme Leader. Saeed Jalili called on Syrians to begin a national dialogue to fix their country's problems. He also stated that Iran's alliance with Syria will not be broken.

Days of rain have triggered multiple tragedies in Manila. Nine member of the same family have been killed in a landslide, four others injured. More than a half a meter of rain has drenched the Philippine capital and forced tens of thousands of people to evacuate their homes.

The head of Cameron's Olympic mission has told CNN seven of its athletes have gone missing in London, including these five male boxers and female footballer and male swimmer. The U.K. home office says the athletes are not in violation of immigration laws until the 9th of November.

You're up to date with the news headlines. Now live to New York and "AMANPOUR."

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