Return to Transcripts main page


UK Regulators Call Libor "Not Fit for Purpose"; Bank Problems; Markets Quiet; Banks Under Scrutiny; Manchester United Goes Public; Analysis of Man U IPO; Euro Flat, Pound Making Gains; Quest-athlon; ASICS Athletes

Aired August 10, 2012 - 14:00   ET


RICHARD QUEST, HOST: Libor lives no more. The UK's financial regulator says the rate is "not fit for purpose."

Divided over United. Trading opens to a cool reception. We hear from United's CEO.


DAVID GILL, CHIEF EXECUTIVE, MANCHESTER UNITED: We're a very professional organization. We know what being a listed company means, and we'll embrace everything that is associated with that.


QUEST: And running a deficit, jumping unemployment, and lifting the market. Forget the Olympics, it's tonight's final of the Quest-athlon.

I'm Richard Quest. I mean business.

Good evening. "Not fit for purpose and in need of reform." Libor can't continue as it is, so says the UK regulators. The FSA, the Financial Services Authority, says trust in a vital part of the financial system has been lost and timely action is needed to regain it.

The FSA set up an inquiry into the lending benchmark after Barclays paid more than $450 million to attempt to manipulate rates. Now, the FSA, having said it's not fit for purpose, says the way rates are calculated should be changed and, in certain circumstances, different benchmarks should be used instead.

We are still some way from a major overhaul. This is a classic case of everybody says something should be done, and now, they've got to get on and do it.

But when you pull the strands together of this week, you realize that banks, particularly when it comes to their US dealings, have been in a great deal of hot water. And those are banks from around the world, because if you take a look here, this is a map. Take a helicopter ride over New York, and the super screen shows exactly what's been happening.

Down in Battery Park, Goldman Sachs, the US Justice Department, now it says there's no viable basis to prosecute them over the sale of subprime securities. But remember, Goldman Sachs has already paid fines on no contest basis for indiscretions.

Barclays up in midtown, a new chairman has been appointed in the wake of the libor-fixing scandal. The new chairman is David Walker, but Barclays is by no means out of the woods from the regulators.

JPMorgan. Now here, the regulators have forced it to recalculate capital levels. Smaller figure in the eyes of of nearly $6 billion losses from its CIO, the chief investment. Remember, this is the one that was a tempest in a teapot until the teapot became the tempest, and well, you get how that one went.

And finally, the -- I suppose for want of a better phrase, the scandal du jour is Standard Chartered. The UK concerned, the regulators in Dubai, South Korea, Hong Kong, are all investigating Standard Chartered and the potential for what it did in its Iranian sanctions busting, arguably, scandal.

So, the markets as they closed the week. When you factor in everything that they had to put up with in terms of digesting news from the banking system, and you allow for the poor export numbers and industrial production numbers in Europe and what's happening in Japan, it makes you realize the fizz has pretty much gone.

But in New York, down 11 points, 13,154. Virtually unchanged. I've said it before, I'll say it again, and I'll probably say it a few more times. We are in the dog days of August, and in this environment, this is what we can expect to see.

These are the European markets and how they closed. Again, people, very quiet just at this point in August. I'd expect to see this for some time.

You are up to date with the way the market has reacted to all the news of the day. Now, let's factor in the scandal. Harvey Pitt is a former SEC chairman and CEO of the consulting company Kalorama Partners. Harvey joins me from CNN in Washington.

Harvey Pitt, the regulators have set themselves up a very high target here. Standard Chartered, Goldman Sachs, Barclays, Morgan. Are they overreaching themselves in the way they are attacking these banks?

HARVEY PITT, FORMER CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION: I don't know if they're overreaching themselves, but it appears that they're not having a great deal of success at the moment. It's not success to have somebody in New York announce a lot of charges but not yet have proven them, and the jury is out on that one, so to speak.

QUEST: Right. So, the core question, Harvey, is whether or not Bruce (sic) Lawsky in New York, has he -- I suppose "ambitious" is obviously they word, he was a general counsel to a senator -- has he gone rogue in what he's done? Do you think there's an element of irresponsible behavior?

PITT: Obviously, we don't know everything, but I would say going off on his own without dealing with federal financial regulators strikes me as self- aggrandizing, as opposed to being concerned with the actual merits of the case.

If he's got a really good case, he should be working with the federal regulators and not going off on his own, unless he thinks they're stonewalling him, and I don't think that's possible here.

QUEST: So. Why did he do it? What do you think is the reason? You know -- you know the machinations of business and politics better than anyone else.

PITT: I think people are interested in headlines. The Financial Services Group in New York is a new group that was formed about a year ago. Here's a way to appear to be quite aggressive and to get headlines.

Now, being aggressive and getting headlines is fine if you do it with professionalism. I think going off without the federal regulators at least knowing what was coming strikes me as irresponsible behavior.

QUEST: Is it time for an overall review of regulators, the way they regulate, and the, if you like, overlapping nature of such regulation?

PITT: I think that's an excellent question, and my answer to it is absolutely. That's what we thought in the US we were going to get when work started on what is now Dodd-Frank. The problem is that Dodd-Frank is a missed opportunity and won't do any of the things we needed legislation to do.

QUEST: So, we have the libor scandal, which still rumbles on, and I think everybody expects that there will be more fines. In fact, just about one or two banks have said as much privately and publicly. Libor, Standard Chartered, arguably, Morgan.

If you pull the strands together, we do come back to this question of the moral compass, don't we? Or am I just a naivete who should have the scales fall from my eyes?

PITT: No, I think we really need to step back and figure out what the most effective way of regulating our markets are. We want our markets to be dynamic. We want people to be able to take sensible risks.

But what we don't want is the kind of behavior we're seeing, and we only compound those problems if regulators don't work together and don't have the tools to do what they need to be doing.

QUEST: Good to have you on the program, sir. As always, a treat to have you, thank you for making time for us. Look forward to speaking to you again. Harvey Pitt, former head of the SEC, with the thoughts on the wider aspects of regulation.

There's one share in particular that everyone's looking out for, or has been this Friday.





QUEST: No, it's not the sound of the crowd at the stadium. Trading has kicked off for Manchester United, and a match report comes from the New York Stock Exchange next. QUEST MEANS BUSINESS, good evening.


QUEST: It's official. Man U is public. It's in the middle of its first day of trading in New York and, as they say in football, it's a funny old game. Those movements -- look at them. Almost give you a bit of indigestion.

They may look big, but they're actually moving less than one cent in either direction, if you look at the range here. So, it's a very -- the scale is quite tight, but it's still quite an active movement. Traders are excited enough to be wearing the team shirts on the trading floor.

Whether they are excited about the stock is perhaps a different issue. Only one color, which is why it's in red, even though it may have gone up or down, Alison Kosik is wearing today. Well-planned, ma'am, well-planned.

ALISON KOSIK, CNN CORRESPONDENT: This was actually coincidence, Richard, I swear to.

QUEST: Well --

KOSIK: It was coincidence.

QUEST: Tell it to the judge.


KOSIK: I know, I know. Let's talk Man U, shall we? I'll tell you what, Man U fever all over the New York Stock Exchange today. I wish we could show you, but we can't turn this camera around. There is a sort of a fake grass here with some goals. We've got traders wearing these great red jerseys.

Yes. You can certainly feel the excitement here on the floor, and the big question is, is this translating to investors?

So, I talked with the CEO, David Gill of Manchester United, and I talked to him about the debt load that Manchester United is carrying. I talked about the IPO price at $14, which happens to be sitting flat right now. And I talked to him about just the big day overall. Listen to a portion of my interview here.


DAVID GILL, CHIEF EXECUTIVE, MANCHESTER UNITED: We looked at various markets. We looked -- largely we were looking at Hong Kong and Singapore, analyzing New York at the same time.

And in the end, we decided to come to New York, because I think it's open. London's not particularly open at the moment. But also, I think that the actual valuation, this is an institutional sale, and the understanding of the business of sport is greater in the US than in Asia in particular.

And also our owners are Americans, so I think they felt comfortable. They're still a major part of their portfolio to be listed in a country where they're domiciled.

KOSIK: OK. So, the IPO is priced below the range, and that cost you, what, about $100 million? How does that affect your plans for what you want to do with the money that you're raising?

GILL: Well, nothing, really. It clearly reduces the level of debt we can pay, 50 percent to pay down debt, so it's slightly lower than we thought, and obviously 50 percent goes to the family. But I think we're very comfortable with that range. I think that price is holding up as we stand here today.

And I think we wanted sort of some long-term institutional holders, and I think we've got that. That's why we priced at that particular level. And it's not going to affect our plans at all.

KOSIK: And you're talking about the price, right now, I think is about a third of a percent higher right now. How do you feel about how it's showing right now? Did you expect maybe a bigger push?

GILL: Not really. I think the important point, you're always a bit nervous the first day, is it going to go up or down? But I think the important point is that we're not listing for today. We're listing for the long term. It's part of the plans for the company going forward. A very exciting time for the company, and let's see how it sort of trades over the course of the next months and years.

KOSIK: Other sports franchises that have traded on the public market in the past, they haven't necessarily done very well, they've just gone back private. What makes Manchester United different?

GILL: We have experience of being credit before. We were actually credit on the London Stock Exchange from -- for 15 years before the Glazer family took us over.

What makes us different? Well, I think we've got various advantages. We're playing in the world's biggest sport, and we can demonstrate the opportunities in terms of our growth, whether it be on the sponsorship side or on the broadcasting side, are very real and very apparent.

And I think we know what -- we're a very professional organization. We know what being a listed company means, and we'll embrace everything that's associated with that.


KOSIK: So, Richard, I want to go ahead and I brought in here Kenny Polcari. I saw him walking down the way here, so I figured, let's ask him. How do you think -- how do you think Manchester United's doing today?

KEN POLCARI, ICAP CORPORATES: I think it's doing great, actually. I think it's a testament to the underwriters to the pricing that they came to. We saw that, in fact, it was priced at $14. It opened very tight, right? I think it opened at $14.03 or $14.02.

It's traded in a very tight range, which really says that the pricing was right. They estimated the demand right, that it hasn't fallen out of bed. The last thing you want is for an IPO to fall out of bed if it's mispriced. We've all seen that. This has not happened with that, and so I actually think it was a great job.

And I think it was -- I think it was great for the IPO market. Certainly that's come back in this country since May. The IPO market is starting to come back. I think it's great for Americans in the New York Stock Exchange to really have a piece of what's so great in Europe with Manchester United.

KOSIK: Yes, but we're not seeing that kind of pop that we've seen with other IPOs. Think of Linkedin. If we're not seeing that push --

POLCARI: Well, you're not seeing that push. Listen, they're two different companies, right? Manchester United is a soccer team, right? It's also brought 17 -- 16.7 million shares. Someone like Linkedin when they came, they only brought half that. They brought 7 million shares. So there was less flow, so you might have more movement.

This -- they brought 16.7 million shares. They priced it tight, they priced it right. You didn't -- you don't really want to see is a stock fall out of bed. You don't want to see too much of a pop. This way, everybody's happy, right? The sellers are happy and the people who bought the stock certainly did not get hurt.

KOSIK: OK, and Richard, I'm hearing that the volume on this is doing pretty well right now.

QUEST: Yes, yes, yes.

POLCARI: 26 million shares, which is --

QUEST: Alison --

POLCARI: -- very, very healthy, certainly on the first day of trading, so we should only hope that it continues to be -- generate that much interest.

KOSIK: Right, right. OK, go ahead, Richard.

QUEST: Right. First of all, remind Polcari that they play with a round ball, not some funny-shaped ball like the American football.

KOSIK: He said they play with a round ball, not a funny-shaped ball.


QUEST: And secondly -- secondly --

POLCARI: Yes, they do.

QUEST: Doesn't he find it rather strange that an English football club owned by Americans quotes in the United States? It's all a bit bizarre.

KOSIK: He thinks it's a little bizarre that an English football club is owned by an -- by Americans and it's being traded here. What say you about that?

POLCARI: Well, listen. I think it's also very interesting. I think it really goes to the power of the marketplace, right? So, why it was ultimately chosen to trade here is not my call. I'm not certainly part of that. But the fact is, we're happy to have it on the New York Stock Exchange, and it's so visible here, right?

It's because it's visible to Americans, and it will give Americans an opportunity to participate in, really, the excitement that the loyal fans have, certainly all over Europe and other parts of the country for soccer, for Manchester United. And so, I think it's exciting, and I'm happy -- we're happy to have them.

KOSIK: Yes. They're very happy to have them. You should see them, they're giddy around here today, Richard.

QUEST: Time out, as you would say. Remind him, it's not "soccer," it's "football." Thank you very much to you both.

KOSIK: He says it's "football," not "soccer."

QUEST: Thank you very much from New York.

KOSIK: I'll say soccer. Thanks, Richard.

QUEST: Both of them there. All right. Time now for a Currency Conundrum. Now, in the UK, the Royal Mint has issued a collection of coins dedicated to London's Olympic Games. What is on the back of the coin commemorating football? Or soccer. Is it A, a portrait of David Beckham? B, a foosball table? C, a diagram explaining the offside rule?

Never mind the offside rule. The currencies, now. The euro is flat as a pancake against the dollar. The pound is making up some gains, around a quarter of a percent. Yen's approaching monthly lows. Those are the rates - -


QUEST: -- this is the break.


QUEST: Here in London, the events are almost over. The battle between the world's greatest economies must end. And tonight, we find out who will take the gold. Welcome -- welcome to the fifth and final day of the Quest- athlon.




QUEST: And these are the contestants as they have been all week. Great Britain, the host; Brazil, the next host; China, the fastest-growing; Germany, the powerful; the United States, the largest.

If we recap the events so far, we have, of course, Germany -- China won the GDP Stakes. The -- Germany won the Stock Market, whilst it was Germany and the UK winning the rating, the credit rating, and on unemployment, it was China.

So, all to play for in the final day, and the final day of course is day five, the Export Discus. Exports as a percentage of GDP according to the World Bank. So, Brazil goes first and comes in at 12 percent. China comes in at 29 percent, world's biggest exporter in nominal terms. But Germany has 50 percent!




QUEST: Whilst Great Britain comes in at 32 percent. And finally, the United States, which under Obama has said it will double exports in five years, comes in at 14 percent. So, on this final day, the winner of the Export Discus is Germany!




QUEST: Which now takes us -- time for a medal ceremony. Solemn. The bronze medal in the Quest-athlon goes to the United Kingdom, Great Britain, Team GB!




QUEST: Fifteen points, helped by the strong Triple-A that they want to keep. The silver medal goes to China, with 16 points.




QUEST: Started strongly with GDP and faded afterwards. And the gold medal in the Quest-athlon of economics -- global economics goes to -- Germany!




QUEST: Twenty points. It's a victory for Mrs. Merkel. They dominated in exports, stock market, and credit ratings. When all is said and done, it has been Germany. And as for the United States, fourth, and Brazil is fifth. So, the Quest-athlon comes to an end for another four years.

Now, if the athletes are going to win, they need a lot of money behind them, and the sport shoe brand ASICS or A-SICS if you're in the US, ASICS in the rest of the world, sponsors hundreds of athletes. And the chief exec of ASICS America is in London supporting them. I spoke to him and asked him how the company decides who are they going to give money to.


KEVIN WULFF, CEO ASICS AMERICA: We look for athletes that we think are going to stand the test of time, that have the chance of winning, who are competitive, have that inner drive, and --

QUEST: But they've got -- they've got to win, otherwise you're just wasting your money.

WULFF: Well, they -- winning -- Lolo Jones is a great example. She has torn, I think, the hearts of Americans in Beijing by hitting the last hurdle after leading, and she was training, she was just performing at a high, high level, had a significant injury, had surgery.

Came back, finished fourth, missed a medal by that much. So, you can say winning is everything, but it's also, I think, the quality of the athlete.

QUEST: And how many athletes are you -- do you sponsor?

WULFF: Well, within the US here, we have around 45 and several teams. Within the Americas, of Latin America, Canada, so throughout the Americas, we have several hundred.

QUEST: OK. Explain to me this, because I'm not sure I fully understand how sponsoring athletes helps you sell one more of these.

WULFF: Of these? Well, we're --

QUEST: Because do you really think people say, "Oh, well, X athlete in the Olympics or the World Championships run them, so -- wore them, so I better get a pair"?

WULFF: When you see that athlete at the world stage, this is a world stage, obviously, here in London. That translates that if the best in the world are wearing ASICS, obviously that should be the best product available for me in how I train.

QUEST: But the best in the world will wear the best whether they're being paid to wear it or not, they'll wear the best.

WULFF: Right. They will. But not at the sacrifice of winning or losing.

QUEST: Does it hack you off a bit, this Rule 40? You've got your athletes wearing the stuff --

WULFF: Exactly.

QUEST: -- even winning with the stuff, but you can't say a word about it?

WULFF: Rule 40 is challenging. What I like about it, you do need to protect the significant investment of the USOC or the IOC sponsors. So, we have a 40-day period, in essence, where we can't do anything related to events or our athletes.

Is it a little frustrating? Yes, it is. There's no doubt about it. But I do respect that you need the rules because of the high, high price tag some of these mega brands are spending.

QUEST: Finally, how would you judge these Olympics? Come on.

WULFF: Yes. I've been to seven straight Olympics, so I've been to many Olympics. And I'd say this is definitely one of the greatest Games. I think the --

QUEST: One of?

WULFF: One of -- I thought Greece was spectacular.

QUEST: One of?

WULFF: Sydney --

QUEST: One of?

WULFF: Sydney was spectacular. So, it is definitely in the top three.


WULFF: And the city itself -- we went on some castle tours. We have many retailers here from the Americas. So, we saw the Americans win the women's soccer last night, the night before.

QUEST: I often find once you've dug the hole, it's best to stop digging.


WULFF: OK. Very good.

QUEST: Thank you very much.

WULFF: Very good. Thank you very much.


QUEST: There'll be a profitable moment on that at the end of the program. When we come back, we'll be on the banks of the mighty Mississippi. Old Man River is struggling to keep rolling because of a terrible drought. And the prices are at record highs on foodstuffs, after the 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.


QUEST (voice-over): And the wife of a disgraced Chinese politician has admitted to murdering the British businessman, Neil Heywood, according to China's Xinhua news agency. Gu Kailai is blaming a total breakdown for her actions. Her trial was adjourned on Thursday without a verdict.

Syria's opposition says fighting across Syria has killed more than 100 people on Friday. About half of the casualties are from Aleppo, where rebels and regime forces are locked in fierce fighting for control. Britain has said it will send the rebels nearly $8 million in additional funds for non-lethal aid.

Hundreds of Palestinians are streaming through the Raffa Gate in one direction. Egypt is now allowing people from pass -- to pass from the Sinai to Gaza, but not the other way. Egyptian troops and military vehicles are still pouring into the region in a crackdown on militants.

A man wearing an Afghan military uniform has killed three U.S. troops in Helmand province in southern Afghanistan. A Defense Department official says the troops were participating in a mission to stabilize a village. The incident follows a suicide bomb attack in eastern Kunar province on Wednesday. In that attack, four Americans were killed.

Mourners have gathered in the U.S. state of Wisconsin on Friday to remember six members of a Sikh temple, who were killed in an attack there on Sunday. The state governor was among the speakers at the memorial service at a high school gymnasium. The gunman killed himself in the temple parking lot after being wounded by police.


QUEST: The U.S. Department of Agriculture is warning 2012 and '13 in the corn yields could be the worst in nearly two decades. Its monthly supply and demand report, hardly riveting reading normally, this time, absolute must-read. A projected drop in harvest by 22 bushels per acre, that's as the Midwest drought shrivels up the crops. Analysts were expecting a drop of 20 bushels.

Now the USDA believes corn prices will hit a record this season of up to $8.90. Now corn futures for December are already close to that in futures trading in Chicago.

The drought in the U.S. is not only pushing up prices, it's hurting livelihoods, as you would well expect. Half of the state of Tennessee is suffering from drought conditions. From the Mississippi, CNN's Martin Savidge reports.


MARTIN SAVIDGE, CNN CORRESPONDENT (voice-over): We are on the bridge of the Joseph (inaudible) as Captain Gene Waller threads a string of barges nearly four football fields long up the shrunken Mississippi River.

CAPTAIN GENE WALLER, CANAL BARGE COMPANY: Yes, I think it's a little shallow above that river, so I'm not going to go my normal.

SAVIDGE (voice-over): In his 28 years of piloting towboats for the Canal Barge Company, he's never seen the Mississippi drop so far so fast.

SAVIDGE: What's the biggest thing that worries you?

WALLER: Unexpectedly hitting a shallow spot.

SAVIDGE: Running into the bottom?

WALLER: Right.

SAVIDGE (voice-over): Just ahead he's heard the river is only 9 feet deep. He sits 9'3" in the to the water.

SAVIDGE: You're deeper in the water than that water is deep.

WALLER: Right.

SAVIDGE: How often do you find yourself looking at that depth gauge?

WALLER: All the time.

SAVIDGE (voice-over): He's got reason to be nervous. Over the last two weeks, boats and barges have been running aground nearly every day.

COMMANDER DAVID BURNS, U.S. COAST GUARD: We probably had on the water 15 to 20 different small incidents or groundings, some of them in the channel, some would be outside of the channel.

SAVIDGE (on camera): How does that compare to a normal time?

BURNS: I would that's probably -- certainly an increase from what we normally see.

SAVIDGE (voice-over): And there are other problems. The giant American Queen has to let passengers off on a levee because the water is too shallow where it normally docks.

Huge areas of river beds are exposed, looking like desert, causing one lawmaker to quip that Mississippi's got more beaches than Florida, which would be funny if it wasn't about to cost us all.

You see, the Mississippi moves all sorts of things we use a lot of, like grain, oil, coal and steel.

DARYL WHEELER, ASSISTANT PORT CAPTAIN, CANAL BARGE COMPANY: Everybody's having to lighten the loads up and not to barge the size of the tows down.

SAVIDGE: So here is the math.

(on camera): If you want to raise the average barge one inch in the water, you have got to take off 17 tons of cargo. To raise it a foot, you're talking 200 tons.

(voice-over): And since, according to the American Waterways Operators, moving cargo by river is $11 a ton cheaper than by train or truck, the more that now has to be moved on land, well, the more the costs go up.

STEVEN BARRY, ARMY CORPS OF ENGINEERS: Eventually the consumers are going to pay that price somewhere along the line.

SAVIDGE (voice-over): That's Steven Barry with the Army Corps of Engineers. I asked him the question that's on many people's minds.

SAVIDGE: They're worried the river could close. What would you say?

BARRY: Well, I don't -- I think with the proactive stance, of course, taking, I don't see the river actually closing.

SAVIDGE (voice-over): That proactive stance includes building thousands of rock dikes like these that jut into the water all along the river.

SAVIDGE: And this is what they do. The water comes downstream. And during the drought it's redirected, deflected into the center of the river. It makes the channel deeper and it scours out the silt.

SAVIDGE (voice-over): But engineering can only do so much. The rest is up to nature. Just how much rain would it take to make the river right?

SAVIDGE: Twenty inches?

BARRY: Right and that would be on a regular and recurring basis.

SAVIDGE (voice-over): That's not in the forecast. Long-range predictions actually show the river dropping another two or three feet, which is why Captain Waller and others on the Mississippi fear life could be about to hit bottom.

WALLER: Well, it just keeps until she quits moving.


QUEST: Martin Savidge on the mighty Mississippi.

The long-range forecast he was referring to, there Tom Sater's at the World Weather Center for us tonight.

TOM SATER, AMS METEOROLOGIST: Yes, Richard, the future does not look bright, or doesn't look wet for the central part of the U.S. Every week, we get a report from the U.S. Drought Monitor. And every week we watch it closely, because it's critical. In fact, it's bad enough to be in a moderate drought, but when you're in extreme or exceptional, then the news gets pretty critical.

Sixty-two percent in moderate drought. It has not expanded across the U.S., but the areas that were already in severe or extreme or exceptional, that has expanded.

This is the mighty Mississippi River, and of course, barge traffic has been halted to the north and to the south. Twenty-four percent of the U.S. is now in extreme drought or worse.

Critical stage for corn -- in fact, when we talk about the farmers, they have their pollination stage with corn in the U.S. when it comes to July. The old saying is you want it knee-high by July. They did not get the rain, so it's a wash.

If we get back to the Mississippi River -- and we're going to go to the south and to the north here for you, take a look at this. In parts of Arkansas, Russellville, Arkansas, has had 24 consecutive days with the temperature 38 degrees or higher.

This is a chart of the flow of the Mississippi. This is in Greenville, Mississippi, typically in red. It dips down in the fall, it makes a big, steep rise in spring, when you have the snow melt. This is how it's been this year. It made its way up to over 19 meters, but currently it's down to 1.8, and the news is not good. As the rainfall totals, what we're going to see are going to be detrimental, in fact, almost non-existent.

This is the upper Midwest. Here's the Mississippi, through St. Louis, all the way up to the north. This is the Ohio River. Back in May, sure, there was some abnormally dry areas, some moderate drought. But we take a look just three months later, and you can see how critical it is, Farm Belt, parts of Indiana, Illinois and Iowa, into Missouri and it extends, of course, westward and southward.

So to put them side by side, to see really what has just happened, in a three-month period, it's unbelievable. I know river levels and some of the tributaries off the Mississippi in parts of Missouri are the lowest levels since 1909. This is where we need the rainfall. We're not getting it. High pressure has been backing the Midwest tinder dry.

We continue to have thunderstorms fire up and around the perimeter. Now the long-term forecast, this just in, it's a prolonged area of drought that will continue. It is a long-range forecast, so through October, the drought will persist. Only above average rainfall in areas of the Southwest and maybe the Deep South, but as far as temperatures are concerned, likely above, again. The news is not good.

If there's any good news at all, it's that the pollination stage for corn, which is in July, Richard, for soybean, it's in August. But that's not going to give them very much help when very little rainfall is in the forecast.

QUEST: Tom Sater at the World Weather Center for us tonight with that.

We thank you, Tom.

When I come back in a just a moment, why the "London Evening Standard" is calling the Golden Games and said London is the beating heart of the world. A "Profitable Moment on the Olympics.




QUEST (voice-over): Now the answer to the "Currency Conundrum," what is on the back of London's 2012 coin commemorating football -- and I knew, of course, both of them today. The answer, oh, is C, one I didn't think, a diagram -- excuse me -- explaining the offside rule.

The coin was designed by Neil Wolfe (ph) and a football fan who got tired of explaining the rule of offside. And I can assure you I'm not about to do anything similar now.


QUEST: If you have -- it's about time you and I got together away from the screen of television @richardquest, of course, is the place where you and I can have a chin wag and a discussion on the world economics.

And of course, if you've got a "Currency Conundrum" of your own, you can -- you can always send it to me as well. We will put it online and we will even give you the credit, not the money, just the credit for having come up with it. It's @richardquest, or the Facebook page as well, as always, is online.

Now, finally tonight, a "Profitable Moment," and my "Profitable Moment" was very much thought about as the result of these.

Now I may be biased, "London Wins Gold for the Olympics," the Games are described by Jacques Roger (ph) as "The city is the beating heart of the world."

I may be biased, but if these Olympic Games have proved one thing, it is that you can, at the end of the day, well, you can trust the British.

Now they have not been the most spectacular games; Beijing probably will take the biscuit for that one. And they certainly haven't been the most expensive the world has ever seen. London has actually come in just about on budget. There's none of the debts that Montreal ran up. And, indeed, it hasn't certainly bankrupted the city.

But just as Britain did in 1948, when the Games were rescued after the Second World War, so the U.K. has warmed the beating heart of the Olympic spirit, exactly as Roger (ph) has said. Just look at what's happened.

They have restored an element of sanity and kept within a relatively modest $14 billion budget. The opening ceremony had probably the right amount of spectacle with, of course, a bit of history in the comic turn of the Queen gave the world a taste of British humor.

Jacques Roger (ph), head of the IOC, said that London represents the Olympic legacy blueprint. So this weekend, when everyone heads home, having had a rollicking good time, that's what they'll probably say. And that's what I say. You know, you can trust the sensible British to get it right.

@richardquest, where you can disagree with me. And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Thank you for making time to join us each evening for our discussion of business, economics and finance. And as always, whatever you're up to in the hours ahead, I do hope it's profitable.



ROBYN CURNOW, CNN HOST: This is MARKETPLACE AFRICA. We're in Maputo, Mozambique, and I'm Robyn Curnow. Now Mozambique used to be a Portuguese colony, and it wasn't too long ago that Mozambique (inaudible) Portugal as a land of opportunity. That's all now being reversed as many Portuguese are coming here, fleeing the Eurozone crisis, looking for jobs and brighter future.

CURNOW (voice-over): In his new apartment, Bruno Gabriel unpacks his suitcase full of his girlfriend's fancy handbags, reminders of their more sophisticated city life back in Portugal. The couple moved to Maputo, Mozambique, four months ago.

Gabriel, a marketing director, said he was headhunted and made a deliberate career move to Africa.

BRUNO GABRIEL, MARKETING DIRECTOR: In Europe, everybody are a little bit afraid with their own future because the crisis, worldwide crisis in terms of economics and once we start to enter the labor business, once we start to work, we understand that to plan the future is a little bit more difficult than what you expected.

CURNOW (voice-over): In the Portuguese continent, the consul-general says she's seen an increase in experienced university-educated Portuguese coming to their country's former colony.

GRACA PEREIRA, OUTGOING PORTUGUESE CONSUL-GENERAL: You know, the last two or three years, people began to come increasingly. Lots of people for small investments, some others working with the companies, some others, you know, working contract by other people. So a variety of people.

CURNOW (voice-over): Walking into Maputo's Portuguese-style pavement restaurants, locals tell us that the new arrivals from Portuguese fly in to Mozambique nearly every day. This group of business men arrived from Porto (ph) the night before.

He told me, "None of us is facing financial difficulties or is unemployed. What we envisage is to find places for the future, because for the next 5- 10 years, Portugal will slow down and stagnate. We want to find places like Mozambique where there is the reverse, where we have sustainable growth for the next 5-10 years.

CURNOW: Thank you. This new wave of Portuguese immigrant are not only lured by familiar food and music. Mozambique's economy is forecast to grow at more than 7 percent this year, no doubt a huge incentive for those wanting to escape lack of opportunity back home and the Eurozone crisis.

VANESSA SOUZA, AVI INTERNATIONAL: (Speaking foreign language).

UNIDENTIFIED MALE: (Speaking foreign language).

SOUZA: (Speaking foreign language).

CURNOW (voice-over): One of the many new immigrants is 32-year-old Vanessa Souza. She left Lisbon in January. She's now working for AVI, a successful South African consumer goods company, helping to promote and sell tea, biscuits and coffee to Mozambique's growing middle class.

She says she's now earning four times the salary she earned back home, works shorter hours, can afford a car, cell phone and insurance. Nearby under the palm trees that line the Maputo shoreline, she says she can now build her future, something she didn't dare to do back home in Portugal, where they're struggling under the weight of the Eurozone crisis, where unemployment is around 15 percent.

SOUZA: There's no job over there in Portugal.

CURNOW: No options?

SOUZA: No. New life, new life, new country.

CURNOW: Why Mozambique?

SOUZA: There's -- first of all, we have jobs here and the language is the same and we have opportunity here.

CURNOW (voice-over): In the dusty northern provinces of Mozambique, there are vast reserves of coal and gas discoveries off the coast. They've sparked a huge swell of investments and growing secondary industries in the towns around the mines.

Many Portuguese, says the consul-general, are setting up restaurants, joining small companies or offering skills in these frontier towns and by passing the capital of Maputo.

PEREIRA: Now things are changing a little bit because, of course, the big project here in Mozambique, they attack a lot of small business around. And so even Maputo has lots of things already in Maputo.

So people are moving outside Maputo. And they are beginning even the beginning their businesses outside of Maputo. So it is very interesting. It could be very useful also.

CURNOW (voice-over): As for the Mozambicans, locals say there's been little backlash to the Portuguese returning in very different circumstances.

HIPOLITO HAMELA, ECONOMIST: Yes, they're coming. But I think really positive.

CURNOW (voice-over): Positive, he says, because new businesses, restaurants like this one, create jobs for local Mozambicans. More skills help development, too, also government quotas on the number of foreigners that a company can hire ensure that local jobs are protected.

And even though scenes like this are becoming more common, Mozambique is still one of the poorest countries in the world, facing serious challenges.

CURNOW: How difficult is it, though, setting up in Mozambique? Is it easy here?

SOUZA: For me, the biggest thing is the security thing.

CURNOW: (Inaudible) crime?


CURNOW: -- just last week?

SOUZA: Last week and police they don't just -- they just don't care.

CURNOW (voice-over): Bruno Gabriel says he's frustrated with the slow pace of life and how that contrasts with Europe.

GABRIEL: It's a little bit more difficult to make things happen than it is in Europe. And Mozambique is a challenge every day.

UNIDENTIFIED MALE: (Speaking foreign language).

CURNOW (voice-over): But still, it's here he's chosen to develop his career, overseeing a local TV program for one of his clients. Portuguese in Africa, as much a story of a European crisis as it is a story of African opportunity.


CURNOW: Now it's not just the Portuguese who are operating here in Mozambique. The Brazilians, the Italians, the Chinese, the Indians have all invested into this economy. No doubt many of them have a Visa card. Well, after the break, we speak to the group president in charge of Africa (inaudible).


CURNOW: Nearly half of the world's unbanked population resides here in Africa. Now that's according to Visa. Well, this might be a gold mine of opportunity. There are also challenges. How do you adequately service this largely informal market? Well, to answer those questions, here's Elizabeth Buse from Visa.


ELIZABETH BUSE, GROUP PRESIDENT, VISA INC.: We are a payment company and we move money and transactions among businesses and consumers and governments on credit card, on debit cards, on prepaid cards and on all of those accounts. But we don't set consumer fees or merchant fees or extend credit.

And the important part of that for reaching the unbanked is that it doesn't have to be done on a piece of plastic. Mobile is what makes the difference in our ability to reach the unbanked, because there are a billion people who are unbanked. They have no relationship with a financial institution. But they have a mobile device, and we can use that to reach them with a Visa account.

CURNOW: And, obviously, that's been one of the big stories in Africa in recent years, is this sort of unleashing of the potential of mobile phones to move money around. But there have been a number of limits with that. How do you come in now at this stage and do something different?

BUSE: You're exactly right. There are many examples of successful mobile money schemes in Africa. But they all have limitations. And those limitations are in general. They are specific to a certain mobile network operator.

If I want to send funds to you, you and I have to be on the same mobile network. By Visa coming in, we enable what we call interoperability. It doesn't matter who's on what mobile network as long as there's a Visa account in each of those phones we can transact, pay bills, transfer funds, make purchases, seamlessly.

In addition, we are border blind. Many mobile network operators can't move from one currency to another, from one border to another, but that's what Visa has done for 50 years, enabling global commerce. And we can do that with a mobile phone.

CURNOW: Has this taken companies like Visa by surprise, in a way?

BUSE: I think it would be a pleasant surprise, but certainly the ubiquity of the technology creates an opportunity that just wasn't there before. So everyone was looking at the unbanked in Africa, 80 percent of sub-Saharan Africans don't have access to traditional financial services.

That number is 8 percent in developed economies. And so we were all looking at how do we serve these people. Mobile is the critical technology enabler. By itself, it's not enough, but it is critical.

CURNOW: And we talk about the unbanked. These are the poorest of the poor in many ways, often in rural areas. But there is still disposable income, and I love that sense that even if you have a dollar extra, it is disposable income. And that's where this critical issue of sending money around, even if it in the smallest kind of denominations, it's so important.

BUSE: You're exactly right.

CURNOW: It's the critical mass of people who are doing this.

BUSE: That's right. In Africa, 325 million people live on under $5 a day. But those people are trying to save and make payments and transfer funds. And that's what the mobile device enables. Now what's really important is that people understand what it means to have a financial account and what it means to save and budget and make payments.

And that's why even though the mobile technology is important, it's not sufficient. There has to be financial literacy, financial education to enable all of those people to take full advantage of access to financial services.

CURNOW: And the key is credit, though, isn't it? I mean, would you be offering someone credit on their phone? I mean, that's essentially what Visa does as well.

BUSE: Well, as a matter of fact, globally, 60 percent of Visa accounts are debit or prepaid. And the fastest-growing account in emerging economies are prepaid accounts, meaning the account can only spend what has been funded, because there aren't credit bureaus.

Many people would not traditionally be seen as creditworthy. So it's critical that we enable a different kind of account, and that's something that we have done globally.


CURNOW: Elizabeth Buse there from Visa on the need to attract more innovation and investments into Africa.

Well, that's it for this week's show. I'm Robyn Curnow here in Maputo, Mozambique. See you again next week.