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QUEST MEANS BUSINESS
US Fed Statement; Berkshire Hathaway Buyback; Fiscal Cliff Fears; Live: Ben Bernanke Addresses Media; Analysis of Fed Statement; Dollar Sliding; UK Unemployment Down; European Finance Ministers' Summit; Eurozone Warning Signs; Choppy Session for European Markets; Greece: The Human Cost on New Homeless
Aired December 12, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST: No rate change until unemployment falls. US Federal Reserve chairman Ben Bernanke speaking live this hour.
Fiscal cliffhanger. Republicans reject the latest offer from the Democrats.
And name your price. We meet the man selling a part of his identity to the highest bidder.
I'm Max Foster. This is QUEST MEANS BUSINESS.
Hello to you. For the very first time in history, the US Federal Reserve is directly linking interest rates to unemployment rates. Borrowing costs will not move until America's jobless rate falls below 6.5 percent.
The Fed's never linked the two together like that before, and Fed chairman Ben Bernanke will be speaking live in a few minutes' time. In his two -- his two mandates to control inflation and help create jobs are now connected by specific targets.
Meanwhile, Operation Twist is no more. The Fed is replacing it with a similar stimulus plan. It's going to by $45 billion worth of long-term treasuries every month. Only this time, it's going to expand its balance sheet, effectively printing more money.
The existing home -- open-ended quantitative easing program also continues. That's another $40 billion of stimulus a month. And this is how Wall Street has reacted: the Dow, currently up half of one percent, 13,313.
The Fed has just released a set of charts showing the board's economic projections for the year ahead. GDP growth, unemployment rates, and inflation, around 2 percent of the long run.
Maggie Lake is at the New York Stock Exchange. Maggie, this was dramatic news, in the end, wasn't it, simply because of the way it's viewing its two targets, now, the Fed?
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Yes, that's right Max. And the concern here, as we've made our way through these stimulus programs is, as much as they've helped the economy, is the amount of the impact they're having waning and being replaced, frankly, with the risks that might come with it, especially when everyone was sort of confused about how and when they might exit the stimulus strategies?
So now, the Fed attempting to put some of those risks -- concerns to bed, rather, and give a specific target that people can watch. As we watch the unemployment drop rate -- rate drop, we will start to understand that they are going to get closer to thinking about tightening.
Now, let's be absolutely clear about this: that's not going to happen for a long time. Based on that projection they put out there, we're looking at it taking, if thing stay the way they are, four or five years to get to an unemployment rate of 6.5 percent.
But it moves it away from that calendar peg, which everyone was concerned about, frankly, within the Fed as well as here on the floor of the Stock Exchange and in the investment community, and it puts it more toward an economic target. So, I think people are going to feel a little bit more comfortable about that, Max.
But the other thing that everyone is conscious of down here is that old saying, you know it as well as I do: don't fight the Fed. We're talking about $85 billion in stimulus a month. That is going to continue to give a lift to these stock markets, Max.
FOSTER: In terms of unanswered questions, what are people looking out for from Ben Bernanke's statement in front of the cameras?
LAKE: I think they're going to want to hear a little bit more detail about how they came up with that particular target, why they're targeting unemployment as opposed to, say, growth. Because remember, they're going to revise their projections, too.
And just from some of the very quick headlines I'm seeing, it looks like they expect that unemployment rate to drop, maybe pick up pace dropping as we head through 2015, but they're trimming their growth forecasts a little bit.
The unemployment rate can drop for lots of reasons. Not all of them are positive. If people are dropping out because they're giving up, as we've been discussing the last few months, you're going to see that unemployment rate come down.
But at the bottom -- at the end of the day, jobs matter. It matters for consumer confidence and for overall economic activity. So, they must have decided that that was the particular economic piece of data that they were going to concentrate on.
But again, economists especially, not so much the traders here today who are going to execute, Max, but the economists out there are really going to want some more detail about how they came to that number, why they picked unemployment, and maybe how they're going to change their language as we watch month-to-month.
But one thing about it, it's already the most important economic data point out there, Max. Now, that sort of attention to that monthly jobs number is going to get even greater now that we know that easing or tightening is tied to it.
FOSTER: The fiscal cliff is looming, of course. Are we looking out for any comments on that from Bernanke when he speaks in the next few minutes?
LAKE: I'm sure they'd love to hear him say something specific about it. He tends to try to stay away from it except to say that we need a balanced approach and that it's imperative that we do something.
Listen, the Fed does not want to play politics, so they're not going to endorse one plan or the other, although I'm sure that a lot of people will try to get them to do that. But everyone down here, everyone in the business in the business community really moving toward wanting to see a deal done.
Frankly, Max, a lot of people are thinking that they're going to get one, and that again is giving some support to the stock market. So, if we don't see that happen or if we move away from what seems to be these closed-door sessions, and there is some indication that there's not going to be resolution, then that is going to be a major negative in the stock market.
So a lot riding on the fiscal cliff. That is right up there with the Fed today. And again, Max, the two are completely connected. The Fed has been forced into this extremely stimulative mode because they're trying to fill the void that is left by politicians who have been divided and unable to do anything on the fiscal side.
So, the Fed would love nothing more than to see a deal done so that they can start to slowly extract themselves from this really experimental position they've put themselves in, Max.
FOSTER: We have one other talking point, didn't we, earlier today? Those Berkshire-Hathaway shares. They were suspended, weren't they? What was the reason behind that?
LAKE: Yes, they -- news was breaking that Berkshire was going to repurchase some shares. This is sort of interesting for people who watch this. Berkshire is raising the amount they're willing to pay for, basically, and it's an indication that Warren Buffet thinks the stock is undervalued.
There are some companies out there who are very aggressive about repurchasing. Berkshire hasn't been one of them. They said the only conditions one should do it is if you have a lot of money, and they do. They have a cash ward. And if you're -- if the stocks and the shares are undervalued, and Buffet clearly believes they are. So, they're sticking their toe in.
People think we're going to see a little bit more of that, and actually, it could provide sort of a new higher floor for Berkshire shares, Max.
FOSTER: Maggie, thank you very much indeed. Back with you later after that Ben Bernanke speech, of course.
And with 20 days left to steer the US economy away from the fiscal cliff, the Democrats are offering corporate tax reform to sweeten their deficit reduction plan. Republican House speaker John Boehner isn't swayed, though, telling lawmakers not to make plans over Christmas.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), SPEAKER OF THE HOUSE: His plan does not fulfill his promise to bring a balanced approach to solving this problem. It's mainly tax hikes. And his plan does not begin to solve our debt crisis.
(END VIDEO CLIP)
FOSTER: Well, Jeffrey Sachs is an economist and the director of Columbia University's Earth Institute. He's also a self-confessed Obama supporter. At the Mobile for Good summit in London, he told Jim Boulden he's confident that lawmakers will reach an agreement on the fiscal cliff, but the road ahead won't be easy.
JEFFREY SACHS, DIRECTOR, THE EARTH INSTITUTE: Everybody's worried about what the US is doing, and they're concerned about it. Why is it that the federal government, which has us spending, after all, $3.7 trillion a year, does not know what its budget is one month to the next.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes.
SACHS: The process isn't working very well, so people are concerned. I do believe that there will be an agreement, and I think it's moving in a -- slowly in a reasonable direction. The president is right that the US government needs more revenue, it needs higher taxes on wealthy people who can pay. And I think he's going to get that in the end. After all, he did win reelection.
BOULDEN: It does mean, then, the Republicans have to blink, which is maybe a hard thing to do after losing an election.
SACHS: Well, I think it's the only thing after you've lost. If they had won, they wouldn't blink, but after you lose, you do blink. You have to do something else. The American people have been very clear, not only at the poll in November, but actually in the opinion surveys as well. They say that yes, rich people should pay more because they've had a great run of things.
There's been crisis for many parts of the economy all over the world, but not for the richest people. They've done very well. Their incomes have continued to rise. And so the idea that they should pay more in taxes is an utterly reasonable proposition to most Americans. Even to most rich people, I would say.
BOULDEN: Yes. But that gets us over the short term. Do you see any evidence that there could be a long-term cooperation between Republicans and Democrats, like the old days of Gramm-Rudman, where we actually thought we could actually get somewhere with cutting the debt, cutting the deficit.
SACHS: Well, that actually raises a harder problem, which is that even if the negotiations go the way the president wants, we still have years of hard slog, because we will not have a balance budget coming out of this.
SACHS: We still have major needs as well as an imbalanced budget. And so, I think the politics around this is going to continue to be heated and continue to evolve. We'll definitely not go in one step to a new world of consensus.
FOSTER: Well, all eyes on the US this hour as Ben Bernanke is about to take questions from reporters. We'll have live coverage for you, and live analysis as the Fed chairman speaks. Stay with CNN.
FOSTER: Well, the Fed's just released its projections for the US economy and announced plans to tie interest rates, interestingly, to the unemployment rate and reworked its bond-buying program. We're going to be hearing from Ben Bernanke any moment, now.
He's due in front of cameras, there. An empty seat at the moment, but reporters ready to ask lots of questions following the statement earlier on.
The most recent thing that we heard was -- from the Fed releasing those charts showing the board's economic projections for the year ahead. GDP growth, they say, will be stable at 2.3 percent. Here's Bernanke.
BEN BERNANKE, CHAIRMAN, US FEDERAL RESERVE: Good afternoon. It's been about three and a half years since the economic recovery began. The economy continues to expand at a moderate pace.
Unfortunately, however, unemployment remains high. About 5 million people, more than 40 percent of the unemployed, have been without a job for six months or more, and millions more who say they would like full-time work have been able to find only part-time employment or have stopped looking entirely.
The conditions now prevailing in the job market represent an enormous waste of human and economic potential. A return to broad-based prosperity will require sustained improvement in the job market, which in turn requires stronger economic growth.
Meanwhile, apart from temporary fluctuations, as largely reflected swings in energy prices, inflation has remained tame and appears likely to run at or below the Federal Open Market Committee's 2 percent objective in coming quarters and over the longer term.
Against a macro economic backdrop that includes both high unemployment and subdued inflation, the FOMC will maintain its highly accommodative policy. Today, the committee took several steps.
Fist, it decided to continue its purchases of agency mortgage-backed securities initiated at the September meeting at a pace of $40 billion per month.
Second, the committee decided to purchase longer-term treasury securities, initially at a pace of $45 billion per month after its current program to extend the average maturity of its holdings is completed at the end of the year.
In continuing its asset purchases, the committee seeks to maintain downward pressure on longer-term interest rates and to keep financial conditions accommodative, thereby promoting hiring and economic growth while ensuring that inflation over time is close to our 2 percent objective.
Finally, the committee today also modified its guidance about future rate policy to provide more information to the public about how it anticipates it will react to evolving economic conditions. I'll return to this change in our communication after discussing our decision to continue asset purchases.
Although the committee's announcement today specified the initial monthly pace and composition of asset purchases, it did not give specific dates at which the program may be modified or ended. Instead, the pattern of future asset purchases will depend on the committee's evaluation of incoming information in two respects.
First, we expect to continue asset purchases until we see a substantial improvement in the outlook for the labor market in a context of price stability. In assessing the extent of progress, the committee will be evaluating a range of labor market indicators, including the unemployment rate, payroll employment, hours worked, and labor force participation, among others.
Because increases in demand and production are normally precursors to improvements in labor market conditions, we'll also be looking carefully at the pace of economic activity more broadly.
Second, the committee will be monitoring economic and financial developments to assess both the efficacy and possible drawbacks of its asset purchase program. The Federal Reserve's asset purchases over the past few years have provided important support to the economy, for example, by helping to keep mortgage rates historically low.
The committee expects this policy tool to continue to be effective, and the costs and risks to remain manageable. But as the program continues, we will be regularly updating those assessments. If future evidence suggests that a program's effectiveness is --
FOSTER: Ben Bernanke, there, speaking in front of reporters. We'll keep dipping in and out of that, but let's get some analysis from former Fed governor, Randall Kroszner. He joins me from Washington. Thanks for joining us.
In terms of what you heard so far, he's talking there about stimulus, wasn't he? This new form of stimulus. The Twist is over.
RANDALL KROSZNER, FORMER FEDERAL RESERVE GOVERNOR: Yes.
FOSTER: Can you just explain what's different here and whether it is very significant?
KROSZNER: So, I think it is an important change, because what they were doing is the so-called Twist, they were selling short-term assets and buying the long-term assets. So the portfolio was staying constant.
But now what they're saying is that we'll end that program. We'll actually make outright purchases. So, we're actually going to expand the balance sheet. And by buying both the mortgage-backed securities at about $40 billion a month and the treasury securities at $45 billion a month, that's $85 billion a month that they'll be adding to the portfolio. So, that's roughly $1 trillion a year.
FOSTER: So, can we call that printing money?
KROSZNER: Yes and no. So, it certainly increases the size of the balance sheet, but the Fed's balance sheet's grown dramatically since I was there. It started out in 2006, when I first got there, at $800 billion. Now it's nearly $3 trillion.
But what's happened to inflation? Inflation actually has been low, rather than high. Why is that? Because there's been so much demand for short-term liquid assets.
FOSTER: But it's just concerning, isn't it, that this sort of -- what was meant to be a temporary measure, this sort of solution, printing money, it just seems to be going on and on and on? They're actually expanding the program.
KROSZNER: Yes, so the monetary base will expand, the Fed's balance sheet will expand. But we're still in such a fragile situation that firms, individuals, and certainly banks, are holding a lot more bank reserves, excess reserves, individuals holding a lot more cash, firms holding a lot more cash. And so, in some sense, the Fed is responding to that demand because of the uncertainty out there.
FOSTER: I also want to ask you about this linking of interest rates to unemployment rates. That actually is a big move, isn't it, in terms of economic policy?
And it's really about sending a message, I presume, to markets, to economists, to say actually in the future, there may be an interest rate change. As a signal, have a look at the unemployment rate, and that might give you a guide. Is that -- am I reading it correctly?
KROSZNER: Yes, so what they're doing is they're making not a formal commitment, but an informal commitment to keep interest rates low and to keep this policy accommodation continuing until the unemployment rate falls sufficiently. And so this, in some sense, is the logical culmination of what we started back in 2008, when I was there, and we had brought interest rates down to zero.
Now, doing all these additional actions and trying to change people's expectations, so it's not just the open market operations, the purchases of the securities, but the open mouth operations, as I call them, of trying to convince people that they're serious and they're going to continue this until the unemployment rate comes down sufficiently.
FOSTER: Is it academic, really, because it's not going to hit 6.5 percent, most economists would argue?
KROSZNER: Oh, at some point, I think it will. But the question is exactly when? And I think it makes a lot more sense to be talking in terms of economic indicators, because that's how the Fed makes its decisions, by looking at economic indicators, rather than saying 2014, 2015, 2016. We don't know exactly when it will happen, but they've made it clear this is now a goal.
FOSTER: OK, great stuff. Thank you very much, indeed, for joining us. We are monitoring Ben Bernanke's speech for you. Often the most interesting bits come with a question. That'll be a bit later on.
But it has been a significant set of statements today, and we'll be putting it into context for you. But meanwhile, we have a Currency Conundrum for you as well.
American gold eagle coins jumped 130 percent last month in a post- election op. What makes them unique? Is it part of the reason why they're so popular? A, the American eagle symbol? B, they are guaranteed by the US government? Or C, their high percentage of gold? We'll have the answer later in the program.
The dollar, meanwhile, is sliding against the euro and the pound after the Fed's announcement. The single currency remains well above $1.30. The yen going the other way, down 0.8 percent against the dollar on the prospect of more monetary easing in Japan.
FOSTER: Well, the UK unemployment level has fallen at its sharpest rate, actually, since 2001. The number of people out of work in the -- in August to October, that period, fell by 82,000, just over 2.5 million. The unemployment rate was unchanged at 7.8 percent.
Now, European finance ministers are gathering Brussels to hammer out plans for a banking union, meanwhile. Talks on a new supervisory body, which would be part of the ECB, ended in deadlock earlier this month. Today, there were still signs that not everybody is on the same page.
(BEGIN VIDEO CLIP)
ANDERS BORG, SWEDISH FINANCE MINISTER: Sweden are not likely to join the banking union. We don't think that we have -- that it's likely that we will achieve an equal treatment. There will be a stronger role for the euro countries than for the non-euro countries, and that is unacceptable for us, so we will not join.
WOLFGANG SCHAUBLE, GERMAN FINANCE MINISTER (through translator): We can certainly say, even if it doesn't happen today or next week -- after all, the Christmas tree is up already -- but I'm confident that we'll come to an agreement on the banking supervisory in good time, before Christmas.
(END VIDEO CLIP)
FOSTER: Industrial production continues to fall in the eurozone. It dropped 1.4 percent in October month-on-month, according to Eurostat estimates. Economists were expecting it to rise. Alarmingly, Europe's exporting powerhouse, Germany, showed one of the sharpest falls.
Now, after a choppy session, Europe's main stock indices ended the day pretty close to where they started. The London FTSE gained for a sixth straight session. It's now at an eight and a half month high. Athens' main index was also showing six session gains. It is the highest -- it's at its highest level, actually, since October.
Now, all this week, we are looking at the human cost of the Greek financial crisis. Deep spending cuts and rising unemployment are casting thousands more people out of their homes and onto the street. In Athens, the new homeless, once workers and householders, now depend on charity to survive. Diana Magnay has been listening to their stories.
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT (voice-over): They've been warned we're here. They don't like it. It adds humiliation to hardship.
"LEO", HOMELESS CHARITY WORKER: We are people that just a few months ago had a job and a house. They could pay the rent, they could afford a car, they could afford going on holidays, et cetera. And now, because they lost their job, because they don't have other sources of income, they're finding themselves on the streets.
MAGNAY: Leo is one of them. He used to make a living painting religious icons until people stopped buying as they hoarded their cash for necessities. Now, he sleeps at the shelter upstairs and helps out at the soup kitchen.
"LEO": Look, a homeless person is a person who believes deep inside that has nothing. So, a portion of food is something that he will own in a minute, and he's afraid of losing it. That's the mentality. I want to get it. I want to own it more than eat it. I want to own something.
MAGNAY: Medecins du Monde are most often seen working among the starving and refugees, but their clinic in central Athens is crammed. It used to be mostly immigrants coming here. They could get free emergency care without having to prove they had papers.
Nikitas Kanakis, who runs the clinic, tells me that's changed.
NIKITAS KANAKIS, CHIAR, MEDECINS DU MONDE, GREECE: What we noticed the last years is that more and more people, they don't have access to the health system. Only here in this practice, we see now more than 70,000 people per year, and for them, half of them, they were Greek, now. Three years ago, they were not more than 8 to 10 percent.
MAGNAY: Greeks like "Kristos," who has a chronic nerve disorder.
"KRISTOS", HOMELESS NERVE DISORDER PATIENT: I am uninsured. That's the only place that can help me.
FOSTER: Now, the Fed is playing its last cards of the year, Ben Bernanke speaking currently after an interesting Fed statement. We were talking about that earlier. We'll talk about it again. We'll find out what the Wall Street reaction is, as well, to his comments as he's answering questions.
MAX FOSTER, CNN HOST: Welcome back. I'm Max Foster. These are the headlines this hour.
(BEGIN VIDEO CLIP)
FOSTER (voice-over): The U.S. Department of Defense says it is monitoring the object that was launched in North Korea earlier today. By now it is still believed to be in orbit. The North Korean government says it is a communication satellite launched on board a rocket.
The U.N. Security Council has held an emergency meeting and issued a statement condemning North Korea's actions. U.S. Ambassador Susan Rice says negotiations will not begin on possible consequences. The U.S. and its allies believe the launch was a covert ballistic missile test.
Syria state television is reporting several bombs have exploded close to government buildings in Damascus, calling in unknown -- causing an unknown number of deaths. This damage was reportedly caused by two blasts near the justice ministry. State TV says a car bomb also went off at the interior ministry.
A top aide to Bosnian Serb commander Ratko Mladic has been found guilty of genocide for the Srebrenica massacre. The Yugoslavia War Crimes Tribunal at The Hague convicted former Major General Zdravko Tolimir and sentenced him to life in prison. Eight thousand men and boys were killed at Srebrenica in 1995.
Conditions are improving at London area airports after freezing fog forced Heathrow alone to cancel nearly 150 flights. Visibility looked like this morning, it's what some people call pea soup or feathery ice.
(END VIDEO CLIP)
FOSTER: Federal Reserve Chairman Ben Bernanke speaking in Washington, still now taking questions on a statement earlier when he actually linked interest rates to unemployment rates, which was an interesting move.
(Inaudible) directly link those rates, been no change in rates until unemployment goes below 61/2 percent. He also said it's critical for politicians to act on the fiscal cliff. He's currently taking those questions from reporters in Washington and will continue to see what he has in response.
Maggie's at the New York Stock Exchange meanwhile, watching the reaction.
MAGGIE LAKE, CNN CORRESPONDENT: Hi, there, Max, and we are coming off those highs we saw just a little bit. We're still holding onto gains not quite as many. Mr. Bernanke, in this press conference, saying that -- creating these thresholds. The hope is that Fed policy will become more predictable and transparent. Let's find out (inaudible). We're joined by Kenny Polcari.
Of course, a friend of our show.
Kenny, what do the markets mean? This is the first time we've had this linked to unemployment. What do you think the reaction is?
KEN POLCARI, FINANCIAL ANALYST: I think the reaction is positive, right? Because there's at least clarity. They've drawn this line in the sand. People know now what to look for. There's no more of that kind of - - that anticipation or that anxiety about, you know, when is it going to happen. Now (inaudible) no until they can keep track of it.
So actually I think it's very, very positive. Although the market's not running, running away, there's still a definite bullish tone on it.
It's been a tone that we've seen now for the last couple of days and one that I think we'll continue as we move into the end of the year, because I think that as long as we get some more motion on the fiscal cliff, that, you know, the market should probably (inaudible). (Inaudible) real disappointment, all bets are off. But I don't think that's going to happen.
LAKE: Now (inaudible) shouldn't be surprised at that base (inaudible) Santa Claus tie on.
POLCARI: That's for Ben Bernanke, right, because he throws more stimulus at it. Today was the perfect day.
LAKE: Right. And that Santa Claus rally, you know, we do (inaudible) positive action for stocks as we near the end of the year. But then can we sustain it? I mean, you know, I know that there seem to be a lot of positive (inaudible) already and you know, Europe's a mess. The idea that (inaudible) are actually going to do something. You could certainly make an argument (inaudible).
POLCARI: You can absolutely make an argument to the contrary. And I think like most people, 2013 is probably going to set up to be another kind of difficult year, kind of year where just grinds out, right?
A lot's going to depend on ultimately what happens in this country with the fiscal cliff. Do you just kick the can down the road? Or do they really make substantive resolution, right? If it's just kicking the can down the road, then I think the (inaudible) we struggle. Because until there's more (inaudible) certainty and clarity issue again, right? Until the market gets that, it's going to continue to flounder (sic).
LAKE: Now one of the interesting things, Ken, when we were talking before, so now we know what we've got to watch with the unemployment rate in terms of, you know, when the Fed might shift policy. (Inaudible).
(Inaudible) and by the way, based on the Fed projections, some market people think it's going to take four to five years. But based on the Fed projections today, that unemployment rate could come as early as 2015. Still three years out, but why is that good for stocks?
POLCARI: OK, because here's what you would imagine as we approach 6.5 percent is that number now, right? So as we approach that level of unemployment -- and, actually, it's probably going to happen if we break 7 percent, right? When it just breaks 7 percent, you'll start to get people, the economy will be moving in that direction.
You'll get people moving out of bonds and into equities, right? So that would be bullish for equities. Now this (inaudible) lot of things happen over the next two or three years.
But if that's the case and the economy's moving in the right direction, unemployment is coming down, everything is feeling better, people will take their money out of bonds and move into -- and move into equities, which would make perfect sense.
LAKE: Which is a really important point. (Inaudible).
POLCARI: That's still a year, year and a half out. Right.
LAKE: (Inaudible) a lot of things in factor, but it is something to pay attention to. Kenny Polcari, thank you so much (inaudible). It is really important because the Fed is going to move (inaudible) out there. But the markets anticipate, right? They trade way out to the future.
So now we have an idea and if it's right and the pieces fall into place, you could have a major allocation shift. So something interesting to watch.
FOSTER: (Inaudible) Maggie, thank you very much indeed.
Here in Europe, meanwhile, Deutsche Bank has revealed its co-chief executive J_rgen Fitschen is involved in a tax evasion investigation.
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FOSTER: German prosecutors raided the bank's headquarters in Frankfurt earlier today. They say 25 employees are suspected of serious tax evasion, money laundering and obstruction of justice.
Arrest warrants have been issued for five of them. Deutsche Bank says it is cooperating fully with authorities.
The news follow major fines this week for two of the U.K.'s biggest banks, HSBC and Standard Chartered as well as three arrests in the interest rate rigging or LIBOR scandal. The bad press doesn't seem to be affecting share prices extraordinarily.
Deutsche stock is up more than 16 percent in this year. HSBC has (inaudible) 31 percent. Standard Chartered is out at nearly 6 percent. Barclays' shares have put on more than 40 percent.
(Inaudible) in the United States could be more risky and expensive next year. That's the warning, at least, from the U.S. aerospace industry's association. Find out why after the break.
FOSTER: Going over the fiscal cliff could see the closure of hundreds of airports and destroy aviation jobs. That's according to Washington, coming from the Aerospace Industries Association. Sandra Endo reports from Reagan National Airport for us live right now. She's just outside Washington and presumably, Sandra, this is because of spending cuts and the aviation industry will lose out.
SANDRA ENDO, CNN CORRESPONDENT: Absolutely. And the big unknown at this point, Max, is how these potential cuts will affect travels. Now if you listen to the air traffic controllers' union, which released this study, out this afternoon they say that the industry and the economy will suffer a major blow.
When you take a look at the projected cuts, the Department of Transportation would suffer a nearly $2.2 billion cut. Half of that would come from the FAA and the TSA would suffer a $643 million cut, a lot of that in terms of aviation security.
So what does that all mean? Well, the head of TSA says that of course they do have a plan in case these cuts are in place. But he says that the frontline will remain operational. And a lot of travelers we spoke to say they are keeping a watchful eye on what's happening of Capitol Hill and paying close attention to the negotiations.
(BEGIN VIDEO CLIP)
BARBARA SMITH, TRAVELER: It does concern me because, yes, I do travel, not extensively but enough on my job and personally. So, yes, it does have some concern. I don't want to have to drive everywhere I have to go. But you know, hopefully, again, they'll -- you know, we won't see too much of an increase or an inconvenience. (END VIDEO CLIP)
ENDO: Now industry experts say the worst-case scenario could involve thousands of air traffic controllers and screeners being seeing the pink slip or getting furloughed and some smaller airports being closed as well.
But again, that is a worst-case scenario. So far a lot of people in the industry are taking a wait-and-see approach, Max.
FOSTER: OK, Sandra. And in terms of the airlines, what's their response to this? Because they're going to be hugely affected.
ENDO: Well, obviously they're not happy about these projected cuts. And the impact it could have on the airline industry, they're saying, though, the most heavily taxed and regulated industry as it is, so to have another blow to the economy and to their industry will really be a very negative hit on worldwide economy and travel.
So, certainly, they're paying close attention. But we did contact some travel agencies and some booking lines. And they say that so far, things haven't been impacted. Travelers are booking at a normal rate and a couple of prominent booking agencies have not commented on our request. But certainly they're keeping a watchful eye on everything as well.
But so far, the travel has remained at a steady pace. But things could change if these cuts take place after the first of the year.
FOSTER: Sandra Endo, thank you very much indeed for joining us and explaining that one.
Now these are already sold the shirt off his back. Now he's selling his name. We'll speak to the man behind a rather sponsorship idea. That's next.
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FOSTER (voice-over): Let's get to the answer to today's "Currency Conundrum" for you. We asked you what makes American gold eagle gold coins unique and popular? And the answer is actually B. They are the only bullion coins whose weight, content and purity are guaranteed by the U.S. government.
As we told you earlier, sales of the coins were up 130 percent in November and analysts (inaudible) another boost from today's Fed announcement as investors continue to seek traditional safe havens (inaudible).
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FOSTER: Now there just are nine hours left to bid for Jason Sadler's last name. The U.S. entrepreneur will legally change his name on January the 1st to the name of the company that puts in the highest bid.
This is his website, spymylastname.com. Last time we looked at the top bid was $35,000. Jason Sadler's first venture into extreme marketing was iwearyourshirt. No prizes for guessing what that venture was about. I spoke to him earlier. He told me why this time around he's putting his name on the line.
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JASON SADLER, INTERNET ENTREPRENEUR: I've been in all my marketing world for a couple of years now and I just saw an opportunity. My mom's going through a divorce and I had this last name that I didn't need anymore.
And I thought, you know, how am I going to find a new last name? Well, why not just sell it? I've been the guy who's been wearing shirts for a living. You know, why not be a guy who sold his last name?
FOSTER: You needed the money for something, right?
SADLER: I actually don't need the money for anything. The money that I'm going to make from selling my last name will be kind of reinvested into my company to do other fun markets things. It just continues to kind of, you know, (inaudible) and (inaudible) get 10 percent of the charity.
FOSTER: The risk is you'll get a really stupid last name. Which did you not consider that?
SADLER: I did consider it. I actually did. I had some legal -- some legalese written up. If you read the terms and conditions, nothing political, nothing religious, nothing defaming anybody.
There's been a lot of talk on the Internet about giving me a dumb last name and it's just not going to happen. I mean, I have the last right of refusal, so I want a brand name. I want someone that I can, you know, partner with and have some fun with for the next year.
FOSTER: Do your friends think you're mad?
SADLER: My friends have thought I've been mad for a while. You know, wanting to sell the T-shirt off my back four years ago, they all thought I was crazy for that. So this one, I think, they were, you know, people have kind of, you know, scoffed and said silly things. But they kind of expect it from me now.
FOSTER: Is it selling out in the most extreme way? I know you've been accused of that, haven't you?
SADLER: Yes, absolutely. I don't think it is selling out at all. And the reason I say that is because I don't want this last name anymore. So I don't have any need for it. You know, the name Sadler doesn't mean anything to me anymore. I've had multiple last names and for me, you know, I want to work with a brand.
You know, I live in this kind of online marketing world. And I'm very passionate about it. And so I want a brand that, you know, is going to want to work with me and do that. You know, I think if I said I'll take any casino or I'll take any pornography site, that would be selling out. You know, I'm looking for a brand. And (inaudible) only had brands bid that are in that same vein.
FOSTER: But it's like having a tattoo, isn't it? It might suit you right now, but it might not in 30 years.
SADLER: Well, here's the thing: it's only for one year. So this is a one-year deal. You know, someone buys my last name for 2013 only. You know, I change it everywhere. I buy the new domain, you know, Jason whatever my name is dot com. I represent them for 2013. Then after that, I either sell it again or I just pick at random one out of the phone book.
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FOSTER: Kind of makes sense when he explains it, doesn't it? But this is not the first unusual sponsorship story we've had this year.
This is U.S. Olympian Nick Symmonds. Now underneath that white patch there is a temporary tattoo of the logo and Twitter handle of ad agency Hanson Dodge Creative. The company paid $11,000 for the privilege. And Simons has to cover up the logo for most events due to sports organizations' endorsement rules.
Then there is the hard-up Greek football team, bailed out by a brothel. A team in Greece's amateur A1 league is now sponsored by a madam and the football kits now carry the logos of her three luxury brothels, including Villa Erotica.
Speaking of desperate times, there's been some travel disruption here in the U.K.
Jenny, it does get disrupted quite easily in the cold, doesn't it, British transport?
JENNY HARRISON, CNN METEOROLOGIST: Well, yes, I hear you, Max. But you know, this is a little bit more serious (inaudible). Freezing fog is something that is actually pretty hard to deal with, because of the elements that actually all come together.
We've got some pictures to show you of what it was like earlier this day at Heathrow --
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HARRISON (voice-over): -- because look at this. You can really straightaway get an idea as to why planes were not being able to land and take off. It was causing widespread destruction on the roads as well. And in particular, this is actually freezing fog. I'll explain that to you in just a moment.
Now the good news, though, is that actually conditions are improving. They have been steadily for the last couple of hours. And if you come back to me I can show you what --
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HARRISON: -- the current conditions are being reported. So just a degree below freezing, but visibility is actually gone down to what it was an hour ago. It was 10; now it's down to 8 kilometers. But we've got an easterly wind and it is generally looking a lot clearer.
This was an image -- you can see an area frosty one in London this morning. But freezing fog, now this is something, thankfully, we don't get that often in many parts of the world. We do get fog, of course. But this is when you've got freezing temperatures. But it's when the fog with all the moist air is actually supercooled water droplets, so much, much colder than normal.
And then it's falling on, these tiny, tiny drops, that they just freeze anything they fall on, because the surface is also well below freezing. And this is when you get this sort of feathery ice that is called rime ice. And it makes it impossible to drive your car, is what's I've tried to drive in it over the years and you have to keep coming off and trying to scrape it off. It is very, very dangerous, too.
So that is actually all set to change. Temperatures are still very, very cold across Europe, -10 in Munich. You factor in the winds and in most places it feels even colder. But there's quite a change in store. This is the south of it. This is the wind forecast. There's some strong winds coming in from the southwest, so a change in direction, a milder wind. And it will bring in with it quite a lot of rain.
So the temperatures will go up; you can see here still cold across northern and eastern areas of Europe. Lots of snow in many places where you'd expect to see it, Val-D'Isere, but also across in Germany and, Max, maybe they haven't got time for the pictures, but in Austria up to half a meter of snow in one little town, which is -- here we go, look.
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HARRISON (voice-over): You can imagine half a meter, 35 centimeters is the all-time record. Now they've got half a meter (inaudible) in Austria. So everybody's dealing with it, Max.
FOSTER: Yes, but if that happened in Britain, nothing would work, would it?
HARRISON: What's the matter with you? Listen to you, Mr. Grumpy, Mr. Britain, yes.
HARRISON: But you're quite right. It would bring things to a standstill for quite a while.
FOSTER: Jenny, thank you very much indeed. QUEST MEANS BUSINESS back in a moment.
FOSTER: In tonight's "Tweets from the Top" we're getting some reaction to the Fed's statement on Twitter. Diane Swonk (ph) from Misero (ph) Financial says the Fed's move to economic targets is more or less than clear than it can be and the ECB which is outside its mandate.
In other news Rupert Murdoch has weighed in on the speculation over a possible new owner for the "Financial Times." Michael Bloomberg, the New York mayor and owner of Bloomberg News Service, is rumored to be interested. Murdoch tweeted, "Bloomberg may buy 'FT', but likes 'New York Times', too. Both small change for him and a new challenge after 12 years' great public service."
That tweet was posted before Murdoch accepted the resignation of James Harding (inaudible) "Financial Times" of London.
And a tweet from the very top on Earth, at least; the pope has made his first tweet today. It read, "Dear friends, I am pleased to get in touch with you through Twitter. Thank you for your generous response. I bless all of you from my heart."
That tweet has already been retweeted, if you can believe it, 46,000 times. And that's just the England version.
That's QUEST MEANS BUSINESS. Thank you for watching. I'm Max Foster in London.
FOSTER (voice-over): The headlines this hour: the U.S. Department of Defense says it is monitoring the object that was launched from North Korea earlier today. Pyongyang says it's a communication satellite. The U.S. and its allies believe the launch was a covert ballistic missile test. The U.N. Security Council has issued a statement condemning North Korea's actions.
Syrian state television is reporting several bombs have exploded close to government buildings in Damascus, causing an unknown number of deaths. This damage was reportedly caused by two blasts near the justice ministry. State TV says a car bomb also went off at the interior ministry.
A top aide to Bosnian Serb commander Ratko Mladic has been found guilty of genocide for the Srebrenica massacre. The Yugoslavia War Crimes Tribunal at The Hague convicted former Major General Zdravko Tolimir and sentenced him to life in prison. Eight thousand Muslim men and boys were killed at Srebrenica in 1995.
Reuters reports U.S. software pioneer John McAfee will be deported from Guatemala to the U.S. McAfee is wanted for questioning in Belize over the murder of a neighbor. His lawyers blocked an attempt to send him back there.
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FOSTER: And that is a look at some of the stories we're watching for you on CNN. "AMANPOUR" is next.