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QUEST MEANS BUSINESS
US Banks Under Pressure; New Banking Regulations; Washington Versus Wall Street; Bernanke Looks Back; US Markets Down; Correspondent's Brother Gets Best Actor Nod; Mayer Sacks Chief Operating Officer; Ecclestone Faces Trial; Make, Create, Innovate: Electric Hot Rod
Aired January 16, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
PAULA NEWTON, HOST: And the end of another trading day on Wall Street. Stock markets fall after some disappointing earnings. It's Thursday, the 16th of January.
A capital idea. US banking reform is paying off.
Hired and fired in the space of a year. Yahoo!'s CEO gives her deputy the boot.
And it's an all-"American Hustle" for an Oscar. That and "Gravity" lead those nominations. I'm Paula Newton, and this is QUEST MEANS BUSINESS.
Tonight, US banks under pressure and under ever more closer scrutiny. Two of Wall Street's giants, Goldman Sachs, and CitiGroup see profits fall, and regulators announce yet more measures to curb banks' risky behavior. Still, US Treasury Secretary Jack Lew says the country's banking system is the envy of the world.
(BEGIN VIDEO CLIP)
JACK LEW, US TREASURY SECRETARY: When I look at the challenges ahead, I also look at what we've accomplished. There's much more capital in United States banks and in global banks.
We've put in place a resolution program that is something that the world is now seeing as a model, where we do stress test, we have living wills, we have a single point of entry in the event of a failure. And we're seeing those become things that the world -- other regulators around the world are trying to put in place.
(END VIDEO CLIP)
LEW: Now, the rally on Wall Street skidded to a halt today as the latest batch of banking results failed to impress investors. Goldman Sachs and Citi released their Q4 earnings, two of several banks reporting this week. Now, join me in the vault for a look at the cash haul.
And it does look pretty impressive. But as we said, it is not impressing investors. These banks announced earnings yesterday. JPMorgan had a net income of $5.3 billion. Wells Fargo, $5.6 billion. Bank of America, $3.4 billion.
Now today, Goldman Sachs reported a net income of $2.3 billion. Now, this was above Wall Street estimates. However, it was down significantly from the same period last year when profits came in at nearly $2.9 billion. And something to think about, that profit is still three quarters of what it was in 2008, before the crisis.
Now, CitiGroup, on the other hand, reported $2.7 billion in profit. And that's more than double its performance in Q4 2012, but still short of expectations. Now, both banks struggled with weaker results in their fixed income business, and we'll hear from Morgan Stanley on Friday.
US regulators today proposed yet more rules to stop banks from taking risks. The office of the Controller of the Currency wants banks with more than $50 billion in assets to monitor their behavior ever more closely.
Now, the guidelines call for independent risk management officers who would report to the bank's chief executives. Now, banks would also have to put their so-called risk appetites in writing -- clearly in writing -- and offer detailed outlines of what their plans are.
The Fed this week also said it intends to restrict banks' ability to trade commodities, and that's highly significant. It is at times a very profitable sector for those banks.
Joining me is Austan Goolsbee and he is the former head of President Obama's economic team, and he joins me now from Chicago. Thanks so much for joining us. Those profits kind of left me rather breathless for the banks, but I think that many people --
AUSTAN GOOLSBEE, PROFESSOR OF ECONOMICS, UNIVERSITY OF CHICAGO: Yes, we should all have such problems.
NEWTON: Shouldn't we, though? But still, if you're talking to these banks, they're saying look, really, Congress, the US regulators have us in a vice. We have just been through a spectacular bull market, and yet, we're not in on the game as we used to be, and they would blame people like you, Mr. Goolsbee.
GOOLSBEE: Well, I don't know -- I'm just a professor, now, so they shouldn't blame me. But I will say this: the key part of your sentence was "as we used to be."
We were in this period in which financial institutions and the financial sector, which in the long history of the US economy have always been a facilitator for other industry, got outsized either as a share of the economy or -- it's not really a sustainable model when the financial sector has got half the total profits of all the entire business sector of the United States.
And that's where -- that is the point that we got to by some measures. And I think we're now moving to a more sustainable model where banks, financial institutions are going to do well. They're going to succeed. But they are not going to be roaring at the go-go days kind of levels.
And I'm sure that is disappointing, but that was an unsafe-at-any-speed kind of a thing going, and we should not be wanting to go back to that.
NEWTON: And it does seem like in many ways this is a better profile for banks to have. And regulators have put in lots of firewalls, hopefully now, to make sure that they don't engage in that too-risky behavior.
The question I have for you, though: we didn't see this coming in 2008. What do we have? Are the regulators able to move closer to an early warning system where if there is some risk of any kind of collapse of any bank that we're going to know about and we're not going to be blindsided the way we were during the last financial crisis?
GOOLSBEE: Well, look, you raise a great point. That's the key question of this. Can we put in a better oversight regime. And if there are problems, and of course there are going to be problems, can we identify them ahead of time?
You saw Secretary Lew saying the thing about forming a living well and resolution authority. All of those are just various technical means and legal means that they've tried to put in place that if we got close to a crisis again, hopefully it would identify that ahead of time and give us some tools to kind of resolve it.
I -- my fears are not so much on US financial institutions. I think they've done a very good job of reducing the amount of risk over a little bit of objection. They have moved some of the riskier parts of their businesses out of core banking.
I think the bigger risks are centered in these large financial institutions outside the United States, whether they're in Europe or other places, where we don't know near as much about them. They don't have the same kind of stress tests we have, where they make clear and disclose what their circumstances are. So, I think everybody's still a little jittery about that.
NEWTON: Do you think in terms of bringing some what we call Main Street values to Wall Street and beyond, do you think we're getting a little bit closer to that? To the point where even on a global scale, we do not have to worry about those stress points and those trigger points for a financial crisis?
GOOLSBEE: You know, I hope so, but I don't -- you never know what people's motives are. I don't know -- I saw "The Wolf of Wall Street" --
GOOLSBEE: -- I have no idea -- so it seems like that mentality has been around for many years and certainly wasn't invented in the 2008 crisis.
I think that what we seek, what we ought to seek in a financial system is one that is robust enough that people can go out, they're looking out, they're trying to make an income, they're trying to be profitable financial companies.
That we align the incentives of them taking risks with funding entrepreneurs, funding investment, and that if they're taking risks, they're judicious risks and they're ones we understand that not everything's going to blow up all at the same time and we all have to run for the fire exit.
NEWTON: Mr. Goolsbee, I want to thank you for joining me. It is a lot more to chew on in the year to come, and certainly a very complicated topic that we'll continue to follow here. Thank you very much. And we'll have more on "The Wolf of Wall Street" later in the show.
GOOLSBEE: Thank you for having me.
NEWTON: So stay tuned for that. Now, Ben Bernanke's term at the Federal Reserve ends on January 31st. I have to say, Mr. Goolsbee thinks he's done a terrific job with tapering. And Mr. Bernanke today gave what could be his final speech as chairman and quite a defense. He defended his handling of the financial crisis and said the deal to bail out the banks did not come easily.
(BEGIN VIDEO CLIP)
BEN BERNANKE, CHAIRMAN, US FEDERAL RESERVE: Even with Lehman, even with the stock market tumbling, as you know, it took two votes of the House of Representatives to get the TARP approved.
I remember a senator telling me when we were trying to around and explain to congressmen why we needed a TARP and why it was critical to the stability of the American economy, and he said, "Well, I have to tell you, my calls on this from my constituents are 50-50. It's 50 percent no, and 50 percent hell no."
(END VIDEO CLIP)
NEWTON: "Hell no." We are going to go straight to Zain Asher at the Stock Exchange. He was very colorful in his language today. You could definitely see he was a little bit more relaxed, basically saying that they avoided -- let's say, he said the car analogy, I'll say a train wreck, and he was kind of going, whew!
NEWTON: Now, Zain, I'm not sure how that's being all looked at, perhaps, in the armchair quarterbacks there at the stock market, but they are having a hard time today with what's going on there, aren't they?
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Hi, Paula. Yes, today it really was all about earnings, that's what people were focused on today, and bank earnings this week have generally come in positive, but today, we sort of had a mixed bag.
So, Goldman Sachs, on the one hand, yes, they did beat in terms of expectations. When you compare how they did in the fourth quarter of 2013 to how they did the year before that, they came in slightly lower. Their revenue -- their earnings, I should say, in the fourth quarter of 2013 came in at $8 billion.
CitiGroup -- not a good day for CitiGroup whatsoever. They missed on both profits and sales as well. They blamed it on their fixed income divisions, mortgage originations.
But overall, all eyes right now really on Best Buy. Their shares down by 28 percent, Paula, and it really is based on how they did in the holiday season in terms of sales. Sales actually fell 0.8 percent, not necessarily that much. They didn't fall by that much. But Wall Street had actually been expecting an increase. And so, the disappointment and the shock is what sent Best Buy share plummeting.
NEWTON: Yes, and given the predictions on what would happen with the traditional retailer like Best Buy, that's not at all surprising.
NEWTON: Zain, I am thrilled that we're going to talk about your family's stock rising today.
NEWTON: I want you to explain exactly --
ASHER: Good analogy.
NEWTON: -- the night and the day you've had and why we're talking about this.
ASHER: OK, so, I'm quite shy, but -- well, my brother, his name is Chiwetel Ejiofor, he stars in a movie that's out right now called "12 Years a Slave." And this morning at work, I discovered that he was nominated for an Oscar for Best Actor, so --
NEWTON: Woo hoo!
NEWTON: That's so impressive, Zain! That's amazing!
ASHER: It was --
NEWTON: I mean, really, what a family!
ASHER: It was just a very emotional day. So, it was very difficult coming to work. I got here slightly before 8:00, and the nominations were announced East Coast time at 8:30. So I had to wait there at my desk, shaking.
ASHER: And then, when I was listening to the nominations, it took forever to get to Best Actor, and then his name was the fourth to be read out of five. So, I was panicking with my producer, like, "Oh, my God, he's not going to get it." Well, then he did get it. So, very, very excited. It's just the best day ever, basically.
NEWTON: And we're all excited for you and your family. And I have to say, I'm going to put in a really good word for the Best Actor's sister as well.
NEWTON: You're very -- an impressive family --
ASHER: Thank you so much.
NEWTON: -- and congratulations.
ASHER: Thank you.
NEWTON: I know whatever happens, you'll enjoy the night. Thanks, Zain.
ASHER: Thank you.
NEWTON: Appreciate it. Now, we need to sober up here on QUEST MEANS BUSINESS or Quest will kill me.
Yahoo! shares have fallen amid signs that all is not well in the company's boardroom. The share price slid more than 2 percent in Thursday's trade, and that came after the firm's CEO, Marissa Mayer, unexpectedly sacked her chief operating officer after just over a year on the job.
Now, Henrique de Castro was Mayer's right-hand man and her first major hire at the company. Mayer and de Castro reportedly clashed during his time at Yahoo! as the company struggles to lure advertisers away from Google and Facebook. And what a task that is.
But it's not all bad news for de Castro, that is, as he leaves the company. Samuel Burke is here to break down the numbers. Samuel, these numbers are stunning.
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Well, for --
NEWTON: Like, it was not don't let the door hit you on the way out.
NEWTON: Do not let the sack of money hit you on the way out.
BURKE: But before we get to those numbers -- and there are a lot of numbers to get to, a lot of them -- when he first came to the company, when Mayer brought him over from Google, it was tweeted with glee, she was so happy.
But you know, I was just at the Consumer Electronics Show in Las Vegas a few weeks ago. He wasn't there, so the rumors were already swirling, what was going on between them? And kind of rumors of bad blood.
Today -- get a load of this statement, what Marissa Mayer said. Usually, people say "Oh, he's looking at something new." But when she wrote to her company, she said, "I made the difficult decision that our COO, Henrique de Castro, should leave the company." So no "he's going to spend time with his family." No "he has a better offer."
NEWTON: No trying to cover this up.
BURKE: No trying to cover it up.
BURKE: Things were not good. So, let me tell you the basics of what we know, what he's working away with just after a year of working at the company. We know he had a $600,000 base salary plus bonus.
We also know that he had a stock grant one time of about $18 million, plus he had a $1 million make hole, money that he got because he would have been getting different money at Google. Plus, he got about $20 million in options at Yahoo! because those were the $20 million he would have had at Google. So, that all adds up to about $40 million for just over one year of work.
But wait! I spoke to a firm that analyzes executive pay, and this company told me that they estimate it's about $109 million that he's walking away with. This company is called Equilar. And they said because he had about 25 percent of the shares offered to him in his contract when he first started, because he was probably fired without cause today, another 25 percent --
BURKE: And so, he's walking away with about 50 percent of his stock options.
BURKE: When he started the stock with about $19, yesterday was about $41, so they estimate $109 million in total.
NEWTON: Now, Samuel, before we talk about yesterday -- we were going to get away from yesterday's news. Going forward, very quickly, the stock is up. But Yahoo! is in big trouble, and that was part of this firing, wasn't it?
BURKE: Yes, everyone always talks about the stock is doing so well, but the reality is that revenue is down. There, you have the stock chart when Marissa Mayer took over, it was at about $15. It's up to about $40 now.
NEWTON: It's had a stellar run.
BURKE: Yes, you look at it there and you think all is well within the company. But Henrique de Castro was brought because they wanted digital advertising. He had a lot of success on YouTube, which is owned by Google. A lot of success in the display ads.
But he wasn't bringing home the bacon in terms of digital advertising there, and revenue quarter-on-quarter is flat at that company, or down some quarters. So, that's obviously why she got rid of him, because he wasn't bringing in the money.
NEWTON: Certainly a closely-watched company and CEO, and as always, we'll continue to follow it. Thanks, Samuel. Appreciate you being here.
Now, the man who's been the engine of Formula 1 racing will soon be the defendant in a criminal case. We'll bring you the details on the allegations that could put the brakes on Bernie Ecclestone.
NEWTON: Bernie Ecclestone has stepped down as director of Formula 1's holding company after judges in Germany ruled he'll stand trial on bribery charges. Now, the 83-year-old is accused of making a corrupt payment during the sale of a controlling stake in Formula 1 in 2006. He denies the charges, and the case is set to go to trial in April.
Despite his departure from the board, Ecclestone will continue to run Formula 1 on a day-to-day basis. Now, Ecclestone comes from a humble background to reach the very top of Formula 1. Many say he is Formula 1. He's quite an icon, and he's now fighting to stay there.
He competed in his first serious car race in 1949. That was in a 500cc Formula 3 car at Brands Hatch racetrack. In 1957, Ecclestone bought the struggling Connaught F1 team and attempted, now, unsuccessfully to qualify himself for the British Grand Prix.
Now, more than two decades later, he founded the Formula 1 Constructor's Association. Ecclestone starts to unite the teams and secure global TV rights.
And in 2000, Ecclestone struck a deal to exploit the commercial rights of F1 for the 100 years from -- yes, 100 years, I read that right -- from 2013. The deal is worth $360 million. What a career.
Christian Sylt is the co-author of "Formula Money." It's an annual report examining all aspects of Formula 1's finance, and he joins us now, live from CNN London. Christian, it's very difficult to even talk about F1 without talking about Bernie Ecclestone. I want you to just kind of underscore for us what this means today when he actually has to step down even from the part that he did step down from.
CHRISTIAN SYLT, CO-AUTHOR, "FORMULA MONEY": Sure. I think it's a -- it's a tremendously significant decision, because Ecclestone, as you say, has -- he's so important, really, within the sport. He is the glue that holds it together in many respects.
And I think the best way of explaining that is that he essentially, for many companies, brands, individuals within the sport, acts as a personal guarantor, not necessarily in a financial sense, but as he often says, the many of his deals are done on a handshake.
He negotiates principal to principal with the chief executives, the chairmen, the presidents of the biggest brands in the world, and they -- the biggest countries in the world for races.
Now, those individuals are doing deals with him because they trust that he will be running Formula 1 in such a way that will basically maximize the impact of the sport, and thereby give them a return on investment.
Now, if there's any question about his position, whether that is -- or whether his wings have been clipped, so to speak, there's a chance that that could make people, perhaps, reluctant to -- or at least maybe not so much reluctant to deal with him, but questioning whether he's the right person to deal with.
As things stand, he's saying he'll run the company on a day-to-day basis, but if you look at the small print, essentially, of the agreement that's been hammered out today, it's all about significant deals being deferred to the board, which he now doesn't sit on.
NEWTON: I have to ask you, though, does this taint Formula 1 and possibly jeopardize those huge profits going forward, even if we leave the personal drama of his life alone and put that aside for a moment?
SYLT: Sure. I think it does to a certain extent. It raises questions, really, about the commercial structure of Formula 1. That's without a shadow of a doubt what it does. And it really -- it leaves that situation in a -- little bit hanging in the air.
You do have this situation where the chief executive of the company is not on the board and is going to be monitored by the board and is subject to certain limitations in his power. That's quite abnormal for a large corporation or a large institution.
Personally, I don't necessarily think it's in the best interest of Formula 1 for this agreement to have been done. I think it would have been much more logical to have the chief executive in control of the business.
So, I'm not sure that it -- not sure it puts the sporting in good stead just simply from the perspective of a decision-making ability, which obviously any big corporation, let alone a sport, needs to be able to have at its disposal.
NEWTON: Yes, absolutely. And I know a lot of people going forward will be looking at that and seeing how F1 basically moves on from this whole incident throughout the next year. And we know you'll be following it. Thanks so much for being with us today. Appreciate it.
SYLT: No problem.
NEWTON: Next, we stick with fast cars. This one can hit -- get this -- 189 miles per hour. Now, this is the impressive part -- it doesn't need any gas. We'll show the secrets of this eco-friendly speed demon when we come back.
NEWTON: Now, electric cars are racing into the hearts of Americans. US sales nearly doubled in 2013, and while you might associate electric cars with being kind to the environment and cheap running costs, you might not expect much in terms of speed.
Now, this car could change all that. It was dreamed up by a Croatian auto designer who's giving the electric car movement an eco-friendly hot rod. Nick Glass went to meet him.
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: If you happen to be among the select few who owns an electric car, it will almost certainly be American or Japanese. But here, rather surprisingly in Croatia, a newcomer has swept in to join the electric car club.
MATE RIMAC, CONCEPT ONE INVENTOR: I invented the world's most-powerful and fast electric car and a million bits and pieces that are needed to make it work.
GLASS (voice-over): Living fast, serially inventing, Mate Rimac has packed a lot into his 25 years.
RIMAC: My first invention was when I was in high school, and I had this idea of a glove that will replace a mouse and keyboard. I made my first patent, and I even made some money.
GLASS: Rimac used this money to buy a car and pursue his passion: racing.
RIMAC: I bought myself an old BMW and I raced it on racetracks with a gas engine. And the gas engine blew up, and I decided to make an electric race car.
GLASS: Inspired by his hero, Croatian-born inventor Nikola Tesla, he set about bringing his car back to life, but also improving it.
RIMAC: He invented the electric motor to use in so many applications today, and I knew simply by theory that this motor is so much better to drive a car, even a sports car.
GLASS: While working on his DIY car, Rimac received a surprise visit from an interested customer.
RIMAC: The guy approached me that was working for the royal family of Abu Dhabi. A few days later, he called me and asked, can you make two cars? We realized at that moment that it could be a serious business, not just fooling around in a garage.
GLASS: Selling all his possessions to finance the project, Rimac set about designing the car. It works like any other electric vehicle, with batteries that drive a motor. But the Concept One is designed for power and performance. The result: the fastest electric car on the planet.
RIMAC: Here are its main components, which are all designed and produced by us. So, these are the real motors, the left one and the right one, the batteries, and the front motors. This motor has a higher energy density, so more power per kilogram than a Formula 1 engine, and that's --
GLASS (on camera): Seriously?
RIMAC: Yes. In their old car.
GLASS (voice-over): The Concept One was unveiled to the world in 2011.
RIMAC: The Frankfurt Car Show back then was the biggest in that year in the world. And there was a new company from Croatia, a country which never had any car industry. Everyone was pretty amazed, and I think they would be a lot more amazed if they knew how little resources we had available.
GLASS: This is where the Concept One is made, at the company's show room near the Croatian capital, Zagreb. From the frame to the electronics, every part is designed, manufactured, and fitted by hand here. At $1 million, the car is expensive. They've built four so far and are working on a fifth.
RIMAC: We are not just making our own cars. We are designing bits of cars or even whole cars for other companies. For example, a large company approached us, and they said you have 60 days to design and make a car, which is basically impossible.
I accepted the challenge. They said if you are one day too late, we won't pay you. I said, OK. We worked day and night. We designed the car and produced it and delivered it on time.
GLASS: To Rimac, it started with his twin passions, cars and technology. And at 25, he's now rather more than just a boy and his toy.
NEWTON: Oh, the future looks bright if we can all get into electric cars.
Now, still to come on QUEST MEANS BUSINESS, some movie producers wait their whole career for just one Oscar nomination, but Megan Ellison is enjoying that for a second time, and that's at the tender age of 27.
NEWTON: Welcome back, I'm Paula Newton and here's a check on the hour's top headlines. Britain's National Crime Agency announced it has broken up the Internet child sex abuse ring with the arrest of at least 29 suspects, most of them in the U.K. The ring charged people to watch live streaming video of children being sexually abused in the Philippines. Fifteen children involved between the ages of six and 15 years old have now been rescued in the Philippines.
In Iraq, at least 25 people were killed on Thursday following the deadliest day of violence this year. This includes 14 men who were tortured and killed, their bodies found dumped just north of Baghdad. Now this is the same violence has fueled fears of an all-out sectarian war.
Vatican officials have appeared before a U.N. committee in Geneva to respond to questions over the sexual abuse of children by clergy. It's the first time ever the Vatican has discussed the issue so publicly. The officials were grilled over the Church's protection of allegedly abusive priests.
A trial of four men charged in the 2005 assassination of Lebanon's former prime minister Rafiq Hariri began in The Hague today. The four suspects allegedly tied to Hezbollah are being tried in absentia. Weary supporters say he was killed because of his opposition to Syria's military presence in Lebanon. Syria and Hezbollah deny any involvement in Hariri's killing.
As you may have heard already, the Oscar nominations are out. And let's take a look at the three films that got the most nods from the Academy Awards. Steve McQueen's "Twelve Years a Slave," a film about a man forced into slavery in the 19th century is up for nine Oscars. "Gravity," a space thriller starring Sandra Bullock and George Clooney received ten nominations and David O'Russell's "American Hustle," a film about con artists in the 1970s, got ten Academy nominations.
Now, the success of "American Hustle" marks a major victory for Hollywood's youngest kingpin producer -- 27-year-old Megan Ellison. With the backing of her father Oracle billionaire Larry Ellison, Megan founded Annapurna Pictures. Now the production company aims to make films others may deem as risky, although I have to tell you, they don't seem so risky in the way they're paying off. Ellison's films already have a string of awards behind them, mostly -- most recently, American Hustle took best picture at this week's Golden Globes.
Now, American Hustle has been a big hit at the box office as well, more than recouping the $40 million it cost to make it. So far, it's raked in $119 million in sales. Now, last year, Zero Dark Thirty, another film Ellison was behind, won five Oscars. It grossed $133 million worldwide. I want to bring in Alexandra Cheney at CNN Los Angeles. Alexandra is the senior film reporter for Variety.
I mean, when you look at this career, you have to think to yourself -- many people say the obvious. This is a woman with a lot of money at her disposal, and she gets to do what many of us would like to do, and that's fund great projects.
ALEXANDRA CHENEY, SENIOR FILM REPORTER, "VARIETY": That's absolutely true. She has a lot of money and it's something where she is open and willing to take on you know (inaudible) you know, people like David O. Russell to really champion their films, and you know as studios are looking to do more you know tent poles or high action films based on comic books, she's really the one to go to for these mid-range. Shockingly enough, they're indie films and you know having great success with them.
NEWTON: Having great success with them, in terms of the money that she has at her disposal, but you have to actually have to know what to do with that money. Is there -- is someone honing in on the reason that she seems to be able to take these projects and know -- yes -- that's a winner. That's something audiences want to see and want to see on the big screen.
CHENEY: Well without a shadow of a doubt, I mean, she has people you know advising her, but at the same time, when you look at someone like the screenwriters behind "Dark Thirty" -- you know -- Kathryn Bigelow, Mark Boal -- you look at someone like David O. Russell and his writing partner. I mean, these are established directors that she's speaking to, and she's just funding projects right now that are most often original screen plays or adaptations that the studios just deem as too risky, so she's willing to put up, you know, the $40 million that takes, let's say, for "American Hustle" to just get the film made. And it's also worth noting that she is very into letting the directors be directors. You know, she doesn't ask for a lot of notes, she's not very heavy handed. She wants them to do what they do best, and these are professionals. I mean, they have a track record that you know proves that they are -- you know -- a big deal, well established and worth funding.
NEWTON: In terms of her career, she's incredibly young -- 27 years old. Do you think that this is also, you know, the path that Hollywood is taking. I know Steve McQueen -- maybe he wouldn't count himself so young anymore, but he certainly started out in this industry fairly young and started out young as an artist. And he's the director of Twelve Years a Slave. So, do you think that, going forward, she really is going to be the 'it' girl in Hollywood. If you want a major film done, go to Megan, she will fund it and it will be done properly.
CHENEY: I mean, I don't think it's worth saying, you know, without a doubt she's going to be the person, but I think that she's definitely someone who's a major player. She's a major financier. She's someone who is definitely on the scene with you know these 17 nominations which you know she just tweeted to the world about six hours ago just the number 17 and that was it. That in itself is a statement. But I do think that there are other production companies looking to do the same thing, I think because of her age. You know, she's really stood out in you know what isn't a very crowded marketplace. You know, people are looking for producers for these films -- these, you know, 50 -- 40, 50 $60 million films.
NEWTON: Alexandra, thanks for being here to discuss someone who I'm sure we're going to be hearing a lot more about. Another Hollywood dynasty in the making there for sure. Thanks Alexandra, appreciate it.
Now, Ellison's films will be battling it out for Oscars with another hotly- tipped film -- "The Wolf of Wall Street." The film's relentless depiction of Wall Street excess in the 90s has divided critics and audiences alike. And as CNN's Maggie Lake discovered, the adult Disneyland the film depicts doesn't ring true with many traders today.
LEONARDO DICAPRIO, ACTOR: This is the greatest company in the world!
MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: It has sex, drugs, rock and roll and money -- lots and lots of money. "The Wolf of Wall Street" takes place in the go-go 90s when dollars flowed like champagne, and life was a lot less (inaudible).
Despite Leonardo DiCaprio's big win at the Golden Globes, critics say this three-hour exercise in excess glamorizes the worst of Wall Street. And long-time traders insist it's highly exaggerated.
Male: Over the top -- totally over the top.
TED WEISBERG, SEAPORT SECURITIES: It's a world that we, certainly I, have never lived in, and it's a world that most of my peers have never lived in.
LAKE: The film is loosely based on the story of stockbroker Jordan Belfort who spent nearly two years in prison for swindling investors out of some $200 million. In a 2008 interview, Belfort, who has yet to repay many of his victims, said he was caught up in the get-rich-quick culture of the times.
JORDAN BELFORT, FORMER STOCKBROKER: The thousand-dollar suits and the gold watches and the, you know, and the drinking at lunch and the cocaine at the end of the day -- and all of this was just like -- it was almost like adult Disneyland for dysfunctional people.
DICAPRIO: Technically I didn't bribe anybody.
LAKE: The wolves like Belfort are howling no longer. There's no doubt about it, millions of dollars still flow through Wall Street, but the era of conspicuous consumption is over. Here at the marina where they filmed scenes from "The Wolf of Wall Street." It's rare that all these yacht (inaudible) are filled, and these days bankers are much more likely to be pinching their pennies than throwing their dollars away.
Male: Nobody knows.
LAKE: Today, instead of free martini lunches, traders belly up to the bar at the trading floor's very own Starbucks. This is the drink of choice now?
BEN WILLIS, ALBERT FRIED & CO.: Yes. I mean, I remember down here when the straws that were in people's pockets were loaded with things other than coffee.
ALAN VALDES, DME SECURITIES LLC: There's still drugs around, but now the drugs are vitamins and probably Viagra. There's still a lot of Coke around, but it's either diet free or caffeine free.
LAKE: Make no mistake, cash is still king on Wall Street, and these are still hard-charging, no-nonsense traders. But lean times have taught many of them that it's not just about making a quick buck.
Male: They were bad times, they were good times, but on balance they were great times. Not great from a monetary point of view, but great because what a wonderful community to have been exposed to and to work in.
LAKE: They may not be the wolves of Wall Street, some of today's traders are just happy to be bulls and bears. Maggie Lake, CNN New York.
NEWTON: All right, still to come on "Quest Means Business." If you're one of the big three ratings agencies, watch out -- there's a new kid on the block. Up next, we'll tell you about a brand new ratings agency that's just launched.
NEWTON: Now a new ratings agency hopes to challenge the dominance of the big three. The industry is currently led by Standard & Poors, Fitch and Moody's, U.S. companies widely criticized for their role in the run up to the financial crisis. Now, a group of smaller credit ratings agencies from Portugal, Brazil, India, Malaysia and South Africa have joined together to launch Arc Ratings. The new ratings agency aims to provide mid-sized companies access to markets outside their home countries. And as well as using debt grades, Arc is introducing innovative new ratings methods. Ratings for financial stability will range from low risk to imminent or actual default, and the company will use a second rating focusing on systematic risk such as political uncertainty. Now, Uwe Bott, Arc Ratings' head of ratings joins us now live from London.
I appreciate you being in here to tell us about his. You know, this has got to be nerve-wracking to go up against those big three competitors, and I know if I ask you, you're going to say 'Of course we've got -- you know - - we can do this, and we've got our mark to make,' but I want to hear from you what tells you now that this is actually a venture that is going to work? What signs are you seeing?
UWE BOTT, HEAD OF RATINGS, ARC RATINGS: Well, I think first of all it's important that we are trying to be game-changers, change agents. It's, you know, primarily our task -- that is ratings agencies' task and Arc's task therefore -- to provide a better environment and empower investors. Through our methodologies -- our innovative methodologies -- through our multi-polar approach, which we have chosen by bringing together these five agencies -- four from emerging markets and one from Portugal which is -- has been -- converted legally into Arc itself. And I think that that in combination with -- and also our focus on mid-sized companies which has been an underserved segment of the market -- will lead us to a B/A change agent and make things different.
NEWTON: Now, in terms of you saying that you're going to service a segment of the market in mid-range companies, that's fine. In terms of the jargon itself, though, how are we to know that it is an innovative way that gives more insight into what's going on -- as opposed to it just being different labels for really the same level of description and risk?
BOTT: Oh, I absolutely agree. I think you've made a very good point there. But, you had mentioned some of these innovations, and the first one is the systemic risk rating which is really an over-arching rating, and it looks at the risk that investors face across the rating universe with regard to corporate's -- a financial institution's sovereignce or other instruments. So, that is very important for them to look at their own portfolio against those risks that we identify and where we are going to give a high-medium or low risk to those events that might affect investors and their particular investments. And I think that is very, very different from what the agencies do. And the same analysis will factor into our own individual assessments and do our own individual ratings that we will assign to all of these various asset classes. That is a different approach.
NEWTON: OK, we'll see if it -
BOTT: In addition, we will have a different scale. In addition, we will have a different scale. We will, you know, use the internationally- recognized ratings scale, but instead of having a dichotomy between investment grade and non-investment grade, we will have four different buckets to help investors to really understand whether they are investing in low, moderate, high or imminent default issues.
NEWTON: OK. And it is the kind of insight that was sorely lacking during the financial crisis. So we'll wait to see if -
NEWTON: -- certainly Arc makes a difference. I appreciate your time today in London. Thank you so much.
BOTT: Thank you very much.
NEWTON: And now we go to Jenny Harrison who's standing by to give us a look at the International Weather Center. Jenny, you know, when you and I talk, for some reason you've always got something dramatic to tell me about the weather. I really hope --
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Right.
NEWTON: -- it's a bit calmer because it has been a bit whacky.
HARRISON: Yes, well, probably more drama then, Paula. It must be your influence you see -- that's must be what it is. And although I've got some good news mixed in amongst all the drama, because this of course has become ever-too-familiar a sight at the Australian Open down there in Melbourne, Australia. So hopefully this is going to be one of the last days we'll see something like this on Friday anyway, because still another very, very warm day is ahead for all of those tennis players or spectators as well. But look at what's happened this last week at the temperatures in Melbourne -- the averages here -- 26 degrees Celsius. And as you can see, it begun on Monday at 35 and then it spiked up to the mid-40s and certainly on Thursday it reached 44. The forecast for Friday is 42, and then we have this dramatic change. And on Saturday, it is going to be 21 degrees Celsius, if that. We've got quite a bit of cloud around, but of course there's a big change because of a system which is on its way through.
Now, it's what, coming up to 9 o'clock in the morning in Melbourne. Already it is 34 degrees Celsius. The temperature will continue to rise. But as I say, late Friday into Saturday, this front is going to swing through. It'll bring in so much cooler air and onshore flow as well as a little bit of humidity in there, but generally feeling so much better. But it will really dramatically drop the temperature. And this is what I mean -- so Friday 42, Saturday 20 and maybe even on Sunday a little bit cooler than that. So, I have to say probably it'll feel a little bit cold for those clothes after the week they've been used to or trying to get used to.
Now, in terms of weather conditions in Europe, again, it's really about the temperature -- although perhaps not quite what you'd expect We've seen some cold air finally begin to push in across into more eastern areas of Europe. Also across the northwest and as well in the last couple of days, some snow finally returning to Moscow. So, looking like this as you can see. But, again, the temperature is not really what we should be seeing this time of year. Now, Moscow for the next few days it will be below average -- -13 Saturday, -15 on Sunday, the average is -6. But look at this -- you'll notice Belgrade -- temperatures in the high teens -- much above the average. In fact, about ten degrees above because of the position of the Jetstream. That is what is happening.
What about Sochi in Russia? Now, you know only too well that we're going to start to really talk about this in the next few weeks in the lead up to the Olympics. Well, it has been mild where the average has been ten degrees. But look at this -- an interesting little fact for you on Thursday -- Tampa in Florida was actually lower at 13 although it should have been 21 degrees. More rain coming into the west, breezy conditions at the same time, the snow continuing to accumulate along the line of the Alps. Still more snow pushing through eastern Europe as well as you can see there.
And then when it comes to skiing, if you're heading off to the slope this weekend, there's a couple of locations for you. (Inaudible) Lillehammer in Norway -- we haven't had a great deal of snow -- very, very slow start to the year so far. But more snow is actually in the forecast -- ten centimeters on the lower depths and much better skiing if you're higher up the mountain. And then in Kitzbuhel in Austria, some great snow -- 35 centimeters down there and Saturday promises to be a very nice day, plenty of snow and some very nice sunshine with which to enjoy it. Paula.
NEWTON: Jenny, as you said, they'll be looking for that snow in Sochi. We should start praying now that they get the snow they need. Appreciate that update, Jenny. Thanks. Now, after the break, Jim Boulden meets a man of exceptional taste for a tour of the British capital. The chef Gordon Ramsay gives us his guide to London. That's up next.
NEWTON: Now the number of foreign tourists traveling to London surged to record highs last year, not surprising really when you consider that pound has been at better rates in the last few weeks. Now the British capital wants to encourage, yes, even more visitors to flock to the city. Officials are enlisting the help of celebrities, including Michelin-star Chef Gordon Ramsay who's sometimes not known as the most diplomatic sort. But Jim Boulden met up with Ramsay as he prepares to launch -- get this -- his twelfth restaurant in London.
GORDON RAMSAY, LONDON CHEF: There's something magical about London, and every time I fly home, it gives me that sense of excitement, -
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes.
RAMSAY: -- proudness. It never sleeps, it's never been as exciting as it is currently. Everyone thought it was going to be a bit of a lull -- host the Olympics -
RAMSAY: -- the Paralympics. But it is vibrant more than ever before, and from a chef's point of view -- for me personally, it's one of the best cities anywhere in the world to come and eat now.
BOULDEN: But you go to L.A., I've seen you in New York, I've seen you in Boston, Baltimore, I mean, you do all the American cities as well. But you still think London's the best?
RAMSAY: Do you know, not only do I think it's still the best, we're still raising the bar. Whether it's an amazing bars fight, you know, to see those bikes now in New York -- I know we gave New York that idea.
BOULDEN: Is London still fighting the old fight which is that food isn't any good here, and -- do people still say that to you even if they haven't come and tasted it?
RAMSAY: Do you know what? London's more maverick now with its foods.
RAMSAY: Whether you're at Brixton Market, Spitalfields Market or whether you're you know having a sumptuous afternoon tea at the Wolseley. Have you any idea how many French students are now getting (taught) cook English food. That makes me feel good, because 20 years ago when I studying in France and getting my butt kicked, it was all about the French cuisine. So we're modern European, and I think the level of success of the restaurants reflect that.
BOULDEN: And here we're sitting in Battersea, and a new restaurant you're going to open in a bit.
BOULDEN: You're still opening restaurants, you're still looking for new places in London?
RAMSAY: Do you know what? I mean, I use my destination travel as that level of excitement, whether it's Paris, New York, Baltimore, Washington, Boston recently -- the new stunning Italian restaurant. I come back and put those little bits of magic into London. So, this is my 12th, (inaudible) I've called London House. That kicks up in a month's time. All the staff are running around frantically --
RAMSAY: -- getting this place up to speed. But here we are. Not in Mayfair, not Chelsea -- I'm south of the river.
BOULDEN: So south London's become cool in the last couple of years as well and you're tapping into that?
RAMSAY: Yes, I mean, I live literally five minutes from here at Wandsworth. I started working across Wandsworth Common when I came out of college. So, I bought my first flat here.
RAMSAY: It was called (Inaudible) -- now it's actually called Stockwell.
RAMSAY: We made it more glamorous 20 years ago, especially when we were trying to take the kill -- come back to my pad -- (Inaudible).
BOULDEN: A questionable part of London.
RAMSAY: Oh, yes, very much so. And then of course you've got all the Chelsea fans walking across the bridge to the stadium, Fulham, down the road.
BOULDEN: But restaurants are still very fickle, aren't they? I mean, not all of them make money, not all of them stay open.
RAMSAY: Good question. I mean, there's competition, and (inaudible). For me, the most important thing is understanding what the customer needs. If there's one thing that London has, it is multicultural ethnic boroughs.
RAMSAY: Of (Inaudible) -- Borough Market for instance, you know the (Chatsworth) (Inaudible) there, understanding why that (inaudible) is the best. The best ingredients, and little (inaudible). Sixty Michelin-star restaurants now in London.
BOULDEN: In London -- wow.
RAMSAY: A few of those mine.
RAMSAY: Plus he thing now, the Spanish, the Italians, the Americans, the French -- all coming in to this melting pot of cuisine in London to learn and they go back to their own country. The reverse of what I did 20 years ago.
I remember we were returning from a long trip, I mean the first thing we do is go out for great curry. (Inaudible) Lane, eating, the most amazing curry.
BOULDEN: Why did you want to do this campaign -- and I understand you are all doing this on your own back (inaudible)?
RAMSAY: You know what, I mean I love working in the States and I have a house in America. But for me, I'm always intrigued with the fascination of the (inaudible) Britannia. What does London really stand for? And we never stand still. The place is constantly moving.
BOULDEN: And of course the best team in football's in London which is Arsenal.
RAMSAY: No, that's half right. The best team in London is Chelsea.
BOULDEN: Oh, I see.
RAMSAY: But they're a little bit Russian.
NEWTON: And there you have Jim Boulden and Gordon Ramsay. Gordon Ramsay on his best behavior. Jim Bounden, I did not like that reference to Arsenal. I'll let it go this time.
French politicians are reaching for the perfume, a protester has let his opinion be known and it stinks. The French government has sold a 1 percent stake in Airbus.
NEWTON: The French government has sold a 1 percent stake in Airbus, the $614 million raised will be used to fund investments and cut public debt. Now, if you were to take that money and spend it on the signature A380 jumbo jet, you would be able to buy one and a half planes. They sell for roughly $400 million. France now holds 11 percent of Airbus, the same as Germany. Unfortunately, though, for the French government, some of the money from the Airbus stock sale might have to go to a big clean-up bill. A truck carrying manure pulled up outside France's national assembly and dumped its load -- that's to coin a term. The truck was marked with the slogan "Out with Hollande and the whole political class." The truck driver has been detained and is expected to face charges.
Now European markets mostly finished lower. Retail sales fell following disappointing sales numbers and the main indices still remain near 5 and 1/2 year highs. Now, that's "Quest Means Business" for today. I'm Paula Newton in New York. Thanks for watching. Yes, Quest will be back here to tomorrow.