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QUEST MEANS BUSINESS
Yellen to Stay the Course; US Fed Monetary Policy; US House to Vote on Debt Ceiling; US Stock Market Surge; UK Flood Crisis; Atlanta's Winter Weather; Money Security; Chip and PIN Technology
Aired February 11, 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)
RICHARD QUEST, HOST: Ah, now. More records than you can shake a stick at tonight. That's Paul Rodgers who is ringing the closing bell. I'll tell you why in just a moment. The markets up about 100 -- oh! -- and 90 points, which means it's the largest points gain so far this year for Tuesday, it's February the 11th.
Tonight, meet the new boss, same as the old boss, in terms of policy. It's Janet Yellen, who's staying the course on Fed.
Clean and Simple. Your US Congress is about to vote on raising America's debt ceiling.
And plugging the gap. David Cameron says money is no object in fighting Britain's floods.
I'm Richard Quest, and I mean business.
Good evening. The market closed up more than 190 points, which is the largest points gain of the year. And why am I telling you that and why do you need to know what the market did? Because it was largely related to that which happened on Capitol Hill. And you can see the market still ticking up just in those final sessions, still under 16,000.
The reason? New Fed chief but same policy. Chairman Janet Yellen says she'll keep her hand steady on the tiller of the US Federal Reserve. She was appearing before US lawmakers when the chairwoman pledged continuity at the central bank, saying the Fed will keep reducing its stimulus as the economy improves.
(BEGIN VIDEO CLIP)
JANET YELLEN, CHAIRWOMAN, US FEDERAL RESERVE: Let me emphasize that I expect a great deal of continuity in the FOMC's approach to monetary policy. I served on the committee as we formulated our current policy strategy, and I strongly support that strategy.
(END VIDEO CLIP)
QUEST: Now, Yellen says there is much work ahead of her, a lot of work. The chairwoman told the House Financial Services Committee there is "more to do," in her words, to restore economic health. And she said the recent volatility in global markets does not present a substantial risk to the US economy. Volatility not a huge risk.
She said too many Americans remain out of work, and she stressed that the unemployment rate does not tell the full story of the country's jobless, particularly focusing on the number of longterm unemployed and the people dropping out of the workforce. The chairwoman cited inequality as a massive concern.
(BEGIN VIDEO CLIP)
YELLEN: Well, I am very concerned, I share your concern about rising inequality. I think it's one of the most important issues and one of the most disturbing trends facing the nation at the present time.
(END VIDEO CLIP)
QUEST: So, that's the new chair of the Fed, Janet Yellen. Austan Goolsbee is professor of economics at the University of Chicago Booth School of Business and served as a former chairman of the Council of Economic Advisors. Austan, good -- as always, very good to see you, and thank you for --
AUSTAN GOOLSBEE, PROFESSOR OF ECONOMICS, UNIVERSITY OF CHICAGO BOOTH SCHOOL OF BUSINESS: Yes, thanks for having me back, Richard.
QUEST: Now, we -- look. Tonight's big story would have been Chairwoman Yellen decides to go in a different direction. But it's not that. That's not the story. It's more of the same and similar, and that's just what the markets wanted, isn't it? Which is why we're seeing it up 152 points.
GOOLSBEE: Yes. Yes. Look, you said it exactly right. Now, I should preface by saying I'm very old friends with Janet Yellen and I'm a huge fan of hers. I think she's going to do a great job. It's not a surprise to the world that she's got a lot of continuity with the -- let's call it the previous regime because, as she said, she was there for the whole time.
GOOLSBEE: She was at the San Francisco Fed, then she was the vice chair of the Fed. So, I don't think this is really a surprise. The only surprise is that the market found this surprisingly positive, because I think this was what most people would have expected.
QUEST: Right, but -- well, but you see, this new -- all right, I'm not going to try and parse the words of that which she said. This new emphasis on unemployment, under-employment, this is what the market is focusing on. Is -- do you see any form of clear water or space between the way she will view the mandate on unemployment versus her predecessor, Chairman Bernanke?
GOOLSBEE: In the short run, not. You know, maybe over the longer run, she might have a more inherent concern about the labor market issues, part of the Fed's mandate Ben Bernanke did, because he was more straight-up from the financial side.
But I think very little gap. And I think in the short run, both Bernanke and Janet Yellen and, really, the whole Fed, is quite concerned about this issue of unemployment and that they specified 6.5 percent as being the rate, once we got below 6.5 percent, they would consider raising rates.
But so much has changed in the labor market with so many people dropping out of the labor force and not counting as unemployed that you've seen them walking that back and trying to find ways to clarify we're not going to start tightening just because the unemployment rate is down.
QUEST: Right. But do you think that there is any real risk that they decide to postpone a month or two, a meeting or two, of the tapering? Because having set themselves on this course, this -- I hesitate to use the word "predetermined" -- but they have set out a course of action on tapering. If they were to miss a meeting and decide not to taper, or to increase the tapering, that would be big news.
GOOLSBEE: I think that would be big news. And as a result, I don't think they're going to do it. But I think your intuition is right, Richard, that if they were to -- they have basically outlined not just directionally here's what we're doing, they've basically outlined a timeline and a speed --
GOOLSBEE: -- at which they're going to do the tapering. And so, if they were -- I think it would require conditions to be substantially worse than what we've just seen of jobs numbers for the past two months, which are more than hiccups but less than real deep concerns. I think you'd have to see deep concerns for them to change that plan.
QUEST: All right.
GOOLSBEE: And if they did, that would be big news.
QUEST: So, to take your sentence, if I may, Austan, more than hiccups but less than full-blown indigestion when it comes to --
QUEST: -- when it comes to the weakness in economic data that we are seeing at the moment.
GOOLSBEE: Yes. I would give some characterization between there. I think the question mark that's over a lot of the data of the last two months is we've had such a freezing cold winter, it's been unbelievable.
GOOLSBEE: Here in Chicago, we've been basically --
GOOLSBEE: -- afraid to go outside, and so I do think that has had an influence on people's retail spending behavior as well as some people not even being able to get to work. So, we're trying to figure out is this a temporary thing, or is there actually a bit of a slowdown?
QUEST: Then I shall not incur your wrath by pointing out I flew back from Dubai in the Gulf over the last 24 hours --
GOOLSBEE: I'm going to get you!
GOOLSBEE: I'm going to get you for that!
QUEST: Thank you very much, Austan Goolsbee, joining me from Chicago --
GOOLSBEE: Yes, good to see you.
QUEST: -- where I'm told it's rather cold. It was certainly a lot warmer in the Gulf, and I'm off to Hong Kong tomorrow, where it's going to be even warmer.
QUEST: The US House of Representatives may vote to raise the debt ceiling tonight. The Republican House speaker, John Boehner, has agreed to support an increase in the debt limit without the need for any other provisions.
He's committed to finding enough lawmakers from his own party to back the measure to ensure that it is passed. The vote's been moved to this evening because of concerns of a very nasty winter storm on Wednesday. Still, Boehner said, the United States' rising debt is President Obama's fault.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER, SPEAKER OF THE HOUSE: So, the president, driving up the debt. And the president wanting to do nothing about the debt that's occurring, will not engage in our longterm spending problem. And so let his party give him the debt ceiling increase that he wants.
(END VIDEO CLIP)
QUEST: Lisa Desjardins joins me, live from Washington. We'll do the politics of it in a mo -- in a second. Let's just do the quickfire questions, all right?
LISA DESJARDINS, CNN RADIO CAPITOL HILL CORRESPONDENT: All right. I'm ready.
QUEST: Here we go. Are they going to vote on it tonight?
QUEST: Is it going to pass as a clean bill tonight?
DESJARDINS: I would bet yes, but we never know until the vote's over, right?
QUEST: And then, if it does pass tonight, is that the debt ceiling done for at least until we get to the midterms and beyond?
QUEST: Right. Now, we can get to some analysis.
QUEST: Lisa, why did the Republicans decide to roll over and basically give the administration, when they were prepared in February of last year to go to the mat?
DESJARDINS: Right. This is an easy one. It could be a quickfire itself. They didn't have a choice, Richard. They did not have the votes to pass a debt ceiling extension on their own, and the only other option they had was, essentially, to send the United States into default.
And of course, after the mess of the government shutdown in October, Republicans don't want to be accused of being fiscally irresponsible anymore, and so they are saying in order to raise the debt ceiling, we have to get along with Democrats, we have to pass a clean debt ceiling bill, it's the only way it will happen. We don't like it --
QUEST: But they didn't --
DESJARDINS: -- but that's what we're doing.
QUEST: But they didn't have any compunction in going to war last time over it. Now, admittedly, it seems as if the president won that battle, if you like.
QUEST: If you want to put it in blunt terms. So, what changed?
DESJARDINS: Well, I do think that a few things changed. If you look at the Republican caucus, look at the -- let's take the big picture --
DESJARDINS: -- that might help everyone understand. Looking at the Republican caucus, this is a caucus that has many divides right now. There are still those hardcore conservatives who will not vote to raise the debt ceiling any day, anyhow, for any reason. They think it's like a credit card.
DESJARDINS: We've had this discussion before. That's not really an apt metaphor, but they think if you keep the debt ceiling where it is, the US will spend less. Now, economists say that's not true. They don't care. They're voting against it no matter what.
There are other Republicans who say this is not practical, we have to keep government running. And then there are the Republicans in between, who have, let's say, a Republican primary challenger in the next few months --
DESJARDINS: -- who is saying, look at you, you don't care about spending, you'll let the government run up its credit card as much as you want. These are people who may think --
QUEST: All right.
DESJARDINS: -- we need to raise the debt ceiling, but it's bad for them politically. All of this comes together, and it just means there's no one group leading the Republicans in any direction forcefully.
QUEST: Lisa, thank you. Before you go, send me an e-mail. I need to know, behind your right shoulder, I'm seeing the legs of a statue. I need to know whose -- your right shoulder.
DESJARDINS: Yes, over here.
QUEST: There's a statue -- yes. Who is it? Tell me who it is?
DESJARDINS: I've got you on that. That is Huey Long, the Kingfisher himself.
DESJARDINS: Well-known politician of Louisiana, who I have a feeling would find his way out of the many messes in Washington, probably would be criticized for them, may not be quite on the up-and-up, but a master politician right over my shoulder.
QUEST: Thank you very much.
DESJARDIINS: You've got it.
QUEST: I should have known better than to test an expert like Lisa Desjardins on the statues at Capitol Hill. Zain Asher is at the New York Stock Exchange. One thing I do know is that the market was up, and I think it's the highest point gain so far this year, correct?
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: That is correct, Richard, yes. The biggest one-day gain of the year. And what's interesting is that we saw gains in every single sector.
Now, what's interesting, though, when you talk to traders downstairs, they say that Yellen was only part of the story. Obviously, she was very accommodative. But a lot of traders I spoke to are really scratching their heads at these gains because they admitted that she didn't say necessarily anything they hadn't heard before. She didn't say anything new.
So, they attribute it half to Yellen and half to other factors, such as we have just had this mini corrections, traders were looking for any excuse to sort of jump back in.
And also, earlier on in the day, volume was relatively light. It picked up later on in the day, but earlier, it was relatively light, and volatility does work both ways, so that did also push the market higher as well.
But overall, though, what they liked about what Yellen was saying is that her stance and her outlook on the economy was generally positive. It looks as though -- she intimated that she does intend to continue tapering, and that, obviously, says that she --
ASHER: -- believes that the economy is going to continue pushing higher on this course, Richard.
QUEST: Zain at the New York Stock Exchange. Thank you for that. A strong, bullish day on the markets.
Vast swathes of southern England are under water, and more rain is expected. We're bring you up to date on the flood crisis, coming up next. This is QUEST MEANS BUSINESS from New York.
QUEST: The British prime minister, David Cameron, has canceled a planned trip to the Middle East as he deals with England's flood crisis.
Thousands of homes are now under threat, rail services have been canceled, and soldiers have been called in to boost flood defenses as the United Kingdom braces for more devastating rain. CNN's Jim Boulden is in the flood zone in Surrey, southwest of London, and sent this report.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): If residents around this part of Surrey want to travel, it's by boat or wading boots. These small homes along the River Thames have been flooded for days. Though it's knee-high here, some say it's double the usual level of flooding.
BOULDEN (on camera): Now, here you see this man moving his 19-year- old daughter out of the house, and his golf clubs as well.
BOULDEN (voice-over): Some residents are taking refuge in the local pub. The Flower Pot is seeing a lot of business.
JAMES LENDON, ASSISTANT PUB MANAGER: I've lived around here most of my life, and I've not seen it as bad as this.
BOULDEN (on camera): But it's good for business?
LENDON: It's very good for business.
BOULDEN (voice-over): Jocelyn Sermon her husband are going back and forth using the pub to charge phones and to use the internet.
JOSELYN SERMON, FLOOD VICTIM: We're right directly on the waterfront, so we know we're in the flood plain.
BOULDEN: (on camera): You said you have flood insurance?
SERMON: No. No, we're self-insured on the flood side, because it's just -- the premium is too high.
BOULDEN (voice-over): The flooding is much worse in the southwest of England. The government has taken a lot of heat for its flood management.
DAVID CAMERON, PRIME MINISTER OF BRITAIN: Money is no object in this relief effort. Whatever money is needed for it will be spent.
BOULDEN: January saw more rain than ever recorded in the UK. Cost estimates are $1.5 billion. And with more rain forecast, it's set to rise.
JONATHAN WILLIAMS, PRICEWATERHOUSECOOPERS: I think the total economic losses will take a while to add up, and what we're talking about in our numbers are the direct damage to property and having that repaired.
BOULDEN: It's not clear if the Thames has crested. Until then, residents watch the water and the skies for any respite.
Jim Boulden, CNN, Lower Sunbury, England.
QUEST: Well, as the United Kingdom's debating how well the authorities have dealt with the floods, the US southern city of Atlanta, headquarters of CNN, is not taking any chances with its own extreme weather. Schools in the city area are shut and tomorrow, and the governor has already declared a state of emergency in 45 counties of the state.
Ed Lavandera is live for us in Atlanta. It looks jolly chilly where you are, and it looks like -- and I know it's going to get a great deal worse. But Ed, look, bad weather's one thing, but this is all really about the failure to get to grips with the weather last time.
ED LAVANDERA, CNN CORRESPONDENT: Yes, there's no question. What happened here two weeks ago in the Atlanta area was simply embarrassing on many levels for many levels of government here in Georgia. And that is why so many and so much attention being paid this time around.
Although state officials, city officials say they are not crying wolf with this storm, that this is a serious situation, about an inch of ice expected, and they really expect this to be an ice storm, an ice event, that they will be dealing with.
We've seen it raining throughout most of the day, just a slight drizzle, it has not started to freeze up just yet. But this is one of those roadways that was a parking lot just two weeks ago as people scrambled to get away from this ice storm.
Things moving nicely right now, but this is really a fraction of the amount of traffic that you'd normally see on this interstate this time of day as we approach the rush hour time here in Atlanta, Georgia. And that is because a lot of people already taking the precautions to start bundling up and getting inside and staying out of the elements.
QUEST: Right. Now, let's just put this into some context, because perhaps unfairly, the rest of the world watched Atlanta fall over and gave a bit of a gleeful sort of -- you get a bit of snow and a bit of ice and they can't cope. But the truth is, it's not a climate that is well-built - - it's not a city that's well-built for brisk, nasty, northeastern weather.
LAVANDERA: Oh, there's no question. Many cities here in the South -- and you look at the city governments, and they just don't have the equipment. I mean, why would you -- why would city governments pay to have all of these trucks and snow equipment that they would only use once every three or four years. So, very limited amounts.
But like the governor here of Georgia was saying, they've had an extra 180 tons of salt and sand brought in for this event.
LAVANDERA: So, this isn't the kind of thing that in the northeast and the northern part of the United States, they have this equipment ready because it's used constantly. Here in the southern part of the United States, it happens very once in a while. This is just a winter where we're going to see it happen twice.
QUEST: Ed, stay warm and keep us reported and keep us informed on what's happening. Ed Lavandera at our headquarters -- or in the city of our headquarters in Atlanta.
When we come back after the break, we'll tell you how much money is being lost to credit card fraud.
(BEGIN VIDEO CLIP)
CYRUS VANCE, NEW YORK COUNTY DISTRICT ATTORNEY: I think it is a tsunami.
(END VIDEO CLIP)
QUEST: How many businesses still aren't getting to grips with the problem? In a moment.
QUEST: Cyber crime has been described by one of America's top district attorneys as "a tsunami." So tonight, how safe is your money? Well, it's reckoned global credit card fraud exceeded $11 billion in 2012 alone.
Companies are still failing to get to grips with the problem. Just 11 percent are compliant with the safety recommendations made by Verizon. And over the next few days, we'll be exploring this issue in depth as we consider the core question: your money, how to protect it, and how safe it really is.
QUEST (voice-over): First, there was cash. Then came checks, and credit cards, SmartPhones, and even crypto-currencies. The size and scale of the non-cash economy is vast. One report estimates non-cash transactions topped $330 billion in 2012. That's $47 for each man, woman, and child on the planet. And the more money sloshing through the system, the greater the risk.
WILLIAM NOONAN, US SECRET SERVICE: Over the past four years, the Secret Service has nearly arrested 5,000 cyber criminals. In total, these criminals were responsible for over $1 billion in fraud losses.
QUEST: The recent cases of US retailers Target and Neiman Marcus were a global wakeup call. Here in New York, the district attorney admits his greatest challenge.
VANCE: I think it is a tsunami. I think that cyber crime, identity theft, is occurring at a pace and a level which make it one of the most significant criminal developments that we've seen in our generations.
QUEST: Target and Neiman Marcus did not just expose the magnitude of the problem, they also revealed the sophistication of those behind it.
QUEST (on camera): Is it a case of skimming the numbers from the back of the card, cloning the card, looking at the card in the restaurant or the shop?
VANCE: We're also looking at situations where, because of people's -- criminals' technical expertise, obviously, they are doing things as alleged in the Target case, going through the software that control the air system in the company and through the back door, being able to move into data and identifying customer data, customer credit card numbers, and the like.
QUEST (voice-over): The real victims are the consumers. Both Target and Neiman Marcus are investigating.
MICHAEL KINGSTON, SENIOR VIP AND CIO, NEIMAN MARCUS GROUP: We have learned that the malware which penetrated our system was exceedingly sophisticated.
QUEST: And have apologized.
JOHN MULLIGAN, EXECUTIVE VICE PRESIDENT AND CFO, TARGET BRANDS: I want to say how deeply sorry we are for the impact this incident has had on our guests.
QUEST: Both are still facing major class-action lawsuits.
TINA WOLFSON, ATTORNEY FOR TARGET, NEIMAN MARCUS VICTIMS: The lawsuit is not only about compensating the actual consumers who were harmed, it also looks the future. One of the things that the consumers are seeking through the lawsuit is that Target implement the kinds of measures that will assure that the consumers' private information is secure.
QUEST: The future will mean a greater effort from everyone. The credit card companies and retailers will have to adopt newer, safer, technologies.
MULLIGAN: Target is accelerating our investment in chip technology.
QUEST: Law enforcement will have to work together.
VANCE: What it really requires is more cooperation internationally.
QUEST: And every one of us will have to be alert when we spend.
QUEST: Now, many say the US is still being targeted because it does not have complex chip and PIN technology in its various credit cards. It's something that's been recently addressed by the CEO of MasterCard, Ajay Banga, after the fourth quarter earnings came out.
Now, let's take that up with my next guest. It's Chris McWilton, who's the president of MasterCard North America. Good to see you.
CHRIS MCWILTON, PRESIDENT, MASTERCARD NORTH AMERICA: Thank you, Richard. Thanks for having us.
QUEST: All right. So, you start off with this stuff. And once this stuff --
MCWILTON: Free cash.
QUEST: Free cash. Once it's gone, it's gone.
QUEST: Then you go to this stuff, checks.
QUEST: Easily forged in may cases. And then you come to the credit cards, including your own, of course, MasterCard.
QUEST: What's gone wrong? Why are we seeing, suddenly, what the district attorney describes as a "tsunami" of fraud?
MCWILTON: What's happened is that the -- if you look on the back of our card, you'll see a magnetic stripe, which is all the card data is stored back there, individuals' data, and some other bank information is back there.
And that data has been stored on that mag stripe in that format for about 40 years. It's worked pretty well in the United States for a long time. Fraud rates have come down.
MCWILTON: But the problem is, that that mag stripe data is really technology that is 40 years old now, and the fraudsters have figured out how to get it.
QUEST: So, the core question, why hasn't the US gone to chip and PIN like the rest of the world?
MCWILTON: Basic reason it hasn't gone as quickly is because fraud rates in the United States have been kept at relatively low levels because of the banks' internal systems of detecting fraud.
QUEST: So, you made a calculation. Not you personally, but your company's made a calculation that fraud will continue at X, but it would cost X plus Y to do chip and PIN, and it was better to take X.
MCWILTON: Precisely. So, what it --
QUEST: So now, it's taking Z.
MCWILTON: What's it's been -- what it's been relegated to is a spreadsheet exercise. So the banks and merchants do business cases and spreadsheets and say, well, if we invest in terminals that only accept chip, we'll get X --
QUEST: Short-sighted. You knew you were going to have to do it eventually.
MCWILTON: Well, the recent breach is a real wakeup call, and I think it's made people realize, this is not something that is relegated -- or can be relegated to a spreadsheet model.
When you lose the public trust in your business, whether you're a merchant or a bank, you have no business, and you can throw all the spreadsheets out the door. It's not going to work. And that's why we've got to move to EMV in this country, and we've got to do it quickly.
QUEST: Move to chip and PIN.
MCWILTON: Chip and PIN. EMV.
QUEST: EMV, OK, right. What else can you do? Because not only are - - again, with the DA said, there is a perception it's a victimless crime, and also, you indemnify or my bank indemnifies me against losses because you want me to use these.
QUEST: Now, if you were to take away that indemnity so that I would have to bear the losses --
MCWILTON: Well, that wouldn't be a pleasant situation. Nobody would use the card. As a consumer, you'd be very wary of using the card. Banks are standing behind the zero liability policy. Not MasterCard.
The banks are standing behind the zero liability policy, and it's costing them a lot of money, which they have to recover. From consumers in other ways, or from reducing the cost of their infrastructure, whatever they need to do. So, it's not a victimless crime. It has a victim.
MCWILTON: At the end of the day, the consumers lose on this, at the end of the day.
QUEST: Chris, just give me an idea how much money goes through MasterCard North America every day, or give me --
MCWILTON: Billions and billions of dollars.
QUEST: Oh, come on, give me -- tighten it up.
MCWILTON: I can't tighten it more than that. It's in the -- it's being --
QUEST: Every day?
MCWILTON: Every day. And we move it around the world. It's trillions per year around our world between --
QUEST: And if there's one thing -- you've got viewers around the world watching -- if there's one thing you would like them to do, what would it be to make their money safer?
MCWILTON: First thing is never give your checking account number to anybody. There are a lot of people out there that willingly give their checking account numbers online in bill payment formats, et cetera. That is something that goes directly to your checking account. It's very difficult to recover it.
If you use a card, you're going to get zero liability indemnity from the issuing bank. So, don't give out your checking account number.
QUEST: Which is why you'll see on these checks, there's no --
MCWILTON: There you go.
QUEST: And to give you some idea of just how difficult this is for us to even cover this as a story, we have to cover every part of these cards so that you can't see, because somebody somewhere could be at risk --
MCWILTON: That's right.
QUEST: -- of freeze framing the picture -- that's yours, by the way.
MCWILTON: Taking the card. Thank you very much, appreciate it.
QUEST: I'll take these three.
MCWILTON: Right. Thank you Richard, appreciate it. Thank you.
QUEST: Now, one other piece of news point out. Some news just into CNN. Bitstamp, one of the biggest online Bitcoin exchanges, has suspended withdrawals. It's blaming inconsistent results reported by its Bitcoin wallet, all caused by a denial of service. That's when the website's flooded with huge requests for data. Bitstamp says it's obstructed ability to check balances.
When we come back, we will go from the credit cards to the clearing banks, and the only thing they same to be doing is clearing vast amounts of money for themselves. In a moment, QUEST MEANS BUSINESS.
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just moment. This is CNN and on this network, the news always comes first. At least 77 people have been killed in a military plane crash in the eastern mountains of Algeria. The plane was carrying members of the Algerian Air Force and their families. A spokesman for the country's Civil Protection Office says there was one sole survivor. State radio said bad weather was behind the crash. The U.N. special envoy for Syria says Syrian peace talks are not making much progress. Lakhdar Brahimi encouraged both sides to cooperate and to pick up the pace. Syria's reconciliation minister went so far as to say the Geneva talks are doomed to failure. Taiwan and China are holding their highest level direct talks in more than 60 years of splintered relations. The meeting in Nanjing is the first of its kind since China's civil war ended in 1949. Relations started to improve in 2008 when a new president was elected in Taiwan.
The French president Francois Hollande is the guest of honor at a White House state dinner in just a few hours from now. Earlier today, the U.S. president and Mr. Hollande held a joint news conference. They stressed their solid partnership and spoke about a range of issues from sanctions on Iran to the conflict on Syria.
There's good news and there's bad news for Barclays employees today. Investment bankers of the British lender will get bigger bonuses and thousands of employees will get pink slips. That's in the American Terminology -- of course it could be P45s as described in the U.K. Let's take a look. As many as 12,000 job cuts are coming in 12 -- in 2014. Barclays has around 140,000 employees worldwide, so 12,000 job losses. That's the view from the bottom. But if you want the view from the top, well there bankers' bonuses are up 13% from the previous year. Some senior bankers will be amongst lose -- those losing their jobs. Put it all together and you get an idea -- two views of the bank from the bottom and the top. The move has sparked outrage amongst unions. The Institute of Directors is furious. The director of Corporate Governance there, Roger Barker, says, "It cannot be right in any business for the executive bonus pool to be nearly three times bigger than the total dividend pay out to the company's owners. The question must be asked -- for whom is this institution being run?" Now, Malcolm Small is the senior advisor of the Institute of Directors joins me now from CNN London. Malcolm, what has gone wrong when you get a decision like this to give the bonus pool so much and more -- three times more -- than those who own the bank?
MALCOLM SMALL, SENIOR ADVISOR, INSTITUTE OF DIRECTORS: Well before I answer that, let me get one thing straight. The Institute of Directors is not about bashing banks in the U.K. We want to see strong, healthy banks delivering profits and, yes, paying bonuses and most of all lending to businesses. So we want a strong, vibrant, competitive bank sector. I think our issue today is with both the substance and the presentation of this particular set of results. As Roger pointed out, it just cannot be right that the bonus pool is nearly three times the size of the dividend pool.
QUEST: Well, let me -- I'm going to ask you the question again -- I accept what you say about you know, I mean, it would be a rum day when the IOD bashes bankers. I can accept that from you, but what went wrong? Because sensible, professional, reasonable people made these decisions -- why did they do it?
SMALL: It looks to us like a failure of both governance and presentation. And there is a substantive issue here -- there's no denying that. But the only way that you get to a position whereby the bonus pool is three times to size of the dividend pool is that somewhere in the system the governance failed. Now, whether that was in the remuneration committee, whether that was in the main (inaudible) of deliberations -- there has been a failure somewhere down the track.
QUEST: A failure somewhere down the track. Now, I'm going -- I'm going to push on this, and I know you're not here to defend the banks and I know you're not here to sort of defend Barclays, but bearing in mind it was the banks that got us into this unholy mess five, six years ago and bankers' bonuses has been on the agenda pretty much since day one. That's a pretty dramatic failure of governance to allow this to happen.
SMALL: You're absolutely right, and there's a sense in which you question the extent to which the banks really get it. We know within Barclays that they've been making strenuous efforts to reform their corporate culture. But when you get presentation results like this, presentation figures like this. You've got to wonder whether they do really get what they've got to do in terms of reform both substantively and presentation-ally.
SMALL: And it's a very poor result in both sectors.
QUEST: And the danger here -- because, again, we're not just going to bash Barclays in this sense. The danger is -- is it -- that it becomes almost impossible to resist the calls as you got in Europe for caps on bonuses. Because you only need one bad case like this for every European and commission official to simply say, 'We told you so!'
SMALL: Yes, I completely agree. It's really, really hard -- and let's make it clear -- we don't as the Institute of Directors support the European Union bonus cap in any way, shape or form, but it's really hard presentation-ally to get behind the banks when we see these kind of statements, these kind of results -- pretty flat or a declining profits and yet bonuses go up, dividends as a share of the cake appear to go down -
QUEST: But -
SMALL: -- it makes it really hard for those of us who would like to get behind the banks to do so.
QUEST: Sir, thank you for joining us and having this good conversation on this. I appreciate you coming in late in the evening in London.
SMALL: Thank you.
QUEST: Many thanks indeed. European stocks gained on Tuesday. Chairman Yellen with her continuity of monetary policy led the rise. The Fed to continue reeling in stimulus. The shares in Barclays fell. I really should have worked out what might Barclays profits are. You remember at the low point in Barclays we bought on this program some shares just to see how they would -- next week we'll find out exactly how those Barclay shares -- I think we paid 60 pence for them at the time. Anyway, she lifted the spirits of Americans who were out of work and struggling during the Great Depression. Today the world is saying goodbye to Shirley Temple Black.
SHIRLEY TEMPLE, CHILD ACTRESS: I've thrown away my toys, even my drum and trains -
QUEST: We look back at her career beyond the silver screen after this break.
TEMPLE: -- I want to make some noise, with real live airplanes. Someday I'm going to fly -
QUEST: The silver screen icon Shirley Temple who has died of natural causes at the age of 85. Now, she was arguably the most famous child actor in Hollywood history. Shirley Temple began acting at the age of three. She was a box office sensation before she turned ten. Her wildly popular films were credited with saving Twentieth Century Fox from bankruptcy.
(BEGIN VIDEOCLIP) TEMPLE: In every bowl of soup I see lions and tigers watching me. I make them jump right through a hoop, those animal crackers in my soup. When I get 'hold of the Big Bad Wolf -
QUEST: Her acting career peaked during the mid-1930s. She said the people in the Depression wanted something to cheer them up, so they fell in love with a little girl.
TEMPLE: I just push under to drown, then I bite him in a million bits, and I gobble him right down. On the good Ship Lollipop, it's a sweet trip to the candy shop where bon- bon's play on the sunny beach of Peppermint Bay. Lemonade stands everywhere -- (AUDIO AND VIDEO CONTINUES TO PLAY IN BACKGROUND).
QUEST: Ah, we could just join in, couldn't you? She was the rare example of a child star who reinvented herself as she grew older. In later life, she was Shirley Temple Black and became a diplomat representing the United States on the world stage, not being ambassador once but twice and chief of protocol. She -- Black -- credited her mother for keeping her grounded from such a young age.
TEMPLE BLACK: My sweet mother -- we never -- she called it a job and I'd say 'What are we going to do today?' She say, 'Go to work as usual.' There's was nothing about, you know, Shirley Temple being anybody special.
QUEST: Now Ms. Temple Black served as the U.S. ambassador to Czechoslovakia as it was then from 1989 to 1992. Michael Zantovsky was the -- was President Vaclav Havel's spokesperson during her term in Prague is now the Czech Republic ambassador to the U.K. he joins me now live from CNN London. When we hear U.S. ambassadors, we think political appointees, we think people who are just doing the job because they were well known by the president, blish, blash, blush. But that wasn't the case with Shirley Temple Black, the ambassador. The ambassador knew what she was doing, didn't she?
MICHAEL ZANTOVSKY, AMBASSADOR OF THE CZECH REPUBLIC TO THE U.K.: Absolutely. I mean, she may have been a political appointee, but she -- she's had quite an experience in diplomacy by that time having been the chief of protocol and ambassador to Ghana, so she knew what the job was all about.
QUEST: And what was it like -- what was she like in dealing with here? There -- I mean, as an ambassador was she good at it?
ZANTOVSKY: Well she was not your standard ambassador. In fact, I think she was not very different from the personality that she emanated as a child actress. She was very personable, very lively, she was -- gave a sense of performing much of the time, but she did get the job done.
QUEST: And did she have that diplomat discretion? I mean, one thinks of today's movie actors in Hollywood, the last thing one would think of is discretion. But a diplomat as you know, sir -- you and I have talked many times -- is all about discretion.
ZANTOVSKY: That's right, I mean she was not your typical ambassador. She had a -
QUEST: What do you mean by that? I mean, are you a typical ambassador?
ZANTOVSKY: Well, I'm not a typical ambassador either. She had a sense of humor and a quite wicked sense of humor at time. I mean, she had a dog -- a boxer dog -- the dog was called (Garby) which, you know, in 1989 was rather courageous.
QUEST: But you remember her well and you remember her time well?
ZANTOVSKY: I was quite fond of her and I went to see her later when she retired from the service and I was the ambassador to Washington. So I went to see her in California in Woodside and she was a great host and we had a lovely time.
QUEST: Ambassador, thank you very much indeed for joining us tonight. Now,
ZANTOVSKY: Thank you.
QUEST: Earlier in the program I talked about the weather. Not only the weather in the U.K., but the weather in the U.S. in Atlanta. In fact, there's pretty grim weather all over. Jenny Harrison is at the World Weather Center. Jenny, which part of the world shall we dwell on today?
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: I know, exactly and not for the -- not for the good reasons. I'm going to start in the U.S. actually, Richard, and talk to you about the storm that is really girding its loins right now. It's already been making its presence felt across some regions of the southeast. Is this area of low pressure the bitterly cold air that's been plunging southwards over the last 24 hours. This system is picking up all the energy from the waters in the South, the very warm waters and then coming down as rain and icy mix and also some fairly heavy amounts of snow. The system will work its way up through the eastern seaboard -- you can see here -- Wednesday on into Thursday. Thursday's the worst day across much of the far Northeast New York and on into Boston. But when it comes to snow, that is pretty much what you'll have up there in the Northeast into New York and Boston. But it's the ice accumulations that are very concerning for most areas. There is some heavy snow -- look at these totals coming down 11 centimeters in Philadelphia, 19 in Washington, you can see there 23 in Roanoke and 7 centimeters once again two weeks on in Atlanta. You can see the whole storm system there working its way up towards the Northeast. These are the warnings currently in place -- pink and purple and as you can see here, the dark purple as well which is all about the ice and there could be some pretty big accumulations of this ice in the next 24 hours. This is so dangerous, you cannot drive in this. You really can't operate when you have got a coating of ice over everything. It brings down the trees, it brings down the power lines and you can see here that in some areas across Georgia, moving on into the Carolinas, we could have more than two centimeters of ice. So, it really is a crippling situation for really most types of transport. And certainly this storm system say works its way east and so when you get further towards the Northeast, it is more a case of the snow that is coming down. And all of this really beginning as we go into the early hours of Wednesday morning local time. The cancellations of course already for Wednesday -- over 1,300 cancellations, most of those into and out of Atlanta. Now, let's move to this. This is the U.K. -- some pictures to show you of course now we know that the Thames -- there is still 16 severe flood warnings in place along the banks of the Thames. That is when the Environmental Agency warns of the possible danger and threat to life. But look at the current level of this -- the Sunbury Lock -- a portion, as I say, along the Thames. Currently it's over 5 meters. The highest recorded before is 4.61, so you get the general idea. It is not surprising, we've seen the flooding we have just seen in the last couple of days. But if you want to talk about flooding for the last few weeks, and in fact the last couple of months, and it really is Somerset, Dorset, parts of Devon where it is so widespread and it is going to be weeks before this of course begins to go down. The reason for that is because the water table -- the actual ground -- it is so saturated that as these systems coming in from the west, they bring more rain. There is literally nowhere for that rain to go. You can see it working its way eastward in the last few hours. As well as this, of course, Richard. As well as the heavy rain causing the flooding. We've had some very strong winds as well. And as I say the cold air, the actual Jetstream because of the negative phase of the Arctic phase oscillation, this is what has been feeding these storms. And this same pattern, Richard, across the northwest of Europe. So that is why we're seeing system after system impacting the U.K. and also western areas of France. And there's no change through the week. Wednesday, another big storm and Saturday as well.
QUEST: Jenny Harrison, thank you very much. And, Jenny, thank you for your guidance. Jenney Harrison was advising me earlier that the weather for New York as you just heard there has been fairly awful in that way. Well, I'll tell you about it in "Profitable Moment" in a moment. While I won't be with you for the rest of this week, I meant to be heading to Hong Kong. I was supposed to be going on Friday, but with all this bad weather that Jenny Harrison's been talking about, I'll actually be leaving tomorrow for the Pacific. Coming up after the break, the bureaucratic work of (inaudibles) of the future. The UAE hopes drones like these will boost government efficiency. "Quest Means Business" (inaudible).
QUEST: The UAE, the United Arab Emirates, has unveiled a somewhat unorthodox plan to ramp up government efficiency. It's called drone deliveries. Now, the country is going to use these unmanned aerial devices -- devices pretty much like this -- to deliver official government documents to people and to monitor road traffic. They'll use Google maps to find addresses and fingerprint technology to confirm recipients' identities. That of course, his Highness the Sheikh who is getting a preview of what this will all be. Emerging market editor John Defterios sat down with the minister in charge of this new battery-powered delivery system.
MOHAMMED AL GERGAWI, UAE MINISTER OF CABINET AFFAIRS: We have a six month of a trial and our plan to will implement it after one year. That's our plan. And if I see the plan is going to be implemented gradual. Now we've been doing that trial actually and it's working.
JOHN DEFTERIOS, CNN'S EMERGING MARKETS EDITOR AND ANCHOR OF "GLOBAL EXCHANGE" SHOW: For those who are skeptical, because you built the world's tallest tower, you have the Palm Islands offshore here. Is this an effort in branding or a real effort to go to the next phase of development for Dubai? How do you answer the skeptics?
GERGAWI: I think this is the new face of development, not only for UAE, but for the world basically. Technology will change our life. He either embrace technology or he resists it. If he resists it then the (guide) between you and your competitor wouldn't be a year or two, it's going to be 500 years. We'd like to embrace the future, we'd like to look at the future and bring it now to our people and our citizens.
DEFTERIOS: Let's get practical. Would delivering emirates I.D. cards to individuals, driving licenses, photos at auto accidents. What are you thinking are going to be the first applications here?
GERGAWI: I think identi-card is very practical. We tried it. I think looking at -- usually we have a lot of traffic conditions sometime. And because there is small car accident, you can fly instead of sending a car. I mean, for example, there is a fire and an (inaudible). A drone can go analyze even before the fire brigade will get there. So there's a lot of practical thing can be done, really to change people life, and as a government to be much more efficient.
DEFTERIOS: You know we're in a region that four months a year you have, what, 45 degrees centigrade, very high humidity, sometimes sandstorms. Do you dock the drones during this period of time? Can they run 12 months a year? Have you thought that far out?
GERGAWI: We have plane that fly at that temperature, minus and above base actually when they go 45,000 feet, which is a worse climate basically there.
DEFTERIOS: We're talking about drones here of course.
GERGAWI: (Inaudible) drones, so with (inaudible) technology, we believe that it is adoptable, we live in a very hot climate. All our technology basically be working in the season technology. The most important thing is really how adoptable we are to these changes. We are I think so. And whatever we'll do, we make sure that is going to work 12 month a year.
DEFTERIOS: Say I'm sitting in an office. I want my emirates I.D. delivered to me, I have the drone. Does it penetrate the office? Does it say meet me outside on the steps?
GERGAWI: I think it's good to deliver to the doorstep of your office basically. That'll be good enough.
QUEST: Now, never let it be said that we don't put things right when we go a little astray. Tonight's "Profitable Moment." In the program you heard me ask Lisa Desjardins about the statue behind her. We could just see the brass knees. Well, she thought I was talking about one statue, she was talking about another statue. I thought -- was -- she said Huey Long because she thought that was the statue. She was referring to the brass knees of Huey Long, but actually the statue she was really standing in front of was Will Rogers -- the humorist Will Rogers because we were talking about different statues. Which means you can't even see that statue. You get the idea. There's a lot of statues in Capitol Hill, and at some point of one another, we got the wrong one, or at least it was a mistake. Now, talking of what else is happening, I will be in Hong Kong for the rest of this week and next. I'm going early because of the bad weather that Jenny Harrison was telling you about. So, that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I do hope it's profitable. I'll see you next week.