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QUEST MEANS BUSINESS
European Debt Crisis Drives Euro Down; More Problems for Toyota
Aired February 8, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST, QUEST MEANS BUSINESS: Betting against the euro? A European debt crisis drives the currency to an eight-month low.
Problems accelerate the Toyota, dealers get ready to fix thousands of Priuses.
And reforming the system, we speak to the head of Nasdaq index about the challenges ahead.
I'm Max Foster in for Richard Quest, and this is QUEST MEANS BUSINESS.
Is the falling euro just a reflection of economic reality or are wily investors sensing an opportunity for a quick buck? Well, tonight on the show we are ask if speculators are kicking the currency when its down.
And if the G7 was trying to ease investors worries over Greece it didn't work. Share in Athens tumbled steeply as speculation about a government debt crisis raged. EU finance ministers told their G7 partners they'll make sure Greece sticks to its debt reduction plans but the anxiety of a huge budget deficit is spreading to Portugal and to Spain. And giving the euro a truly torrid time.
Let's have a look at some figures then. Greek stocks down almost 4 percent on Monday. The index lost 8 percent last week, and the EU last week, gave its backing to a Greek plan to make deep budget cuts. But strikes in protest of those cuts are now breaking out. So, a really difficult economic time there for Greece, of course,
And here are the main figures we have been looking at today. These are a few of the Greek banks. EFG, Euro bank, down 9 percent; National Bank of Greece down 8.5 percent; Marphin Popular Bank and Bank of Piraeus, all down pretty sharply as you can see. It is very, very difficult times for the financial sector over there at the moment.
Now, in Spain the benchmark stock index actually was up around 1 percent today. But there were big falls last week. Overall a picture over six months is one very much of decline. In Portugal a similar story, sharp falls towards the end of 2009; stocks also rising this session, though. The euro is stabilizing close to Friday's value, we can tell you. Earlier on Monday, it came close its lowest level in something like eight months. Today's low on euro was actually worth $1.36. Sterling also just up from an eight-month low versus the dollar today, one pound worth around $1.55
Let's speak to Al Goodman right now, because he's in Spain. He can give us the latest picture there.
What's it like in Spain right now? What's the feeling in Spain when all this economic news is just engulfing those countries we have been talking about?
AL GOODMAN, CNN INT'L. CORRESPONDENT: Hi, Max.
Well, part of the feeling in Spain is right where you are, in London. The Spanish finance minister and her top aides were in London this day trying to sell credibility which has been in short supply here as this Spanish stock market has been taking a beating.
They were up meeting with leading investors. They also met with the editorial board of "The Financial Times", basically saying that Spain is going to pull through this. It will make necessary cuts to get things back on track. It says, look, we invested right when there was a boom time, and we will get through this.
Now, the question is whether the markets will follow that. Now, also there was a cabinet minister here in Madrid, who along the lines of what you were saying just a moment ago, at the top of the program, basically saying that this attack on Spain and driving Spain down is really part of a broader tact by international investors to drive down the euro. So, that is one opinion that you are getting out of Spain, Max.
FOSTER: And as that happens, then people in Spain are probably going to look for support from the rest of the Euro Zone. Are they hoping to get that or are they, as you say, trying to sort it out themselves?
GOODMAN: Well, the Spanish prime minister really is trying to handle this. He's not expecting he's going to get some bailout. At least he's not saying that publicly. What he's saying is I've got a deep cut plan; $70 billion that will be cut. He's also claiming-and this is what they were selling in London today-that they'll be able to take the public deficit from 11 percent as a ratio of GDP, down to 3 percent in a few years.
Now, Deutsche Bank came back out quickly with an analysis, and said, we like the basic plan of Spain's austerity plan, because it is hitting its structural reforms it is not just a one-off tax hike. But that idea that they are going to get the deficit down from 11 percent to 3 percent in a few years, they think that is way too rosy, Max.
FOSTER: And in terms of this speculation, the suggestion that speculators are seeing an opportunity in the euro falling, they can make money from that. But as they do that the euro falls even further in value, that hasn't really started to any great extent yet, but there is an indication of it. Is there a fear that the euro could be driven down into nonexistence, effectively?
GOODMAN: You are not hearing that publicly, this day, because what Spain was trying to do was stop the hemorrhaging of last week with the main index, the IBEX 35, down 8 points. It is already down 15 percent, 15 percent just at this-the beginning of this year. So, the fact that it moved up 1 percent today, although it was a very volatile day, it was negative territory for quite awhile before finally ending at 1 percent. That is what they are trying to sort out right now and get things stabilized. I think they'll care about the euro a little bit later, Max.
FOSTER: Al Goodman in Spain, thank you so much for that.
Now, Europe's major stock markets regained some ground this session despite all of those worries over sovereign debt across the continent. The key indices were coming back from last week's big sell off. The worst one- week slump actually, since March 2009. Miners were the biggest risers in London with Waring (ph) Gold putting on a gleaming 6.4 percent. In Frankfurt, Daimler added 3 percent, the steel sector did pretty well. Soxcater (ph) in Germany, and Asalla Metal (ph) in Paris. French banks also made pretty chunky gains.
Now, unease about the scale of America's national debt is hovering over Wall Street this session. U.S. Treasury Secretary Timothy Geithner is offering what reassurance he can. He says investors will still continue to buy U.S. Treasury bonds because they are safe and the U.S. government will never lose its premium credit rating.
(BEGIN VIDEO CLIP)
TIMOTHY GEITHNER, U.S. TREASURY SECRETARY: That will never happen to this country. Again, if you step back and look at what has happened throughout this crisis, when people were most worried about the stability of the world, they still found safety in Treasuries and the dollar. You are still seeing that, every time people are reminded again about the many challenges you see around the world that is a very, very important sign of basic confidence in our capacity as a country to work together to fix these problems.
We have done it in the past. This is within our capacity to do. And the best way to get there is, again, to make sure this economy is growing again. That translates into more jobs that reach more Americans. That is the only path to try to make sure that we are able to turn to fix our long- term fiscal problems.
(END VIDEO CLIP)
FOSTER: Let's have a look at how the U.S. markets are fairing this session, because investors are concerned about the quality of the economic recovery in the United States. But they are also concerned about global issues and front and center of that is what we are talking about here in Europe, those debt problems.
Not having a huge impact, but a negative nevertheless, the Dow down a third of 1 percent.
Now, we're going to get the latest news headlines for you. Isha Sesay joins us today from CNN Center.
FOSTER: Now it takes decades to build a reputation for reliability, but just a few weeks to lose it. Toyota bosses take a deep breath as drivers wait to hear what they'll say next. Stay with us.
FOSTER: Toyota dealers around the world are bracing themselves. The world's biggest carmaker told them at the weekend the solution to breaking problems in the hybrid engine Prius is on its way. Media reports say we could get word any day that it is recalling at least 300,000 cars.
The company said last week there was a problem in the software that governs part of the breaking system and the Japanese government ordered Toyota to look into it. Regulators in the U.S. are carrying out their own official investigation.
The Prius was designed, or redesigned for the 2010 model year. The current model is the third generation of the environmentally conscious car. And Toyota may also have to notify drivers of another car, sold under the high-end Lexus brand, has a similar fault. The breaking system in the Lexus HS25H is said to be the same as the one used in the Prius.
Now, if Toyota's reputation goes from hero to zero, how do you make a living if you are income depends on a Prius. Well, CNN's Kyung Lah caught up with a Tokyo taxi driver to find out.
KYUNG LAH, CNN INT'L. CORRESPONDENT (voice over): Japan's number one selling Toyota happens to be the cool cab of choice. Prius taxi is all over Tokyo's roads. Thousands of people climbing in and out of the new Prius all day, and all night. Taxi driver Kuni Toshi Shinji is on the night shift, driving one of the 10s of thousands of the 2010 Priuses without the fix.
"I haven't had break problems," says Shinji, who adds he's a big fan of the Prius' gas mileage. His worry is on the impact to his business.
"I'll be in trouble if customers are afraid to use my taxi because of all of this negative news," he says. Most passengers we spoke to don't worry about it. But at least one passenger does.
"I would think twice before getting into a Prius taxi," says Nori Yuki Miyakowa (ph). "I wouldn't want to get in an accident, even if it is a one in a million chance."
It is that small chance of a split second break failure that has lead to the onslaught of negative Prius press.
(On camera): When you boil it down to the numbers, the Prius problem is relatively small. We are talking about a few hundred thousand vehicles maybe between the U.S. and Japan that are affected, that are currently on the street. But analysts say a ding into the Prius image could have a major impact on Toyota's future.
KOJI ENDO, ADVANCED RESEARCH: Financial damage might be relatively small, but probably more damage on the brand image for Toyota green car strategy.
LAH: Shinji says he'll keep on driving the Prius and get the fix when Toyota calls. Willing to give the automaker some time to get its future back on track hoping for his taxi business' sake that it is sooner rather than later. Kyung Lah, CNN, Tokyo.
FOSTER: Well, in the U.S. Toyota is busy trying to restore consumer's faith in the badge. Poppy Harlow from CNNMoney.com joins us live now from New York to tell us how the company actually is going about it.
Fascinating techniques they are using, at last, Poppy?
POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: They are. What is very interesting is they are using social networking to try to talk to their consumers. And we'll get to that in a minute and show you some of the questions that folks have for the people at the helm of Toyota.
But we also want to update you on where the Prius stands right now. We have seen multiple reports of a potential recall for the Prius. I want to reiterate, Toyota has not said yet, that they are recalling the 2010 Prius because of brake problems. They have admitted there are brake problems but, Max, as you no it is the middle of the night in Japan. So no announcement right now. Many reports saying we will hear something officials from Toyota on Tuesday morning. So we'll keep any eye on that.
But as for the rest of the issues Toyota is facing, take a look at some live pictures right now of Toyota plants back online here in the United States. We'll try and pull them up for you so you can see what we're talking about. This plant is the biggest in North America. It is in Georgetown, Kentucky. It was offline for a week. They started work there again at 6:30 a.m. this morning. They are now resuming production of those eight Toyota models that were recalled. Of course, these all have the fixed accelerator pedal in them. That is the key. And they are resuming production here. So Toyota is moving forward, as is their slogan, on this front.
The Prius, still, a major question what happens to that. But we spoke to one of the people that worked in this plant, this morning. Just her sense of what is going on with Toyota right now. Take a quick listen to that.
(BEGIN VIDEO CLIP)
RENEE BROWN, TOYOTA EMPLOYEE: It's been kind of scary. You know, of course we are all very concerned about the recall. We do take it very personally. I mean, Toyota always has a perception that we build cars like our family is going to drive it. So, we're very adamant about our quality. Are we worried? Oh, definitely. It is the talk of the shop when the lines are down.
But you know, we have had a chance to refocus. Even though we have great quality checks and stuff in place, and now we are even stronger. I mean, it is going to make us stronger as a company.
(END VIDEO CLIP)
HARLOW: We will see that as the hope there. But, Max, as you know, quality is the issue she was talking about just there. That is the issue that Toyota has been trying to push forward, that they still have the quality that consumers are looking for, Max.
FOSTER: Some criticism in the early days that the company wasn't communicating enough with people, and that the PR wasn't great.
FOSTER: But now we don't stop hearing about them. And tell us about this social networking you were talking about?
HARLOW: It is exactly right. Let's show you Digg.com. This web site, this social networking web site, is where Jim Lentz, who is the head of Toyota US, is taking your questions. You see it right there.
Max, I have to tell you more than 1,300 people posted questions on there, for him, at 5:00 o'clock Eastern Time, here in New York. He is going to start answering those questions. Let's take a look at what people are writing in. What do they want to know from Toyota at this time? A lot of different questions.
The first that we have for you is: "What did Toyota know and when did it know it?" That's a very basic question. People want a clear timeline here.
Another question is: "What's your message to non-Toyota drivers who might still be interested in your cars, but they are concerned about the crisis?" And also, another one, "Do you believe Toyota is being unfairly maligned here?"
So, a lot of different questions coming in, Max, that he is going to have to answer starting later today. But interesting to see how a major company like Toyota do the social networking, don't you think? To really touch base with their consumers?
FOSTER: Yes, it is a tough thing. And they weren't criticized, were they, for the way they have technically dealt with it. It just been the PR, really.
FOSTER: It has been a bit of a-
HARLOW: Exactly. Exactly.
FOSTER: OK, Poppy, thank you so much. Back with you as we get more on that.
Now, a return to the top table. More than a year after being pushed of Merrill Lynch, John Thain is out of the wilderness. We'll look at how he could fair as the head of a commercial lender, still tied to a federal bailout.
FOSTER: The business world is watching the return of John Thain to the top table. The ousted boss of Merrill Lynch is the new chief of troubled U.S. commercial lender CIT. And one analyst says that if Thain can restore CIT's fortunes he is going to be king. Financial Analyst Todd Benjamin joins me now.
I guess from a very low-level, and you go to great success, that is what happens. Is it fair of me to say that, or am I being unfair?
TODD BENJAMIN, FINANCIAL ANALYST: Well, I think this is really a chance for John Thain, in a sense, to rehabilitate himself. I mean, he was one of the golden boys of Wall Street, you know, when he was at Goldman Sachs, the New York Stock Exchange. And then, you know, he did save Merrill from a potential fate that Lehman had.
But at the same time he was badly tarnished in terms of a reputation because of Merrill's losses, but I think more importantly for the lavish spending he had on his office, $1.2 million, and for the bonuses that were paid to Merrill executives, despite the billions of dollars in losses. Now, this is a time for him to try and prove that he deserves a higher place in people's minds.
FOSTER: And we are seeing these executives who were integral to the financial crisis having lost their jobs but actually back in the jobs market.
BENJAMIN: This is a great thing about Wall Street. You screw up. Hey, you can always get another job. And even if you screw up you walk away with a lot of money. I mean, John Thain, for instance, at Merrill he was forced out, OK? Now he's back at CIT. Fred Goodwin the disgraced former head of Royal Bank of Scotland, he's in an adviser to an architectural firm. They head of Northern Rock, another, you know, institution that went bust. He is involved in private equity. We're in the wrong business.
FOSTER: Yes, learning that. John Ryan, interestingly, he is the CIT lead director. This is a comment from him.
FOSTER: It just jumped out at me and I think he's probably got a point, whichever way you look at it. "John is a well-respected financial services executive, and proven leader, who is uniquely qualified to lead CIT at this critical stage."
He's got a point, hasn't he? If you have been involved in a financial crisis, of a failed firm, you can argue, you are uniquely qualified to try and get another firm out from the woods.
BENJAMIN: I think what John Thain understands-first of all he has a very good grasp of the industry. There is no doubt about it. He is a brilliant guy. Secondly, I think that because he understands the complexity of being in a very difficult situation he probably knows what he needs to get done. But when he was asked what he learned at Merrill is, typically, these problems are deeper and take longer to solve, than you would think. And as you go along you discover new problems.
So, I think he is going into the situation very much with realistic eyes. The other thing I think for John Thain is he's certainly going to have to kind of restructure their debt load. He's going to have to work carefully with regulators, so he has a lot on his plate. But for him, I think he's very happy to be back in the fold. He admitted that after Merrill Lynch he would often still don wearing a suit. I mean, it is kind of a sad thought, because he was just so unused to not being a player.
FOSTER: And we joke about your comment about the office. A lot was made of it at the time, his office, you know, over a million dollars worth of refurbishment. And interestingly, he's referred to that again, in his new job, saying he's going to keep his office. But fundamentally, what we are talking about here, a lot of the problem was PR, wasn't it, for these banks? They didn't handle communications very well.
BENJAMIN: Well, no. I go beyond that. It wasn't so much communications. When you spend $1.2 million refurbishing that office, including at $35,000 commode, that is not, you know, mishandling communications, that is poor judgment. And it sounds to me, he's learned from his poor judgment. Let's hope so.
FOSTER: OK, Todd, thank you so much for joining us. Good to see you here.
Now we are going to get back to our top story. We were talking about the problems and the concerns surrounding European debt levels and how that is impacting the euro. Earlier I spoke to Peter Westaway, he's the chief economist for Europe, at the investment bank, Nomura. And I asked him if speculators were capitalizing on the uncertainty surrounding the euro as Al was suggesting earlier.
PETER WESTAWAY, CHIEF ECONOMIST, EUROPE, NOMURA: Well, it certainly has been interesting that the euro has been depreciating as much as it has recently. If you look at what has been happening to the interest rate on the Greek sovereign debt.
WESTAWAY: While that has been going on the euro has been going down pretty much, one for one. And when you consider how small the Greece, it is round about less than 3 percent than the Euro area economy, that is quite extraordinary.
FOSTER: Does this suggest to you that speculators are trying to drive the value of the euro?
WESTAWAY: I think that is a little bit of a melodramatic way of putting it. I think people in financial markets are worried about the fiscal situation in Greece and by extension to some of the other euro area, so-called periphery countries.
FOSTER: He concern, obviously, is that people are capitalizing on an already unfortunate situation that could have a severe macro-economic impact.
WESTAWAY: Well, these things, financial markets have a way of blowing up situations that perhaps, in the cold light of day, shouldn't have such large effect on financial markets. But I mean, ironically-
FOSTER: It is undermining the whole currency, the pan-European currency.
WESTAWAY: Well, I think there is-there is a tail risk being priced into the euro that certain countries like Greece, and perhaps others, Portugal, even Ireland, might want to leave the single currency. But I think those risks are massively overblown to be honest.
FOSTER: But it becomes more likely the further the euro is driven down, doesn't it?
WESTAWAY: Not necessarily. I don't think the value of the currency itself is going to cause that to happen. Ironically, went the euro goes down, that is actually stimulate activity in the euro area.
FOSTER: OK, this is pretty unprecedented, isn't it? For the euro area? So what is your impression about what the politicians will do about this? You expecting the larger stronger countries to step in, to save this currency?
WESTAWAY: I think in the end, they would step in to save the currency, but in the short term, I don't think we should be surprised if we hear the European Commission, the ECB, talking very tough. I think they are playing a game of chicken at the moment. If they give the game away and say that they are going to bail out Greece, then obviously the Greek government won't do the right thing. So, they have to-they've got to talk tough.
FOSTER: OK, we were already talking about Portugal, Spain, and Ireland, and Italy and Greece, aren't we? Is Britain going to be added to that list? Because if you look at the way things are going, and the way people are talking in the city, it does seem that people think Britain may be suffering in the same way as Greece, even though it is a completely different economy.
WESTAWAY: Well, I mean, the UK's fiscal situation is pretty-pretty dire as well, but I think they are in a very different situation. And in fact, I think the U.K. government has set out plans for halving the fiscal deficit in four years. Financial markets at the moment don't seem to be happy with that. They want to do something-they want the government, either the current one or any future Conservative government to do even more than that.
Personally, I think there is a real risk that financial markets are going to bully governments like the U.K. into tightening policy by too much. And therefore they might undermine the recovery before it even gets going.
FOSTER: Might Britain lose its Triple A credit rating?
WESTAWAY: Well, it is a possibility. I mean, one possibility that I have heard people talk about is that if the U.K. elections delivers a hung parliament, that uncertainty might cause politicians to defer the difficult decisions. That will lead to a downgrade. That will lead to a sterling crisis, and the whole thing spirals from there. But personally, I think that is a bit melodramatic.
FOSTER: Everyone watching the euro, right now. Right, after the break we are going to be speaking to the head of Nasdaq OMX, lots of questions to ask him about his company's results. Also, what he thinks about regulatory changes that are taking place in the U.S. and whether or not they are achievable.
FOSTER: Welcome back. I'm Max Foster, in for Richard Quest, and this is "QUEST MEANS BUSINESS" here on CNN.
Now, if you're under 25 at the moment, economic conditions are probably tougher than they've been at any time in your life, and it's all down to decisions made by people much older than you. Now, a group of young people are making their voices heard at a summit here in London. It's called One Young World, and it offers 1,500 people under the age of 25 a chance to have their say about business and politics and religion. Let's hear from some of them right now.
UNIDENTIFIED FEMALE: I'm a financial adviser, and I belong to the (inaudible) academy that teaches free financial consultancy seminars in the Philippines. Our mission - no family left behind. We enrich mind-set, and this is our long-term (inaudible), to helping end poverty in the Philippines.
UNIDENTIFIED MALE: Just have to think of the world not as a collection of different nations, different peoples, but as one humanity.
UNIDENTIFIED FEMALE: What I mean by mobile technology eventually (inaudible) specifically Kenya on the map before (inaudible). For most of the Africans, the mobile phone is like their personal computer.
UNIDENTIFIED MALE: This is -- it has a unique role in developing social enterprise systems.
UNIDENTIFIED MALE: Tired of complaining about the problems that the world faces today and find this to be a great opportunity to finally be heard and to do something positive for my world. It's a great opportunity for any young leader to be heard and to make a change in our world. I look forward to the One Young World summit and all the positive aspects that it brings along.
UNIDENTIFIED MALE: (INAUDIBLE).
(END VIDEO TAPE)
FOSTER: OK. One of the delegates is here in London. And he is a Young World Summit member, Hussain Nada. He's 23 years old and he's representing Egypt.
Thank you so much for joining us. * HUSSAIN NADA, ONE YOUNG WORLD DIALOGUE: Thank you for having me.
FOSTER: What are you -- what's happening at the event?
Just describe what you're going through.
NADA: Well, it's a global summit, the first of its kind. It brings about -- over 1,000 young individuals like myself from 100 different countries to come together to try and steer the world in a -- in a sense of correct direction toward drafting the different resolutions.
There are going to be six different issues to talk about. One of these issues, of course, is going to be the global economy and its role.
FOSTER: Yes. And how were you picked?
How were the different members picked?
NADA: Well, what you do is, first of all, you have to be an active member of society, meaning you have to have engaged in extracurricular activities and things of such like. And then you have to have a keen interest in the issues that are facing our world today and to want to have a means of solving these issues.
And then what you do is you create a profile on one of the many social networking sites such as YouTube and Twitter...
FOSTER: And (INAUDIBLE).
NADA: ...and then you have your peers vote for you.
NADA: Then after that, you're -- you're elected.
FOSTER: And you're meeting peers from around the world. And when you're discussing the global economy, what would you -- how do you describe the mood and how it's been handled by the generation ahead of you?
NADA: Well, what we want is a chance to be heard by the older generations. We want to have a say in what happens. And right now, this is the first step in -- in several other steps that are to come so.
FOSTER: But what do you think the older generations have done?
FOSTER: What do you think of them?
NADA: Well, they left us...
FOSTER: Be honest.
NADA: ...with quite a mess, to be honest. They left us with quite a mess to clean up.
FOSTER: That you're going to have to sort out?
NADA: We're going to have to sort that out, of course. Of course.
FOSTER: Because you're going to have these huge mountains of debt...
NADA: Of course. Of course.
FOSTER: ...in each country to try to resolve.
NADA: Of course.
FOSTER: So is there a -- is there a sense of anger?
NADA: It's not so much anger as it is regret as to letting the older generations take control. I think it's time for the younger generations to step up now and to say you know what, we have a say in this. It's our world, too. And you have left it with a sense of damage and we have to repair it now. So let us step in and do what's right.
FOSTER: So in terms of fixing the economy, what do you think those world leaders you're meeting can do?
NADA: Well, first of all, they have to provide us, as a younger generation, with the necessary resources into accomplishing better fields in the jobs, meaning provide us with better job training, give us the -- the needs that are suitable for us to be working in successful working environments, things as such.
FOSTER: And what do you think you're not getting which you do need more of?
When you talk about training, what do you mean?
NADA: Well, what happens is you have an individual who graduates. He's 23 years old. And he's trying to find a job and he can't find a job in his field of work or in what he desires. And when he finally finds a job, he -- he expects a certain wage, for instance, and he doesn't get that wage. So, as a result, you become a depressed individual. You don't want to work anymore. You don't want to do anything.
FOSTER: Do you think there's a lot of pessimism in your generation or is there a lot of optimism that you're going to do things better?
NADA: We're definitely an optimistic generation, that's for sure.
FOSTER: And do you think a lot of these people you're meeting are going to be...
NADA: Very much...
NADA: We're all united under one belief.
FOSTER: OK. So there's common feeling around the world about this?
NADA: Yes, sir. Yes.
FOSTER: OK. Thank you so much for joining us.
NADA: Thank you for having me.
FOSTER: We'll be back in just a moment.
We're going to speak to the NASDAQ's chief executive after this short break.
FOSTER: The second largest equity exchange in the United States says business was sound in this latest quarter. The NASDAQ OMX Group netting (INAUDIBLE) $43 million, up 23 percent. Job cuts and a rise in prices for some of its training platforms helped boost the bottom line even though revenues were down a little in the quarter, a drop of 8 percent -- not as bad as analysts had expected.
Joining me now from New York is Bob Greifeld.
He's CEO of the NASDAQ OMX Group.
Thank you so much for joining us.
It seems extraordinary that your business has stayed...
ROBERT GREIFELD, CEO, NASDAQ OMX: Good afternoon.
FOSTER: ...pretty steady when, actually, you would assume that the amount of trade that's going on is down sharply.
Just give us a -- a picture of the amount of business that's being done on the Exchange.
GREIFELD: Well, what was remarkable about our fourth quarter of 2009 is that we did see a decline in volume in two -- in December, but still, we had a very solid quarter. We reported nine gap (ph) earnings of 46 cents a share. That compares to the 42 cents a share in the third quarter of 2009.
So we see increased activities in the first quarter of 2010. So we're optimistic going forward.
FOSTER: Having said that, your -- your equity market share is actually down slightly.
What happened there?
Who's taking away your business?
GREIFELD: No. What happened was we declined slightly is the beginning of the quarter then we rose toward the end and that trend lines has con -- continued in 2010. So we're very happy with our market share gains in U.S. cash equities.
It's also interesting, in Europe, we have the highest market share of any of the established exchanges and we're over 80 percent.
FOSTER: OK. One of the things that's going to really start affecting you is all the regulatory reform that we hear about from President Obama.
What's your view about what you've heard so far from him?
How realistic is it to put this plan into action?
GREIFELD: Well, I think what's known as Volcker Rule is -- has some intellectual merit. But I think in real life, it's going to be very difficult to implement.
In particular, what is proprietary trading, what is not proprietary trading?
When we look at our customers, we see they do a lot of trading to facilitate customer activity. And in that facilitation process at points in time, they have positions.
But does that mean it's proprietary trading?
I don't think so. I think the definition would be quite elusive.
FOSTER: Do you think this is because the White House doesn't fully understood what it's getting involved with or that it's not being realistic about what it does understand?
GREIFELD: Well, I -- I don't want to comment on that. But as I said, I think it's very hard to define proprietary trading. I -- I think you'll see probably some move to -- to capital standards as a way to enforce behaviors that are perceived to be proper. And I think when you get into the weeds of what's proper and what's not, it's just very, very difficult.
FOSTER: Will it make much difference, then, the regulatory reform?
GREIFELD: What will be most different?
FOSTER: Will it make a difference?
Will it make the...
GREIFELD: Well, I think (INAUDIBLE)...
FOSTER: ...will there be less risk taking?
GREIFELD: Yes. I -- I think it certainly will. When you look at the over the counter derivatives market, that is the largest unregulated market on the planet and that applies, you know, for all of, certainly, Western society.
And you will see central clearinghouses come into that market, that will dramatically reduce systemic risk in that market. And I think in time, you'll see transparent price discovery, which will bring efficiencies into the market.
GREIFELD: So at the end of the day, financial re-regulation, both here and in We -- in Europe -- will have dramatic changes.
FOSTER: So the other thing I wanted to ask you was the insight that you have into the state of investors' minds, just from what goes on on your exchanges. And investors seem so nervous right now. If you see what happened last week, their reaction to European debt figures and those jobs numbers, as well.
How would you describe the state of the global investors' mind right now?
GREIFELD: Well, I -- I think you state it right. The only thing I would say that's relatively positive is the appetite for IPOs has certainly increases. When we look at 2009, over 90 percent of the IPOs were in the second half of the year. And we see a strong backlog in 2010. We hope these IPOs have the ability to come into the market.
But the fact is that in 2009, the second half, we had a number of IPOs where investors were willing to take a chance on the future, believing in, certainly, macroeconomic forces and also belief in the validity of the business model.
So we live in a nervous environment, but clearly we can see -- we can see pockets of opportunity.
FOSTER: At the back of their minds, is it that they think that there might be a double dip recession, we haven't seen the worst of this yet?
GREIFELD: Well, certainly, I'm not going to make a prediction on whether we're going to a double dip or not. But I would say this much, we're clearly in a better position than we were a year ago and we do see, generally, strengthening business conditions. We certainly follow our listing companies very well. And we're proud to see that Cisco is in the process of hiring a significant number of people.
Our customers in the banking sector, both Morgan Stanley and Bank of America Merrill Lynch announced last week that they'll be hiring people.
So if you look for it, there are positive signs out there.
FOSTER: Good stuff.
Bob Greifeld, CEO of NASDAQ OMX, thank you so much for joining us on the program today.
GREIFELD: Thank you.
FOSTER: Let's take a look at how the -- the U.S. stock market is getting on this session. And we've been -- we noticed earlier that it's down slightly. Nervousness amongst those investors that we were just talking to Bob about obviously still there.
Stephanie Elam is joining us now from New York with the latest on her assessment.
What do you make of things this Monday -- Stephanie?
STEPHANIE ELAM, CNN CORRESPONDENT: Well, Max, we kind of have a bit of a Monday doldrums, if you will. We haven't seen a lot of movement here, just a bit of wavering around the flat line on the Dow. And it's pretty much remained at or just below the flat line for most of the session. The NASDAQ has managed to stay on the up side for the most part, although right now we are seeing some red in the screen.
It's really been a rocky couple of weeks for the market. The Dow fell below 10000. That was the first time we've seen that in three months. That happened on Thursday.
Going into today's session, the blue chips are now down 4 percent for the year. And there's not really a lot going on on the economic calendar this week, so investors are primarily focusing on debt problems in Spain and Greece and whether the U.S. dollar can hold its own despite the pressure overseas.
The big question hanging over Wall Street is whether a global economic recovery is truly underway, especially after this fly (ph) that we've seen starting off the year. And the fact that we don't have a clear answer is making a lot of people nervous -- and, Max, that means that this may be another volatile week.
Is there any sort of positive sign in the earnings figures as we get toward the -- the end of this season?
ELAM: Yes, you know, overall, the earnings have actually been pretty good when you look at the year end numbers that we've gotten here. We also know about three quarters of the S&P 500 companies have managed to come out on the high end of expectations. That's something Wall Street really likes to see, even if the market hasn't necessarily been showing it.
But today we heard from Hasbro. We also heard from CVS Caremark. The toy maker, Hasbro, posted a big surge in quarterly profits. That was mainly due to demand for toys for -- and games related to "The Transformers" movie franchise. Hasbro is anticipating 2010 to be a strong year, as well, with toys tied to release of "Iron Man 2" as well as "Toy Story 3." The company is the second largest toy maker after Mattel, which also gave a strong 2010 outlook last week. Hasbro's shares are up 12 percent right now, near their highest level since September of 2008.
As far as CVS Caremark, they reported a 10 percent jump in profits. That just way, way exceeded expectations. The drugstore chain has helped - - it has been helped by a -- a pharmacy benefits unit. Sales overall topped those of rivals Rite Aid and Walgreen's. And that has CVS shares spiking since -- 6 percent right now.
But this just goes to show you, Max, that even though the numbers have been coming in stronger for a lot of these companies, it hasn't been enough to overcome the jitters that we've seen on Wall Street here and, also, on your side of the planet.
Thank you so much, Stephanie, for joining us from New York.
I want to get some breaking news we're getting now about the fallout from Michael Jackson's death.
The late pop star's personal doctor, Conrad Murray, has been charged with involuntary manslaughter. That's breaking news coming to you from CNN.
So the late pop star's personal doctor, Conrad Murray, has been charged with involuntary manslaughter. He's expected to be charged later today at a courthouse in Los Angeles. That's breaking news following the death of Michael Jackson.
We'll bring you more on this, of course, as we have it confirmed, including those charges.
Right now, though, we're going to cross to the Weather Center and speak to Guillermo, who's giving us the latest from there -- hi, Guillermo.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Hi.
A little bit of a challenge in here, trying to figure out the delays that we have at airports. It's important to point out, everybody, coming to the States, Washington, especially Washington, Baltimore, Philly -- what happens in here is that the weather is fine after the big snow that we got this weekend, but there's a backlog of delays and cancellations. So even though conditions are fine and the airport is operating normally -- you will hear that -- at the same time, everybody is getting delayed because they are trying to catch up with the -- the problems from the weekend.
We have another system coming our way, so if you're planning to come to the States, don't think, oh, I wasn't there on the weekend, I'm fine. Look at all the advisories and warnings and watches in place all over mid - - the Midwest all the way into the Northeast. And this is the next system that is going to come and cause probably 20 centimeters of snow and rain in the South here. And it's going to happen this week.
So it's gradually advancing. Right now, the problems are in Little Rock, Arkansas. It's not a big airport, but other big airports are going to be impacted like they have this past weekend.
OK, look at this now -- 45 centimeters is what we got this weekend in Washington, D.C. and only four storms since 1899 as big, a little bit smaller or larger than that.
Delays upcoming, Dallas -- and let me tell you one thing quickly. I was checking out London, as well, because you got snow -- light snow at Heathrow. You're expecting the same thing. Paris may see light snow, too.
The problems are going to be in the south here, Max, with this low, as it trails across the southern parts of Europe, with winds, with heavy rain in Spain, Portugal. Again, another system here, Barcelona now under those clouds. And snow in Bucharest. That's where we have the delays in Europe right now -- Bucharest here in Romania.
And then in the north, we have dry -- mostly dry but gray conditions. A little bit more snow than last weekend, we are seeing, not only in the higher elevations, but Germany. Berlin again back with snow there; Southern France with some snow.
This is the overall picture of Europe. So you've been advised, especially in the east there, Ukraine, Russia, Belarus and the Balkan Peninsula.
Stay with us.
Max will be back after the break.
This is QUEST MEANS BUSINESS.
FOSTER: More now about that breaking news resulting from Michael Jackson's death.
The late pop star's personal doctor, Conrad Murray, has been charged with involuntary manslaughter.
Ted Rowlands is joining us now from L.A. -- Ted, you're at the courthouse.
TED ROWLANDS, CNN CORRESPONDENT: Yes, Max. And just within the last few minutes, the Los Angeles District Attorney's office did officially charge Dr. Conrad Murray, Michael Jackson's personal physician, the physician that was with Michael Jackson when he died, charging him with, as you mentioned, one count of involuntary manslaughter.
In the district attorney's press release, it says that Mr. Murr -- Dr. Murray is charged with, "unlawfully and without malice killing Michael Joseph Jackson in the commission of an unlawful act."
The maximum possible sentence, four -- the -- in the event of a conviction, you know, the involuntary manslaughter charge is four years in state prison. Of course, that's a long way down the line. Murray is expected to be arraigned on these charges, in his initial court appearance here, at this courthouse, outside the downtown Los Angeles area, over by the airport. It's called the Airport Courthouse.
As you can see, media from around the world has camped out here in anticipation of Murray's arrival, which is expected within the next two hours.
His arraignment has been set for 1:30 Pacific time. So less than two hours from now, we do expect Dr. Murray to make his first court appearance and his first answer to these charges.
We also expect his attorneys to hold a press briefing to say how they will combat these charges.
But the headline is that after six plus months of investigation, the Los Angeles District Attorney's office has charged Dr. Conrad Murray with one count of involuntary manslaughter -- Max.
FOSTER: And I see now, we get the first sense of his reaction to this.
What do we know so far about his position?
ROWLANDS: Well, basically he is saying that he didn't do anything that would have -- should have killed Michael Jackson. And their legal team will first attack the cause of death, saying that the Propofol that he admitted given -- giving Michael Jackson was such a low dose, it shouldn't have killed him. And he will argue that he was the last of a long line of doctors that had given Jackson not only this Propofol, but other things.
We haven't seen the toxicology reports of this case, either. One of the potential strategies to get out of this would be that if something in Jackson's blood didn't match what Murray gave him, he could use that, as well.
But the bottom line is medical experts say this was a drug, this Propofol was administered to Michael Jackson in a setting that it shouldn't have been given to him. It wasn't in a hospital or a clinic. He wasn't monitored. He was given this powerful anesthetic, which knocks people out for surgery, usually -- usually -- he was using it as a sleep aid in his home and that was inherently dangerous. And that's why you see these charges here today.
FOSTER: And, as you say, this has been a story that has unfolded over many months.
And what have we learned about Michael Jackson and his -- his medical history over that time?
ROWLANDS: Excuse me, Max. I didn't -- I didn't catch the -- that question.
FOSTER: I'm just wondering what we learned about Michael Jackson and his involvement in medicine, as it were, over that -- over this period of the investigation, because all sorts of details have leaked out about how ill he was and what sort of treatments he was taking.
ROWLANDS: Yes. I think it -- it -- conservatively, you could say that since his death, people have come forward and have said that over the years, they had given Michael Jackson X, Y or Z. In fact, what this powerful anes -- anesthesia, Propofol, other people have come out and said, yes, I gave it to him back when he was touring in Germany years and years ago.
So a -- a pattern of using drugs specifically as a sleep aid has come out since Jackson's death. And Murray seems to be sort of the last man standing in a long, long list of doctors that provided the pop star with what he wanted in terms of drugs over the years.
FOSTER: OK, Ted, just before you go, just take us through the series of events that we expect to happen in the coming hours.
ROWLANDS: We expect that within the next few hours -- actually, probably sooner than later -- Dr. Conrad Murray to show up here at the courthouse to answer to these initial charges, the one count of involuntary manslaughter. From there, the judge is expected to allow him bail, because he doesn't -- you know, he's not a flight risk by any stretch of the imagination.
So he'll probably make bail, leave this courthouse and be allowed to go back to his home in Houston, Texas. And then, of course, he'll be coming back and forth between Houston, presumably, and Los Angeles, as this trial proceeds.
When will it actually go to trial?
Probably some time late this year at the earliest, unless -- unless Murray's legal defense team wants to push it through. But that would be highly unlikely given the complicated nature of this case.
FOSTER: OK, Ted, just reminding viewers that Dr. Conrad Murray, who is Michael Jackson -- or was Michael Jackson's personal doctor -- has been charged. And, Ted, as we say, is outside the courthouse in LA.
I don't know -- I know you're not a -- necessarily a lawyer, Ted, but I don't know if you can explain what the phrase means when they say, "unlawfully and without malice kill Michael Jackson."
What does that actually mean?
That seems to be contradictory in one sense.
ROWLANDS: Right. Well, basically what they're saying is that his actions were not with malice in that he didn't -- they're not alleging that he tried to kill Michael Jackson by any stretch. That what he was doing, he consciously knew could kill the pop star. What they're alleging is that his actions were so egregious that they rose to the level of being a felony in the United States, and specifically in California law, that he was negligent, but it was without malice and that he didn't try to kill him.
However, they are holding him accountable in the singer's death because of his actions, which they say caused his death.
FOSTER: Ted Rowlands in LA.
Thank you so much.
Back with you when we get that appearance at the courthouse behind you.
Back in a moment with an update of the markets.
FOSTER: Let's take a look at those U.S. markets, how they're faring this session. It's a Monday and it was a terrible week last week, so we're waiting to see if that will continue. It is continuing, to a certain extent, down a third of 1 percent, but not nearly as bad as last week. Stocks seesawing over the day, really, about concerns about the economic recovery in the U.S., but also global considerations. European problems keeping investors very much on the edge. The euro falling today, as speculation -- speculators are behind that, as well.
The NASDAQ looks a little healthier than the other indices, interestingly.
Now, the European markets made a bit of a come back today, their worse week in 11 months last week. Miners led the gains here in London. Steel makers were strong in Paris and in Frankfurt. And the French banks also added weight to the -- the CAC 40.
In Zurich, the pharmaceutical stocks helped lift the SMI. It was up 1.32 percent, as you can see. It was a mixed picture for stocks in Southern Europe. The main markets in Spain, of course, could both bounce back a bit following those heavy loses last week.
That's it for QUEST MEANS BUSINESS.
"AMANPOUR" is up next.
But the news bulletin next.