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QUEST MEANS BUSINESS
The Best of Quest
Aired December 31, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Bail-outs of budgets and economic batterings. It's been a bruising year. The life of the chief ex -- the Heinz CEO says there's more to it than counting the beans.
And we end the year with a bang. A movie stuntman shows us his world at work.
I'm Richard Quest. And, yes, I mean business.
Good evening. Welcome to this special edition of QUEST MEANS BUSINESS, as we look back at some of the most important moments of 2010.
After all, it is at this point that many of us are looking forward to gifts and the hand-outs. But 2010 will be the year that Greece remembers it was forced into accepting a huge and dramatic hand-out from the E.U. in order to survive and stave off bankruptcy.
It was the year of the bail-out. And it wasn't only Greece. Ireland also had to accept a huge bail-out, and we'll talk about the Irish position in just a moment.
The crisis in sovereign debt began in Greece, where a rescue package was agreed with the European Union and the IMF that was worth $146 billion over three years. The very package sent shock waves through the eurozone. The move was designed to keep the euro stable and rein in a Greek deficit that had spiraled out of control. At nearly $400 billion, the deficit had become larger than the Greek economy and had threatened to take it down.
Back in January, I spoke to the Greek prime minister, George Papandreou, at the World Economic Forum in Davos. Then, he insisted Greece wouldn't need a bail-out. I asked him about that, and here's what he said.
(BEGIN VIDEO CLIP)
GEORGE PAPANDREOU, GREEK PRIME MINISTER: We hope not to reach that point. We are, I believe, with the credibility we have with our program -- and this is a very specific European framework, which is the growth, the stability and growth plan, which will get the stamp of approval from the European Commission, and then, of course, by the ECOFIN, the European Union in general. That, I think, is a very important credibility point, which will allow us then to stabilize the markets vis-a-vis Greek bonds.
QUEST: To use an unpleasant word, are you saying you do not expect to see and require a bail-out?
PAPANDREOU: I don't know why that's an unpleasant. We don't need a bail-out, and we're not looking for a bail-out.
(END VIDEO CLIP)
QUEST: As we now know, Greece was not the only country which would need to be bailed out by the end of the year. Ireland also got into very deep financial problems when the banking industry nearly took the entire country over the cliff.
Ireland's prime minister, Brian Cowen, asked for a $113 billion rescue package from the E.U. in November, after its failing banks threatened the entire nation. Now, it became a huge issue of national pride for the Irish people. Like his Greek counterpart, Mr. Cowen spent days insisting his country would not need a bail-out.
(BEGIN VIDEO CLIP)
BRIAN COWEN, IRISH PRIME MINISTER: At the moment, we're having discussions and see where we could apply for the facility, what would be the general shape and package of that.
UNIDENTIFIED MALE: So, there will be strings -- there will be strings attached. You don't think that'll be one of the strings attached, one of the penalties Ireland will have to suffer, raising the corporate tax rate?
COWEN: Well, as I've said, these are -- the whole question of our taxation policy is a matter for national governance (ph).
(END VIDEO CLIP)
QUEST: The eurozone, with the IMF and others, have put together a bail-out fund for the best part of $1 trillion, aiming to ward off any speculators.
However, Portugal and Spain are very much in the market sights. The whole issue of contagion has been on the mind. And the financial squeeze has been testing the very foundations of Project Europe.
All the talk is of another bail-out coming hot on the heels of Ireland's. And the only question is, where next?
The survival of the single currency itself is in question, despite the best efforts of those in charge.
At the height of the financial crisis in Ireland, I spoke to the French finance minister, Christine Lagarde. And I put it to her that countries like Ireland are now having to face this fact. If you join the euro, you must give up some of your sovereignty.
CHRISTINE LAGARDE, FRENCH FINANCE MINISTER: Well, being part of the same monetary zone with one single currency, which is the public good of all member states, and each and every member of the population of each and every member state. You can call that a loss of sovereignty, but it's, in effect, a common asset that we have.
And we are joining forces in that respect, which is why we are giving a hand to Ireland at the time when it's been very difficult for the Irish people and Ireland as a result of market appreciation...
QUEST: But does it mean...
LAGARDE: ... of the risk.
QUEST: But there's a reluctance of policymakers -- including yourself to some extent -- to basically call the spade the shovel, and say, yes, you did give up some of your sovereignty when you joined the euro. You're going to have to take some of the medicine that we are prescribing.
LAGARDE: It's a program that we're putting in place. And a program is -- there is quid pro quo. So, you give on the one hand at discounted rates, however, you know, difficult that is.
But in consideration for that, there must be commitment on the part of those that receive the program or have the benefit of the program. And that takes the form of very strict management of public finances, cuts in the compensation of the civil servants, and any and all other measures that have been taken and decided by the government of Ireland.
QUEST: Quid pro quo.
LAGARDE: That's how you call it, I suppose.
QUEST: There's one aspect in all of this, as commentators are now saying...
LAGARDE: It's not qui pro quo. It's quid pro quo. In other words, you get something in consideration for something.
QUEST: There is one thing, though, that we are inexorably moving towards. And that is a realization that monetary union cannot exist without greater fiscal union, and the P word, political union. That's the truth, isn't it?
LAGARDE: We are moving in that direction, Richard. We are definitely moving in that direction.
If you look at the work that has been undertaken by Herman Van Rompuy, the president of the European Council, together with the task force, of which I am a member, that's where we're heading. We're heading towards better coordination, more joint economic governance, accountability, sanctions, if things -- if the discipline is not respected. That's what you call better inclusion.
QUEST: Because the euro won't work without it. We've -- you've discovered that over the last few years. The euro cannot work with just monetary union on its own.
LAGARDE: Well, the crisis has made it plain clear, that we have to respect the same principles, and that we cannot have exceptions and derogations, and what have you. And once you agree that you have to keep the deficit down, that you have to reduce the debt, you just have to stick to it. Yes.
QUEST: Hasn't the one thing been showed over this crisis, ma'am, and that is that the institutions were found wanting -- not through any perhaps lack of ability of those involved, but they simply couldn't cope.
LAGARDE: Which is why it's...
QUEST: Would you agree with that?
LAGARDE: Well, there have been deficiencies, clearly. I'm not trying to, you know, evade that. There have been discrepancies. There have been shortfalls.
And obviously, this European Union is being built through crisis and was initially created as a result of a major crisis in Europe. And all the founders of this European construction have actually said so. It builds up and it strengthens over a crisis.
QUEST: But you're saying that we are destined to live our lives by crisis, then, if we accept that.
LAGARDE: I'm talking about institutional crisis.
QUEST: Yes, yes. Institutional crisis.
LAGARDE: And that's -- in a way, that is the way Europe, you know, evolves, strengthens, gets better.
QUEST: Are you worried come January, when the bankers' bonuses come out, we are -- just as austerity measures hit all of us in higher taxes, and what, lower social services -- the bankers are going to make off like bandits?
LAGARDE: I think the bankers had better be careful when they attribute bonuses.
QUEST: I'm sorry.
LAGARDE: I think the bankers better be careful when they attribute bonuses come January.
QUEST: Is that a threat?
LAGARDE: It's not a threat. It's just a call for a sense of public interest, which I know some banks share. And, you know, there are rules that have been put in place, and they need to be respected.
QUEST: Jean-Claude Trichet says the crisis will continue until countries can prove they are serious.
(BEGIN VIDEO CLIP)
JEAN-CLAUDE TRICHET, EUROPEAN CENTRAL BANK PRESIDENT: All advanced economies have big challenges in the present time after the worst crisis in our advanced economies since World War II.
(END VIDEO CLIP)
QUEST: More from the president of the European Central Bank after the break.
QUEST: Even now at the dawn of 2011, many European banks remain on life support. Funds from the European Central Bank continue to flow into the region's neediest institutions, keeping them alive.
Now, banks will be able to draw on that money until well into next year. The emergency funding continues instead of being cut off cold.
And the ECB will help governments borrow money to keep on paying the bills, by buying up bonds on the open market and helping to drive down the painfully high price of debt that's rising ever higher.
Simply bailing out struggling nations one by one is no longer effective, as Ireland has proven. The head of the ECB, Jean-Claude Trichet, says these measures are extraordinary, and they are temporary.
The tone has shifted remarkably over the course of the year. Policymakers have been hinting that it was time to wean the banks off their emergency funds, roll back this extraordinary intervention -- apparently, not at the moment.
I spoke to Jean-Claude Trichet and asked what had happened to the exit strategy.
JEAN-CLAUDE TRICHET, EUROPEAN CENTRAL BANK PRESIDENT: We have decided to continue to practice full allotment at fixed rates, not only for the one week operation, the main refinancing operation or for the one month, but also for the three months. And these are non-standard measures that we have judged appropriate in the present circumstances for being sure that we can transmit correctly our monetary policy stance.
So, all our non-standard measures are commensurate to this, I would say, impairment of the transmission of monetary policy. We have judged that this was, today, the right decision.
QUEST: Which clearly suggests -- well, not -- it says bluntly that the mechanisms are still -- that the markets are still not normal, and that the ability of monetary policy to drag Europe back into good growth is still not there.
TRICHET: No, I wouldn't say that. I would say only that the monetary policy stance that we have -- one percent interest rates -- is, in our opinion, appropriate, and would permit us to continue to have a very solid anchoring of inflation expectations.
But it's true that we see tensions on markets, and we judge that it is necessary to have this level of non-standard measures.
You remember in the past, we had a one year non-standard measure...
TRICHET: ... the six months non-standard measure. We exited from that. But at the present moment, we consider appropriate to go on with this three months, full allotment fixed rate, which is commensurate to what we see for a good transmission of our monetary policy.
QUEST: Now, you called...
TRICHET: We do not -- we do...
QUEST: Go ahead, sir. Go ahead, please.
TRICHET: No, I only wanted to say that we are not injecting liquidity in the euro area in a manner that would not be commensurate to the monetary policy stance that we have.
We have also this program of purchase of security, and we withdrew all the liquidity that we are injecting when we pursue that program. I say that it was an ongoing program. And I have said that also...
TRICHET: ... I have to say it with the European Parliament.
QUEST: Now, you talk of -- you call it the SMP. In my language it's bond purchases, or security purchases, that our viewers will understand.
When you said two days ago that you had all the tools at your disposal, you were telegraphing to the markets and to the world, bond purchases would continue.
TRICHET: The goal is to permit restoring as good as possible a transmission mechanism for our monetary policy stance, which again we judge appropriate.
We have the standard measures, the non-standard measures. Standard measures are there to permit, to be up to our responsibility, which is price stability.
By the way, our track record is, if I may, Richard, a good one, because we have delivered 1.97 percent of inflation as a yearly average over the past 12 years.
QUEST: For most of us, finding yourself leaping from burning cars or flying through windows probably means you're having a bad day at the office. Not if you're this man, who we're shadowing in our stuntman world at work.
QUEST: Here on QUEST MEANS BUSINESS, it is a priority that the program talks to the people who matter. Which raises the question, what does it take to be a big decision-maker?
A group of top chief execs contributed to a book released earlier this year with their own top tips. And here are some snippets of chief exec wisdom.
It is easy to become isolated at the top, surrounded by yes men and women who tell you what you want to hear. There's no doubt you have a lack of private life. The privacy goes. Everything you do reflects on the company, and vice-versa.
Now, the next one might sound so obvious. Leadership is crucial. But leadership is more than just having the vision. Leadership involves getting people to follow that vision and execute.
The food company Heinz sponsored the study. I had an entertaining chat with their chief exec, Bill Johnson, about how to be the boss.
WILLIAM R. JOHNSON, CHAIRMAN, PRESIDENT AND CEO, H.J. HEINZ COMPANY: Many of us get to these jobs by successful operations and other ways, venues up to the top. When we get there, we're not sure how to acclimate. We're not sure how to navigate. And frankly, we're not really sure how to innovate, because that's not necessarily what we've done.
So, I was concerned that maybe I had a unique view, and maybe I was the only one that had that view. So, I asked a group to go out and do a study of 27 sitting CEOs, including myself, to determine what others felt.
We originally titled this study "What I Wish I Knew." It's now become, obviously, a study on leadership. But it was very enlightening to learn what others didn't know, as well as what I didn't know, when we acceded to these jobs.
QUEST: Bill, this is a quote that I read from the book. Never forget in this job, you are only as good as your last quarter. That's a bit like me saying tonight, I'm only as good as my last show.
But isn't that exactly the problem with leadership? In your focus on the last quarter's EPS, you're not focused on the long-term strategic goal of the company.
JOHNSON: I think there's a real value to understanding the quote in the context of it. I think ultimately, it comes down to establishing a creative tension between the short term and the long term, and reaching an appropriate balance in terms of how you manage both.
It is a very difficult thing to do. And frankly, most of us who get to the top are not prepared to deliver that balance, because that's not what we've done. Our focus has always been on delivering next week's results, or last month's results, or whatever it may be. And as we get to the top, there's enormous balance required.
QUEST: Another quote. "I had no idea how physically demanding this job would be," it says. "To be successful, I need to be energetic, focused and disciplined."
And a fascinating idea. I frankly have always wondered how you guys manage to sleep on planes, sleep in cars. You never yawn when you shouldn't yawn.
How do you do it?
JOHNSON: Well, partly it's discipline, and partly it's just a function of the beast, I think. Those of us who get to these jobs -- I mean, I got up this morning and went 5.5 miles in a run. And I try to do that every day.
I've been in Russia, Eastern Europe, Turkey, Asia the last couple of weeks. And you just sort of acclimate to it.
And the secret is just to keep going, to keep disciplined...
JOHNSON: ... and to keep focused on the task at hand.
QUEST: Right. But that brings me to my point. Are CEOs born, or are they made?
Now, I recognize it's a truism that we can't prove one way or the other, because by the time you've got to the job, you're already there.
But do you think it's something you learn, or it's something that's innate within you?
JOHNSON: You know what, Richard? I believe it's a bit of both. I think you can teach leadership. I think Vince Lombardi, the great American football coach, once said, leaders are made, not born.
Having said that, I do think there's a certain amount of energy that's inherent in the being. I think there's a certain amount of curiosity and desire to learn more.
I mean, one of the things that I've really enjoyed about my job is seeing different cultures, learning different ways of living around the globe. If you don't have that drive, if you don't want to have that curiosity, you're not going to succeed, no matter how talented you really are.
QUEST: Finally, we've come to the end, and there's a -- I mean, I frankly could talk to you for the next half-hour, but we don't have the time. And, Bill, this -- I notice that you are the chairman, the president, the chief executive. And you're also -- you know where I'm going. I can see you're nodding already.
But the traditional view in the rest of the world is, you don't have the same man or woman being all three. You have a non-exec chairman, somebody who stands as a foil to you as the leader.
JOHNSON: Well, I sort of dispute that, Richard. There's been no inherent or empirical evidence to support one view or the other.
And we have a board of directors that's independent and fiduciaries of the shareholders. And believe me, there's sufficient tension in the boardroom to question the things we do and to make sure strategically and morally and objectively, we're on track. And so, I think the tension exists.
And when I first got this job 12, 13 years ago, I did have a non- executive chair for two years. Moved into that job. And ultimately, that's what'll probably happen to my successor.
QUEST: Bill, will you know -- this is the toughest question perhaps of all -- will you know when it's time to go? Or will you have to be taken out and shot?
JOHNSON: No, I won't have to be taken out and shot. It'll come from a number of sources, Richard. One will be my wife, who once said to me, I'll let you know when it's ready to -- when you're ready to go, because you owe (ph) me (ph) you (ph).
One will be my own sense of whether or not the challenge and the interest and the energy is still there. And another will be if the skill requirements have dramatically changed because the environment's dramatically changed, and whether it's time to bring someone else into the job who brings a different perspective.
QUEST: Being at the top of your game is all well and good when you're the chief exec. But, if the star of our next World at Work has a bad day, he could well be spending the next few weeks in hospital -- that is, if he even recovers.
If you've ever wondered what it takes to be a Hollywood stuntman, we went to London's famous Pinewood Studios to find out in this very risky World at Work.
ROY TAYLOR, PROFESSIONAL STUNTMAN: Stuntmen are the unsung heroes of the movie business. And that's not -- that's not a bad thing, I don't think.
UNIDENTIFIED MALE: Put it in there. Make sure it's home (ph), and then you're ready to fire. All right? I'll leave it on full auto, which...
TAYLOR: For years and years to come, these films will be watched again and again. And even, I suppose, when I'm dead and gone, my kids and my grandkids will be watching the film. And they can say, you know, that's me great-great-granddad, or whatever, and you'll still be entertaining them. It's a good feeling.
One of the stunts I did for "St. Trinian's," the first movie, I was doubling Colin Firth. And I get -- the girls throw Colin Firth's character out the window. So, I had to jump out the window, which was 28 feet up, and I was landing in three feet of water.
COLIN FIRTH, ACTOR, IN "ST. TRINIAN'S": You wouldn't know the way to the hockey pitch, would you?
TAYLOR: If I landed in feet first, I probably wouldn't have been walking again. And if I landed in head first, I probably may not have been coming out of there at all, to be honest.
So, at the moment, we're putting on some squibs, squib hits, which you'll be able to explain, but then I will. It's basically, there's blood packs in here.
UNIDENTIFIED MALE: He'll basically have a single hit button, and he'll be able to control the hit. Suppose he hears the shots of the gun. He'll be able to hit this, and then, obviously, explode the -- detonate the bags on the front of his chest. And it'll part the shirt, and obviously, it'll look (ph) a bullet hit.
TAYLOR: You need a high physical fitness. You need a hell of a lot of skills to be a professional stuntman over in England. That's for sure. You need to be professional in, like, at least six different sports -- like martial arts, horse riding, trampolining, rock climbing.
UNIDENTIFIED MALE: On action, they'll open the doors, get out, go through...
TAYLOR: The scene we're going to do today is, we're going to have -- there's going to be this character that's up on top of this building. And he's got on top of this sort of city hall type building. And he's going to -- he's got a gun, an automatic weapon.
I may need to move the box (ph), so it's, like, further out.
Move that about...
UNIDENTIFIED MALE: Three foot?
TAYLOR: Yes, about that.
The police are going to come in. They're going to ask him to drop his weapon. He doesn't. He gets shot twice in the chest, and then he'll fall to his death, obviously, hitting the floor. So, that's what we're going to hopefully achieve today.
UNIDENTIFIED MALE: Police!
UNIDENTIFIED MALE: You all right, Roy?
TAYLOR: There is a lot of times where you do end up with either broken bones or bruises, sprains, aches. I'm only 30 years old. And to be honest, when I get out of bed in the morning, I feel like a 60-year-old. I'm creaking, and I'm aching.
UNIDENTIFIED MALE: (UNINTELLIGIBLE), you all right?
TAYLOR: I think sometimes a lot of other people on the set will look at the stuntman and go, "What are they doing? They're not even doing anything."
But then when we do it, it hurts.
UNIDENTIFIED MALE: Hey.
UNIDENTIFIED MALE: Well done.
UNIDENTIFIED MALE: Good job.
TAYLOR: That was good. Did they cut (ph) with (ph) that (ph)...
UNIDENTIFIED MALE: (UNINTELLIGIBLE)?
TAYLOR: Is that what (UNINTELLIGIBLE)?
UNIDENTIFIED MALE: Yes, (UNINTELLIGIBLE).
TAYLOR: I'm standing up, chatting to you. So, I think it's gone pretty good. I've got a jingling (ph) going through me at the moment, so it's kind of a nice feeling. So you'll have to forgive me if I sort of go a bit sort of in and out. But, yes, that was good.
And there's only 280 of us in the U.K. that are professional and that do this job. And to be part of that elite group, I'm really proud.
I get to meet some great people, like some of the best actors in the world, which is great. I get to die, but still go home at the end of the day, as well.
So it's kind of -- it's a really good feeling because I've always got a different story to tell when I get home.
(END VIDEO CLIP)
QUEST: In the next half hour, Jim Boulden tackles the thorny issue of hedge funds in our jargon buster.
We host our own Economic World Cup.
And who won in a moment.
QUEST: And a warm welcome back to this as Priya said, edition of QUEST MEANS BUSINESS, the very best of QUEST 2010.
As we traveled down the road to recovery during the year, financial reform became a major issue. I was on Wall Street the day President Barack Obama announced sweeping reforms to the banking sector.
This is how we reacted to the president's plans back in April.
QUEST: We are live from the corner of Broad and Nassau, just by Wall Street.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN, on an important day for the financial world, as President Obama once again puts his political credibility on the line, going head-to- head against the financial industry, telling them be with us, not against us, it's in America's interests to have financial reform.
The president isn't the only one who's pushing a reform agenda. Finance ministers from the G20 will be meeting in Washington over the next few days, as part of the spring meetings at the IMF. The ministers will be reviewing a raft of proposals all designed to strengthen the global financial system and prevent another collapse.
I caught up Wayne Swan, the Australian treasurer, the finance minister who's been leading the charge for financial reform.
WAYNE SWAN, AUSTRALIAN TREASURER: Well, we'll be talking about that this weekend at the G20 meeting. But look, we owe it to the millions who lost their jobs and to the tens of thousands of businesses that hit the wall to fundamentally reform financial arrangements in the global economy.
Failure to do that, failure to learn the lessons will mean that these problems will simply resurface yet again.
So there is a strong need for reform. We need to develop a commonsense set of principles which can apply globally and, of course, make sure there is a degree of flexibility nationally.
QUEST: Do you get the feeling that there is actually now a consensus?
And if there is, what's the core of the consensus?
SWAN: Well, we have to work very hard to get that consensus. And part of doing that is the G20 finance ministers meeting this weekend.
(END VIDEO TAPE)
QUEST: The historic Wall Street reform bill, nicknamed the Dodd-Frank Bill, is now law and the measure represents the biggest rewriting of the rules since the 1930s. One of the named senators behind the bill wants now to go further and harmonize reforms in America with those being taken in other countries. I caught up with Christopher Dodd, the Connecticut Democrat who's about to retire. And I asked him why he spent two years working to change the way investment banks are regulated.
(BEGIN VIDEO CLIP)
SEN. CHRISTOPHER DODD (D), CONNECTICUT: Well, it needed to be done. You know, you went from about a $100 billion to $150 billion over the counter derivatives market to $600 billion with almost no transparency, any accountability. And we watched a residential mortgage market that metastasized through the securitization process because rating agencies weren't doing due diligence. There's so many pieces to this, that in the absence of this bill, we'd be right back where we were in the fall of 2008, subjecting not only the United States, but globally, to the kind of financial meltdown that was being predicted by the chairman of the Federal Reserve.
QUEST: Let's talk about the international...
QUEST: -- because we look between New York, London...
QUEST: -- Hong Kong and Tokyo, no financial center is an island.
DODD: That's right.
QUEST: And to that extent, the U.S. bill doesn't address an international aspect of a global agreement.
DODD: That's a great point. And I met the other day with members of the European Parliament. We're going to plan some joint hearings this fall, early in the fall. We need to harmonize. You're exactly right. If you end up with what I would call sovereign -- sovereign arbitrage, much like regulatory arbitrage, where people go around and shop -- you remember January of '07, how many people came to me from Wall Street and said, you know, Senator, you do that and we're moving to London. My colleagues in London, in the parliament, said, you know, our bankers came to us and said, if you do this, we're moving to New York.
QUEST: The Basel solution...
DODD: We can't have that.
QUEST: Basel 3...
QUEST: -- is still some way off.
DODD: It is but...
QUEST: Basel 3 is some way off. The WTO Doha round is a -- is still a shambles. The G20 has got more committees than you and I can probably count with all our fingers.
DODD: Right. But don't give up. This is what we've got to do, because you're are absolutely right. If we do an island unto ourselves, each nation goes off, a group of nations goes off and just sets their own rules, not trying to harmonize. You can't end up with one set of rules globally. But if the G20 countries end up with at least common principles in these areas, so you don't have what Arthur Burns used to call the race to the bottom -- one nation, one group or other saying, come here, we'll treat you so much better. If we don't do that, we're going to be right back where we were before.
QUEST: And, finally, Senator, we came as close as any of us ever want to see to financial apocalypse.
DODD: That's right.
QUEST: Do you believe that we are safer today and that there can be no repeat of that?
DODD: Well, we are safer today. And based on what we've done with this bill -- and, again the harmonization globally -- I think we can -- we'll have other economic crisis's, as certain as you and I are standing here. We didn't stop that. But we're going to be able to stop these things from mushrooming into the kind of global threat that this crisis posed for us. That much I am certain about.
(END VIDEO TAPE)
QUEST: Many analysts point the finger at hedge funds as some of the biggest financial risk takers. European regulators have said they need to be more transparent.
Our Jim Boulden explored the hidden world of the hedge fund.
And as he discovered, it's a story with many twists and turns.
JIM BOULDEN, CNN CORRESPONDENT (voice over): Secretive, exclusive and notoriously unregulated, a maze of complexity. Allow me to cut hedge funds down to size. The term is tricky to define because it covers a huge range of risk levels and strategies for investing in just about anything -- companies, bonds, commodities, aircraft, even the outcome of a baseball game.
The hedge fund industry was born on Wall Street in 1949 by pioneer Alfred Winslow Jones. He worked for nearly two decades in almost total obscurity before his success was made public by "Forbes" magazine. Jones' original strategy was simple compared to the more complex ones you find today, but he did forever change the financial landscape.
Fund managers have become big players. They shift huge sums of money around the world to take positions that anticipate market changes. In case you feel like a like a flutter, hedge funds are not for the man on the streets. The huge sums of money involved can generate astronomical profits. But beware -- hedging investments are often made with a high degree of borrowed money or leverage and the risks are great when it all goes terribly wrong.
Of course, hedge funds are here to stay, but very soon we all may know a little bit more about them.
Jim Boulden, CNN, Hitchin, England.
QUEST: At the height of the crisis, AIG was rescued with more than $180 billion in U.S. taxpayers' money.
While I was in New York, I met the man who created AIG, Hank Greenberg. Not surprisingly, Hank had a lot to say about the world after the crisis.
QUEST: We look now at how this all transpired.
Let's talk about the bankers themselves.
First of all, I -- I've got to ask you, you know, because just about everybody in the world and their wife is interested in the question -- the whole question of bankers' bonuses and the -- the indecent haste with which the financial community has justified returning to very high levels of reward.
HANK GREENBERG, CHAIRMAN, STARR INTERNATIONAL & COMPANY: Look, my own experience is, I ran a pretty big company. We didn't have anything like there's -- the topic you're -- that you're discussing. And the maximum salary for anybody was a million dollars, because that's what you got a tax deduction for. Bonuses were very, very modest. There was stock options and stock grants that -- and the most important plan, you couldn't take the stock until you retired.
GREENBERG: So we were in complete harmony with shareholders.
QUEST: Now, as you're -- as you move it to one side and you look at the activities that have taken place over the last six to nine months...
GREENBERG: Well, I...
QUEST: What's your own gut feeling?
GREENBERG: I want to throw up. It's wrong. It's just plain wrong. I mean it's -- it's going back to the way things were.
QUEST: But that brings me to my question, which is which part of the failure of morality in the banking or financial industry doesn't see that?
QUEST: Has their moral compass become so skewed that they can self- justify a return to that sort of behavior?
GREENBERG: You can't do away with innovation and rewards for innovation or you destroy the -- the direction of any company. But there's got to be a balance. And that's really start -- it has to start with the company itself and its board.
And if you have to have a third party tell them, you know, you're -- you're over paying your people, there's an incentive to shortcut, it's got to be within the company.
QUEST: But you're still involved in the insurance industry?
GREENBERG: I am. And investments.
Why didn't you retire?
I enjoy doing what I'm doing. Having -- I'm having a -- I'm having a ball.
QUEST: Are you enjoying it?
GREENBERG: Very much so. I wouldn't do it if I didn't enjoy it.
QUEST: What is it...
GREENBERG: I can only play so much tennis and -- and skiing. But I love doing what I'm doing. I love building.
QUEST: Which must make it even harder seeing what's happened. I mean whichever way we slice it, to see something you've built up dismantled when you love building must be difficult.
GREENBERG: Well, listen, AIG was the largest insurance company in history. There was no company -- insurance company ever larger than AIG throughout history. And, of course, it's -- it's disturbing. Very much so. On the other hand, I'm not dwelling on that. I'm too busy doing what I'm doing.
(END VIDEO TAPE)
QUEST: There's no corruption charges, no cheating scandals and no prima donna players, not in our tournament. The Economic World Cup and it's next on QUEST MEANS BUSINESS.
QUEST: The summer's biggest event didn't take place in a boardroom or a parliament building. It happened on the pitch and we were there to see it -- at least economically speaking, with our Economic World Cup.
Now, the real World Cup 2010 sent South Africa football crazy for two months. And Spain fans certainly won't forget it. They won the tournament for the first time.
Off the pitch, we had our eyes on the economic prize in the World Cup. After all, 32 countries, 32 economies and we wanted to look at the strengths and weakness of each one. And that meant a football powerhouse like Spain, well, necessarily weren't quite as successful in our tournament. After all, Spain have -- it has high unemployment, austerity measures, struggling to rein in the deficit. If it was just the Economic World Cup, they wouldn't have won.
Brazil, however, only made the quarter finals in the football, but we had high hopes for them economically, one of the BRIC nations, strong mining, manufacturing sector and a 7 percent growth expected in 2010.
So, they were our favorites for the tournaments and, of course, the host of the next football World Cup in 2014.
Let's kick off with our Economic World Cup recap with Brazil, as I argued the case with Todd Benjamin.
QUEST: You'd better weigh this, because you -- if it was just economics alone...
TODD BENJAMIN, FINANCIAL ANALYST: Yes.
QUEST: Just economics...
QUEST: -- who should win, between the Netherlands and Brazil?
BENJAMIN: No brainer, Brazil, for all the reasons that Jim's guest just said. You know, fantastic natural resources. Their fiscal position is in good shape. They've done tremendous things over the last decade. True champions.
QUEST: So, Brazil should have. Now, if we take Brazil against any of the others -- and tonight, for example, we have Uruguay and we have Ghana. And I mean, you know, you pays your money, you takes your choice on that one. Both are reasonably run economies today.
BENJAMIN: But I would actually choose the African economy over the South American economy in this particular instance.
QUEST: They both have chops, but you are probably right. But Brazil should have been able to trounce most of them.
BENJAMIN: Well, there's a difference what goes on in the pick and then what happens in the real economy.
(END VIDEO TAPE)
QUEST: Brazil will be hosting the 2014 Cup. As for the next two, there are two new destinations. FIFA has decided Russia will host in 2018 and the tiny Emirate of Qatar hosts in 2022. Uncharted territory for football's governing body -- Eastern Europe and the Middle East. Neither have hosted the tournament before and both are going to need massive spending to get infrastructure ready. That includes stadia, training facilities, transport links, hotels. They'll all need a massive, major upgrade.
Once the crowds go home and the spotlight fades, some countries are left with new state-of-the-art facilities, but nobody to use them.
Nkepile Mabuse reports on one of them in South Africa.
NKEPILE MABUSE, CNN CORRESPONDENT (voice-over): It cost more than $150 million to build and after hosting four games during the World Cup, the state-of-the-art Peter Mokaba Stadium in South Africa's Limpopo Province mostly lies empty and unused.
NDABE RAMAKUELA, DIRECTOR, WORLD CUP LEGACY PROGRAMS: It's not a waste of money.
MABUSE: The director of World Cup legacy programs, Ndabe Ramakuela, says it has not been easy trying to convince some of the country's most popular sports teams to play here. Many would rather use bigger venues, such as Soccer City in Johannesburg and Durban's Moses Mabidha.
Officials say with a maintenance budget of around $2 million a year, the stadium needs to host two big events every three months to offset the costs.
RAMAKUELA: The plans to have maintenance on a regular basis are now completed and we have contacted a number of companies and clubs that will come and play at the stadium.
MABUSE: Without the cash injection, costs of maintaining the stadium's imported grass, its upkeep and security will have to be paid from government coffers.
(on camera): Management insists it's not what happens inside the stadium that should be the focus, but rather the economic activity that's generated in the province by crowds who come here.
(voice-over): Every time an event is hosted at the stadium, hotels, restaurants and street traders are expected to benefit from the influx of visitors.
RAMAKUELA: Outside, the economic benefits almost four times more than what we are spending in a year. So it does far more than just bring in activities to the stadium.
MABUSE: South Africa spent hundreds of millions of dollars to build and renovate a total of 10 stadiums for the World Cup. Some say it was too high a cost for a country where many live without basic services. Just 40 kilometers away from the Peter Mokaba Stadium, Johannah Ragatjie chops wood to make a fire and walks long distances to fetch water. To her, the stadium represents money that could be better spent improving her living conditions. "We don't have water or electricity. We are struggling," she tells me. "That stadium is doing absolutely nothing for us. We don't even go there because we simply can't afford it. It is for people who have money." It is not only here, in Limpopo, where the cost and viability of a World Cup stadium is being questioned. The Nelson Mandela-based stadium (ph) in the Eastern Cape and in Bombella (ph) in Naspros (ph) are also seen as potential white elephants.
Like Limpopo, they do not have their own home football teams and are struggling to attract other big events. The government sees these stadiums as a long-term investment that can generate income through conferences, concerts and the like. But if they fail to do so, South Africa's World Cup venues may one day become symbols of excess resented by the country's poor and desperate.
Nkepile Mabuse, CNN, Limpopo, South Africa.
(END VIDEO TAPE)
QUEST: It's just a few weeks until late January, when we will be heading back to Davos for the World Economic Forum. Twelve months ago, in 2010, we went back to basics to find out how the world's leaders planned to rebuild the global economy.
QUEST: When you go to Davos for the World Economic Forum, you can rely on two things -- an avalanche of big thinkers and mountains of snow. In 2010, the Forum's theme was back to basics -- rethink, redesign, rebuild. Which we thought was perfect to test out on our very own snowman.
QUEST (voice-over): It's a sorry sight. Meet GEF, the snowman -- global economic fortune turned global economic failure.
But how can we turn GEF back upright again, make him proud, once again, to be master of all he surveys?
Back to basics.
Getting things started should be as easy as rolling a new snowball. Like the global economic system, this snow is not fit for the purpose of building a snowman. It won't roll. Which is why here in Davos, the week's going to be spent rethinking how we make a new financial system.
While the rebuilding goes on, some will undoubtedly take advantage, still scavenging over the wreckage, hoping to make a bonus.
(on camera): We know there's plenty of snow, It's just a question of rethinking how to use it. And that's where rethinking the project comes into play. Use a bucket. This should do it. Bigger is not always better. These days, you need to do it differently; add a bit of water. I'm making progress. It's slow-going. Thankfully, I'm not alone. Expert help is appropriately named.
Was ist wir namen?
UNIDENTIFIED MALE: Hans.
UNIDENTIFIED MALE: Yes.
QUEST: Yes. The more hands the merrier to get this snowman right. We need to salvage what we can from that which remains.
Davos is different this time -- paradigm shifts, out-of-the-box thinking. GEF, the global economic fortune, is neither as big nor as beautiful as perhaps we'd like. But it's taken a lot of effort to get us this far. We've had to rebuild, redesign and, crucially, rethink. And if it's not all it might be, well, hey, it's good enough for this year.
(END VIDEO TAPE)
QUEST: And, incidentally, the theme of Davos 2011 will be the new reality. We'll be in Davos for that.
For the moment, that's it for this as Priya said, edition of QUEST MEANS BUSINESS.
As always, whatever you're up to this time in the year ahead, I do hope it's profitable.