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QUEST MEANS BUSINESS
Ransomware Attack Hits Global Companies; Investors Face Dilemma as Venezuela Crisis Deepens; GM CEO: Investing in Diversity and Tech Innovation; Federal Reserve Releases Stress Test Results. Aired 4-5p ET
Aired June 28, 2017 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN HOST: Greif company celebrating the 140th anniversary of their founding, it's amazing what you can do when you ring
the closing bell at the stock exchange. But that's what they're doing with the Dow Jones. No record, but it is nearly 140 points. And I think we
count that as a sturdy gavel from NYSE's Greif and Co. To bring trading to a close on Wednesday, it's June the 28th.
A crippling cyberattack bringing shipping terminals around the world to a halt. One man thinks he has the antidote.
Spiraling violence in Venezuela put investors into ethical dilemma. And GM's chief exec says she needs women and minorities behind the computers to
put cars on the road. Mary Barra speaks exclusively to CNN. I'm Richard Quest live at the world's financial capital in New York, where of course, I
Good evening. Tonight, it's a major cyberattack and it continues to cripple companies across the globe. It is wreaking havoc, particularly in
the world's logistics industries. This is the sort of messages that are being seen on computers in all sorts of industries, if you see this text
your files are no longer accessible. And the demand to send the money in bitcoins, send $300 worth of bitcoins to the following address. Which is
no longer active.
This is serious stuff and it's getting worse. Europol is warning the threat is active with the numbers of victims, computers and companies not
known. And the ramifications are only just being felt. It is the range of businesses that are struggling to resume operations. From shipping to
transportation, and energy that is giving this is a unique character.
So, we put this list together to show you, from obviously the transports to the banks to the insurance companies, to the oil and gas. The virus has
shut down major firms across United States, over here, Mondelez, FedEx, Merck and the like. And then into Europe, down into India and across right
the way to Australia. Obviously, following as the world turns and as the day moves on. Different parts of the world being affected, as they wake
up. And switch on their computers. One researcher thinks he may have an antidote and we'll tell you that in just a moment. The virus has rattled
the markets. If you were with us earlier on "QUEST EXPRESS," it was clear.
(BEGIN VIDEO CLIP)
QUEST: This is the trading post where FedEx trades on the New York Stock Exchange. As you can see trade has been halted pending news. The stock
was up just 1 percent or so, before that announcement was made.
(END VIDEO CLIP)
QUEST: So, FedEx, when that announcement came, it showed that the cyberattack had moved into a dangerous new phase. FedEx said the worldwide
operations of its subsidiary, TNT express, in their words had been significantly affected. And there's a warning, it could have a material
financial impact. A spokesman telling us that the contingency plans were in effect. Elsewhere, a Cadbury's factory in Australia had to stop
production after the attack hit its computer systems. The shipping giant Maersk said normal operations have still not been resumed and shipping
terminal failures have caused major disruptions at the busiest ports in the world, hubs like Rotterdam and Mumbai. And this is still the sign that you
see. CNN's Jose Pagliery, you here last night, Jose, when I asked you, is this getting better or is this getting worse? I ask you the same question
JOSE PAGLIERY, CNN INVESTIGATIVE REPORTER: It's getting worse and here's why. What initially looked like an amateur criminal attack in an attempt
to extract ransoms from companies is now starting to look like a concerted sophisticated attack, a destructive attack on Ukraine and just about any
company or government agency that has business in Ukraine and shares computer infrastructure with them.
QUEST: So, you are saying this originates out or at least the attack goes into Ukraine first.
PAGLIERY: Yes. And here's what we've heard -- especially from Microsoft just in the past few hours -- the start of this attack seems to be a
company in Ukraine, a tax software provider. These are the kind of companies that provide software, so you can do your taxes. Except in
Ukraine, law mandates that you use this software. So that's why by infecting that point, and essentially spreading that infection to everyone
who uses that service, that's how we know that this is starting to spread in Ukraine and targeting people there.
QUEST: Right. But if we bring up that map again, that shows the size and scale of this, Jose, how does an attack on a tax preparation software
company in Ukraine cause that havoc around the world?
PAGLIERY: Well think about how the way the modern business world works. There are computer networks that share infrastructure everywhere. So many
businesses have pushed out parts of their computer systems --
QUEST: But they're supposed to be. We were told there was a patch for this. Some people hadn't used.
PAGLIERY: As it turns out that NSA tool that was used, that takes advantage of that hole in Microsoft software, that's not the only tool
these hackers used. They've used other tools within this attack that help them spread across networks. So, what this really shows is not just that
companies have not updated their systems. But it shows that this attack is really is that sophisticated and is spreading rapidly. The fact that we're
seeing it in shipping right now might be just be because that's where it's most readily apparent. Because everyone relies on shipping and shipping
companies must announce it immediately.
QUEST: Good to see you. Thank you very much. The virus is paralyzing companies, leaving them with few options, number one is Rosneft, the
Russian oil and gas giant said it switched to a back-up system to avoid serious consequences. Back-ups or option two, APM terminals in Rotterdam,
one of the biggest ports in Europe is communicating with staff by Gmail and WhatsApp as it tries to fix the problem. Operation number 3, pay the $300
ransom in bitcoins. Europol is specifically urging companies, do not choose that option as it will simply help fund future attacks.
Michael Daniel is president of Cyber Threat Alliance. Former cybersecurity coordinator for President Obama. He joins me from Tel Aviv. From your
understanding of this situation, what is the gravity?
MICHAEL DANIEL, PRESIDENT, CYBER THREAT ALLIANCE: Well it certainly seems to be a very serious situation. But with most of these cyber incidents, a
usually takes a while for the full extent of it to become apparent.
QUEST: I mean -- are we just I guess doomed to the inevitability of these cider attacks. I know from your work in government and I know that you
obviously studied this carefully. But when there is the potential of say an NSA or a government sponsored leak of a cyberweapon, this puts it into a
different league, doesn't it?
DANIEL: Well it does. To go to your point though, I do think that cyber incidents, intrusions, threats, cyberattacks of this kind they are going to
be a fact of modern, 21st-century life. And all organizations are going to have it get better at managing their cybersecurity risk.
QUEST: That's sort of says -- argument that says, deal with it.
DANIEL: Well, it's not just deal with it. There are things that governments can do. There are things that organizations can do that can
materially reduce their cyber risk. But you'll never be able to drive it completely to zero. So, the idea that you'll be able to completely prevent
all cyber intrusions that you'll be able to keep all bad guys from getting into your network. All the time. That's not realistic. But if you, if
you put in place good cybersecurity programs, good cybersecurity procedures, have a good incident response plan and practice it, these are
the kinds of things that can reduce the impact of an event it can reduce the likelihood of an event occurring to you and it can reduce the impact of
an event, if it does occur to you.
QUEST: If we have been negligent -- or if companies have been negligent at stopping these things coming through the front door with their cyber
prevention, they would be downright forgetful. Indeed, most companies do not have a sophisticated developed plan for what would happen if this does
happen, do they?
DANIEL: That's right. Most companies don't have a well-enough developed incident response plan. That's a critical part of having a good
cybersecurity framework in place for managing your cyber risk. You have to have that assumption that at some point the bad day will happen to you and
you need to be ready for it for when it's going to happen.
QUEST: Finally, the people behind this, state sponsored, organized crime or spotty teenagers, who want to cause havoc and do cyber vandalism. Which
is your gut feeling?
DANIEL: You know I can't tell you at this point. The jury is still out in my mind. I learned very early on during my time at the White House not to
prejudge these situations.
[16:10:05] Because as the information changes, and it will change rapidly over the next particularly 48 to 72 hours. We will learn a tremendous
amount more and then we'll start to have a much better idea of who might have been behind this.
QUEST: Thank you for joining us, sir, much appreciated. Thank you.
A cyber researcher in Israel claim to have developed a vaccine for ransomware in a mere three hours. CNN's Oren Liebermann reports from Tel
AMIT SERPER, CYBEREASON: I didn't believe it would work and I also didn't believe that it will blow out like this.
OREN LEIBERMANN, CNN CORRESPONDENT (voice-over): Amit Serper had a few hours to waste on Tuesday when his dad told him about this new ransomware
he heard about on the news. So Serper got a copy of the ransomware from a cybersecurity website and began poking around.
SERPER: I had an eureka moment. I don't know if it means that I'm good or if they were not good or it's simple. I think I just got lucky, honestly.
LIEBERMANN: In 19 lines of deconstructed code in the ransomware, Serper found a way to prevent the ransomware from encrypting the computer. What
he calls a temporary vaccine by creating a simple file.
SERPER: There is an algorithm there that says, if this file exists quit. If it doesn't encrypt the files and create this file. But it just make
sure that this file exists.
LIEBERMANN (on camera): The file didn't seem to do anything it was just there.
SERPER: Yes. It's just like a marker in the sand.
LIEBERMANN (voice-over): A 30-year-old cybersecurity researcher at a company called Cybereason, he put his vaccine on Twitter to publicize it.
(on camera): Serper's here in Tel Aviv talk to talk at Cyberweek. He's giving a talk about the security devices connected to Macs. That's his
expertise, not windows, not ransomware. He says he got lucky in where he looked to find this vaccine.
(voice-over): From the moment, he looked at the ransomware code until he put out the vaccine, it took less than three hours he says. But it's a
simple fix that's easy to overcome by whoever made the ransomware.
SERPER: They can start a new attack just by changing the name of the original executable. The file that starts anything. Then again, if they
won't change anything in the code, if they will just do that, then it will be really easy because we already know the trick.
LIEBERMANN: Serper's vaccine doesn't help if your computer is already encrypted. But now it's a race between the spread of the ransomware and
its temporary solution. Oren Liebermann, CNN, Tel Aviv.
QUEST: Now GM's chief executive wants to tackle problems like cybersecurity by hiring more diverse talent. We have an exclusive
interview with Mary Barra later in this hour.
Turning to Wall Street now. The rallying in the financial stocks on the back of the stress test And the Results from the Fed helped lift U.S.
equities. Look at that, up 143 points, 21,454. Technology led the dip on Tuesday has now rebounded. The Dow and the S&P and NASDAQ all higher. The
S&P notches up the best day in two months.
Now Wall Street it's always nice to have something new from blue apron. Food is better when you start from scratch. Of course, she's preparing to
unbox an IPO. But the ingredients perhaps could be could better. When it started no apron at a price range for its IPO, a nice meaty $15 to $17 a
share. That's fallen to a measly 10 to $11 a share. The meal kit delivery service faces fierce competition in the food retail business. CNN's Claire
Sebastian and Paul La Monica have been looking at food delivery and the recipes and tastes that comes with them.
CLAIRE SEBASTIAN, CNNMONEY CORRESPONDENT: I can pretty much burn toast.
PAUL LA MONICA, CNNMONEY CORRESPONDENT: All right, do you want to open it up to see what we've got.
(voice-over): One of us is an experienced home cook.
SEBASTIAN (voice-over): The other, a novice would be the kindest way to put it.
LA MONICA: We're digging into Blue Apron.
SEBASTIAN: A 4-year-old company that's trying to change the way people buy food.
LA MONICA (on camera): I'm going to be making the pork chops and honey mustard pan sauce.
SEBASTIAN (on camera): I think I'll make the spicy elote-style vegetable tostadas with cilantro.
LA MONICA: That's going to you --
SEBASTIAN: Yes, that's going me, yes.
LA MONICA: The tarragon is mine.
SEBASTIAN: Or mine.
LA MONICA: That should be yours.
SEBASTIAN: See, I'm already finding this slightly intimidating.
LA MONICA: This is something that does require a time commitment.
SEBASTIAN: I believe they're going to have a pretty crowded marketplace there.
LA MONICA: Yes, there are a lot of meal delivery companies out there. Amazon, is buying Whole Foods. Which is going to possibly be a new
competitor in its own right. They're not making any money. They may not make any money for the foreseeable future.
[16:15:00] SEBASTIAN: So, who are they targeting? I think young people.
LA MONICA: I think they are targeting millennials. That's what everyone is targeting.
SEBASTIAN: I think they're trying to get people who care about where the foot comes from as well, right?
LA MONICA: I agree.
Just getting the carrots and onions and some olive oil.
SEBASTIAN: I got my -- the summer squash going in. I say, were only about halfway through and I'm really exhausted.
LA MONICA: If you sign up with and expect -- it's like, wait a minute. This is harder than making a patina butter and jelly sandwich. Then fool
SEBASTIAN: It's a little harder than that.
LA MONICA: The moment I've been waiting for, the meat, at long last.
SEBASTIAN: What do you think? Does it look like the picture?
LA MONICA: Let's see. I think. Yes.
SEBASTIAN: The question is, would you do it again?
LA MONICA: I would.
SEBASTIAN: because someone like me, I think it's too much work.
LA MONICA: This this is good.
QUEST: Paul La Monica is with me now. Paul, at the end of the day, there are numerous firms that do this sort of thing. Deliver the ingredients and
you cook it to their recipe what is different about them?
LA MONICA: I don't think that's much to be honest that differentiates Blue Apron from some of the other rivals that are out there. And now you have
increase competition from supermarkets which will deliver groceries as well. Maybe not a full-blown recipe. But Amazon buying whole foods that
is a big reason why I think people have grown skittish about Blue Apron as you already noted. The price range has been slashed in just the past week.
QUEST: On the wider market issues, the NASDAQ had the biggest gain since the election. I was down in the stock exchange with "QUEST EXPRESS."
People just sort of continuously say this market -- obviously, it can go down, but it seems to only want to go in one direction.
LA MONICA: Yes. It's been resilient, probably a word that gets used quite often down on Wall Street.
QUEST: But why? What's driving it?
LA MONICA: It really is I think, you know, President Trump will probably want the credit. Each though we haven't seen much out of Washington. But
to be honest, corporate earnings have still been good. We had a great first quarter, second quarter results which we'll start getting in a couple
of weeks probably will be decent. And the Fed, people aren't terribly concerned that Janet Yellen is going to make a mistake and raise rates two
QUEST: That you for that.
LA MONICA: Thank you.
QUEST: Extraordinary event taking place in Venezuela. Absolutely remarkable pictures of a very disturbing nature. Helicopters are attacking
the Supreme Court, the violence spreading from the straight to the skies. A helicopter drops a shower of grenades, we'll be live in Caracas.
[16:20:00] (COMMERCIAL BREAK)
QUEST: Breaking news to bring you now. Venezuelan authorities have located the helicopter that was used in a dramatic attack on the country's
Supreme Court. The pictures are quite -- I was going to say unbelievable. We'll show you that, you can see here. A helicopter launched a daring
attack on the Supreme Court on Tuesday. That's them dropping grenades. A rogue police officer is suspected of being behind it. The attack comes as
the crisis in Venezuela escalates. Protesters are filling the streets with rampant inflation in currency in freefall. And now is just a severe food
and medicines shortage.
We've discussed this with all too frequency on the program. Opposition lawmakers clashed with security forces outside their party headquarters on
Tuesday. The head of the opposition controlled national assembly spoke to CNN's Christiane Amanpour. And he said those security forces were acting
as President Maduro's armed henchmen.
(BEGIN VIDEO CLIP)
JULIO BORGES, VENEZUELAN NATIONAL ASSEMBLY PRESIDENT: We have a real confrontation. And the people which had the responsibility of our own
security, they attack us as deputies. It's something which is a shame for Venezuelans to show this kind of pictures to the world.
(END VIDEO CLIP)
QUEST: Phil Gunson is the senior analyst at the International Crisis Group. He joins me on the line from Caracas. The situation there it gets
ever worse. And yet, there's no obviously way that it comes to an end. If you see what I'm saying.
PHIL GUNSON, SENIOR ANALYST, INTERNATIONAL CRISIS GROUP (via telephone): Yes, that's absolutely right. There is no solution in sight. Largely
because the government which has suspended elections. Apparently, because it's so unpopular that it can't guarantee to win them. When people took to
the street, as they've been doing, as you mentioned, for the last three months, almost daily. The government held tear gas, shoots at them and
basically represses them with everything at its command. And it's apparently dead set against negotiating. Its plan for peace, as it puts
it, is to elect a constituent assembly to rewrite the constitution.
QUEST: But Phil this particular -- I was going to say, audacious attack by a rogue officer who steal as helicopter. Is this arguably -- does this
change the narrative?
GUNSON: From the government's point of view I suppose it does, in the sense that the government is presenting it as a coup plot. But was there
really an attack? We heard a lot of bangs. We heard a lot of shooting. But so far, we haven't seen the picture of any broken glass. There were no
injuries, no holes in the pavement. The helicopter has been found, but the guy who was piloting it and who put out a video claiming responsibility has
disappeared. On the video, he's apparently flanked by four guys in with automatic rifles, but three appear to be cardboard cut-outs. There's some
considerable doubt that this was genuine in any sense at all.
QUEST: On that point though, we have a picture here of the helicopter supposedly on the ground. Is it your, I guess I'm asking you to nail your
colors to the mast here. Is it your feeling this was genuine?
OKAY It could have been genuine as far as the man, Oscar Perez, the man who piloted the helicopter. As far as he was concerned he might have thought
it was genuine. But he might have been fooled into it. Certainly, played into the government's hands in the sense that there delighted to be able to
prove as they would say that there was a coup plot against them. Because they want to paint the opposition as violent. The opposition on the other
hand, of course, says it's engaged in a nonviolent struggle to insist on elections and the restoration of democracy. So, is the government that
comes out of this better.
QUEST: So ultimately, does Maduro -- we can discuss sort of constitutional reform and elections in the severity of the food crisis and the medicines
crisis. But really what I always find with the story when it comes down to it. As long as the military support Maduro, he stays.
GUNSON: I think you've got your finger on it. If there isn't a split in the military, then the demonstrations appear to be going nowhere. Because
the demonstrators can't win on the street. On the other hand, even if the government wins this round and manages to install its assembly, the
underlying social and economic and financial crisis doesn't go away. And Venezuela is running out of money. It hasn't enough money to pay its
foreign debt. It certainly doesn't have enough money to import the food that's required because its policies have destroyed domestic production.
So, people genuinely are talking about a famine by the end of this year. We already have severe malnutrition and a major crisis of food supply.
[16:25:00] QUEST: Thank you for joining us. We'll talk more about it. We'll have you against on the line from Caracas.
The spiral of violence offers a dilemma to international investors. On the one hand Venezuelan bonds are on the best performance investments of any
emerging market this year. And then opposition leaders want investors to stop investing in the Maduro regime. This is the state of the reserves
that Phil was talking about this year. That spike in May came after a major investment from Goldman Sachs. The bank was criticized for investing
in a country that seems to prioritize paying bond holders over feeding its people. Now, Hans Humes is with. He the chief executive of Greylock
Capital, which has invested in Venezuelan bonds. Square this ethical circle for me.
HANS HUMES, CHAIRMAN AND CEO, GREYLOCK CAPITAL: It's always difficult when you get into a situation like this in a country. Servicing bonds,
servicing external debt versus the needs of the people. But if you take a few steps back, you can really see that what's happened to Venezuela is the
result of internal policies. This is --
QUEST: But the investments that people like yourselves are making arguably prop up the ability of the government to continue.
HUMES: Not necessarily. The existing bonds that are traded in the market are bonds that were issued years ago. So, these are bonds that were issued
with parliamentary approval. These are secondary market-traded bonds, not primary Issuant. Even the Goldman Sachs transaction was one that had been
issued by The Ministry of Finance to the central bank and then sold by the central bank to Goldman Sachs. It becomes, yes, clearly --
QUEST: I guess there's a sort of a -- why would anybody want to invest either primary or secondary in an environment where people are starving?
HUMES None of the purchases of these bonds, the money is not going to the Venezuelan government. So, you're basically, people are taking losses,
from what they originally paid on the bonds when they made the original loans, it could be done five, six, seven years ago. In terms of going
QUEST: But you're still taking a coupon on the bond. The owners of the bond still get the payment that comes with it?
HUMES Right and the overall yield on it is much higher if the cost of purchase is lower. Can we take a couple steps back?
QUEST: Please, please.
HUMES: Most large Venezuelan bond holders are really aware of the current situation. And have been dialogues going on for the last two years on how
we can manage a transition of government to accommodate the needs of the country. So, the debate that's going on now is how much of a haircut might
be needed, according to the official sector. Or how much deference of coupon and maturity payments will be need for the country to recover?
QUEST: At the moment -- and I take your point. At the moment to service those bonds requires the government to use money that should be put to
other purposes. You would you agree with me on that?
HUMES: It depends on the situation. If you're talking about Petroleos, for example, as opposed to sovereign bonds, for the country to maintain its
business transactions and exporting oil. If they default on the bonds, they won't be able to export the oil. They'll have a lockdown in terms of
economic transactions. So, it's not as simple as you pay the bond holders, you're not feeding your people.
QUEST: I'm grateful that you're here tonight. Because you know, you make the point that it's not a straightforward, but I guess what I'm asking you,
fundamentally is, what do you see as your responsibility to the resolution of a crisis where medicines can't be bought, food isn't available, people
are starving. The situation is getting worse but the international community is taking money for coupons on bonds.
HUMES: We've gone through this before. A country like Belize had to do a sovereign restructuring of its bonds. And the country definitely wanted to
prioritize education and health care over an austerity program that was being suggested from the international monetary authorities. In that case
we worked with the country to avoid the austerity and made sure that we accepted some deference of payment.
QUEST: Do you think you can work with Maduro?
HUMES: I think it would be very difficult. The ironic situation here is the current government knows that if they default the game is over for
them. This is a country that's never defaulted on its external debt. What we would have to look for, hopefully, is a soft transition and a national
coalition government. And then hopefully be able to manage and negotiate with a reasonable bunch of people on the other side of the table.
[16:30:01] QUEST: We're really grateful that you came in tonight. Thank you, sir.
HUMES: No problem.
QUEST: Thank you very much indeed.
Airlines that fly to the United States will have is some new rules to deal with if they want to keep their routes. Homeland Security has just
announced a host of new measures. We'll have those details when we come back. QUEST MEANS BUSINESS, good evening.
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in a moment. When the Federal Reserve has just released results of its most
important stress test of the year. And there will be an exclusive interview with the chief executive of General Motors looking for the next
generation of coders to join her company. This is CNN and on this network, the news always comes first.
The U.S. Secretary of Homeland Security announced in the last few moments new security measures to combat what he called a renewed interest by
terrorists in attacking U.S.-bound aircraft. The measures include tougher screening of electronic devices, more thorough passenger vetting and new
measures to stop insider attacks through the use of sophisticated screening techniques.
President Trump has accepted an invitation from his French counterpart Emmanuel Macron to go to Paris next month. It's scheduled for July 14,
Bastille Day as part of the commemorations marking 100 years since the United States entered World War I.
Hong Kong protest leader, Joshua Wong, has been arrested on Wednesday, a day before the Chinese president is set to arrive in the city. Other pro-
democracy activists were also taken into custody. Xi Jinping is visiting the celebrations marking 20 years since Britain handed Hong Kong back to
Police in London say 80 people have died or are presumed dead in the Grenfell Tower fire. But it could take until the end of the year at least
before the final number of victims is known. Police say some might never be identified.
And British prosecutors have charged six people in connection with the deadly Hillsborough disaster that took place 28 years ago and killed almost
100 football fans. Among them is the police commander who was assigned to the stadium in Sheffield where the fans were crushed to death before an
F.A. cup semifinal match.
[16:35:00] U.S. Homeland Security unveiled new measures that will affect all direct international flights to the United States. This is not an
standard laptop ban. The DHS Secretary John Kelly said inaction is no longer an option for the world's airlines. The new plans involve what
they're describing as seen and unseen measures. It will be better vetting of airline employees. And interviewing certain passengers before they
board aircraft. The measures are called a first step there will be a phasing in period. And here's the point if a country doesn't follow these
measures, or an airline doesn't take part, then it's the risk of losing the privileges of being able to fly to the United States. Secretary Kelly says
he expects all airlines to comply.
(END VIDEO CLIP)
JOHN KELLY, SECRETARY, U.S. HOMELAND SECURITY: With this announcement, we send a clear message that inaction is not an option. Those who choose not
to cooperate or are slow to adapt, adopt these measures could be subject to other restrictions, including a ban on electronic devices, on aircraft or
even a suspension of their flights into the United States. However, in all the indications are that all airlines will work with us to keep their
aircraft, their crew and their passengers safe.
(END VIDEO CLIP)
MILES O'BRIEN, CNN AVIATION ANALYST: At least, Richard, they've gotten rid of a policy that had so many holes in it, it was like Swiss cheese. The
idea of putting laptops in the luggage compartment as opposed to a cabin out of 10 specific cities in the Middle East and Africa was widely reviled
by security experts, passengers, and the airline industry itself. So, the notion they're taking a little more time to interview people as they go
through the lines, that's a good one. Anybody who has flown EL AL into Tel Aviv knows what that can be like. And the idea that they're looking into
the back door of the airports, a pet peeve of mine, because that's wide open as you well know. And the fact that they are giving greater scrutiny
to that is a good measure as well.
QUEST: I know you've also been critical of many U.S. airports and domestic measures and one assumes that what's sauce for the goose is sauce for the
O'BRIEN: Let's hope so. As you well know, Richard, in Europe, the backdoor of the airport where the employees come in, much more of a
scrutiny, security bubble around these aircraft we know about problems that have occurred historically here in the United States. Atlanta's Hartsfield
Jackson airport. They're running guns, one of the employees of the airlines there. That kind of thing is pretty extraordinary. A breach of
security. To not look at that is not smart.
QUEST: The information that the U.S. believes it has, that shows terrorists are working towards some form of being able to use the device, a
laptop or whatever, as an explosive device. I mean the rest of the world says has given the United States a certain latitude in terms of saying,
they must have something of which they are concerned. Do you buy it?
O'BRIEN: Of course, this is not rocket science. You know electronics, as a means to conceal a bomb, it goes back to Pan-Am 103 back in the late
'80s, it was in the luggage hold of that aircraft. So, this is a long- known potential place where a bomb could be disguised. But are we in the real world? Is it practical to take this out of the mix? Even if you put
them out of the cabin and put them into the luggage hold. How does that impact security? And incidentally puts a bunch of lithium batteries in the
cargo hold which are a fire risk. Richard, flying would be really safe if we all flew in our underwear with no luggage. But we can't do that,
QUEST: I'm sure there's somebody somewhere, Miles, I think it was Zachary Bakkar of Qatar Airways who made that suggestion, but I think we best leave
that for another day.
O'BRIEN: We should.
QUEST: Good to see you, Miles.
The biggest banks on Wall Street have been put to the test by the Fed, the results have just been released, who passed? And who failed? And what's
the implications if you don't pass the Fed's test?
[16:40:00] (COMMERCIAL BREAK)
QUEST: The results are out, and it appears no major Wall Street bank has flunked the Fed's latest stress tests. The second round of tests is meant
to see if the biggest banks in the country in the world, can withstand another crisis. Now the first test focused just on the balance sheets, and
all passed with flying colors, today's test is more than just numbers. It's looking at the overall quality of banks post-crisis. Now there were
concerns about Wells Fargo, which has been through a major management shake-up. But in the end, Wells Fargo passed the test. Although capital
one did have to submit, will have to submit a new plan in six months' time. Last week the Fed governor who oversees the tests says the big banks are
generally in good shape and now may be the time to relax some of the rules.
(BEGIN VIDEO CLIP)
JEROME POWELL, FEDERAL RESERVE GOVERNOR: As we consider the progress that has been achieved, in improving the resiliency and resolvability of our
banking industry it's important for us to look for ways to reduce unnecessary burden.
(END VIDEO CLIP)
QUEST: Joining me from the NASDAQ Entrepreneurial Center in San Francisco, Martin Levonian, who was vice president in charge of banking regulation at
the San Francisco Fed. So, everybody passes. And as I understand it, this now means pretty much that they will be able to at least more able to offer
greater dividends and share buy-backs to return money to shareholders?
MARK LEVONIAN, MANAGING DIRECTOR, PROMONTORY: Yes, that's the implication of this. This is the Fed's annual process to assess the capital plans of
these banks, which includes what they might pay out in the way of dividends or share repurchases that investors like and in this case, this is a really
the first year that this has happened as part of this. They all passed.
QUEST: Are you surprised that they've all passed? I'm not suggesting that they fiddled the numbers, but I am suggesting that maybe they've taken a
LEVONIAN: Well, you know, the capital in the banking industry is roughly double what it was at the time of the financial crisis. And it's been
increasing each year. I'm not surprised that they've passed. The quantitative aspects of this test have looked good for a while. It's been
the qualitative element that's given the banks some problems, it's really that aspect of it that's different now.
QUEST: Is it appropriate? The banks are making good money. They will make better money as interest rates continue to climb. Admittedly the
money they're making in terms of their own trading and that sort of thing is down. Is it appropriate that they should be returning money to
investors in this way?
LEVONIAN: Well, ultimately, they won't have investors if the investors don't make some money. I think that has to happen. It's in all of our
interests, in the interests of the economy that we have a healthy banking system that can invest and make loans and extend credit. I think that's
where we're headed here with this.
[16:45:00] QUEST: Do you think that the U.S. still has too many banks? It's always been said that there should be consolidation. I know if you
look post-2008 there are bigger banks that are even more systemically important. And JPMorgan Chase. Do you think there needs to be even more
LEVONIAN: That's a great question, I think the trend, the consolidation trend in the banking industry goes back many years now. Predates the
financial crisis, maybe there's been some acceleration, we're seeing some start-ups, I think some exciting movement due to technology where some of
the newer firms are coming in. Sand expanding activity.
QUEST: Realistically, I've read a lot over the last couple of days with Italy and resolution of the Italian banking situation. Realistically, we
still do have a too big to fail scenario with some of the big players in the United States. Don't you? I mean JPMorgan Chases, the Citis, the
Wells Fargos, the Bank of Americas. If they were -- they've got excellent capital buffers and ratios, but if they were to get into trouble, they'd
have to be bailed out.
LEVONIAN: I think there's no question that the failure of a large bank would be a significant event. It should worry all of us, I think the
higher capital levels help lot and a lot of the reforms put around resolution planning should help quite a bit. There's a lot more comfort
now that we would be able to handle that will kind of an event.
QUEST: Capital One has to come back with plan next year, you are content that what we have seen with this particular process is strong, valid and
meets good tests?
LEVONIAN: We've seen the regulators have worked with the banks to improve their processes. I know the processes are much better now for estimating
the risks and figuring out their capital. So, I think we should have a lot more confidence in the result. Think this is a really good sign for the
QUEST: Glad to see you, sir, we're very grateful that you've joined us to get some perspective.
As we continue tonight on QUEST MEANS BUSINESS, an exclusive interview, the chief executive of GM, Mary Barra, tells us why finding diverse technology
focuses talent, that is her priority.
QUEST: Aluminum, glass, rubber and code. The essential materials inside the modern motor vehicle of the some of the world's biggest companies are
grappling with a cyberattack crippling their industries. GM's chief executive says she wants to hire more diverse talent. Wants to focus on
technological innovation, CNN's Money Peter Valdes-DaPena spoke to Mary Barra in an exclusive interview.
[16:50:00] MARY BARRA, CEO, GENERAL MOTORS: When you look at increasing connectivity and making sure cars are safe from a cybersecurity
perspective, when you look at autonomous driving and the different technologies that we can't even talk about today that will be on cars, we
need this talent and we need to grow the talent that's going to be able to design the future of transportation.
PETER VALDES-DAPENA, CNN MONEY SENIOR AUTOS CORRESPONDENT: We're talking about the number of STEM. jobs, the engineering jobs, computer science
jobs that are going unfilled right now. Is it really about just we need more engineers so we have to tap into these diverse areas? Or is it about
the diversity, you want different ideas, different back grounds in these fields?
BARRA: I think the diversity is so important. When you have a diverse table, people approach things differently, they come up with different
solutions together. They can collaborate. When you look at what's happening with technology impacting virtually every field we're going to
need more technical researchers, people who understand coding or understand technology application.
VALDES-DAPENA: One thing for the CEO of the company to say, I see the necessity for this. But down the line you've got to hiring managers all
the way down the line who are going to be doing what people typically do, which is this person looks like me, I want to hire that person. How do you
BARRA: For me it was an aha moment saying wait a minute, you're right I generally want to put people that are like me. But encouraging all of us
to see the benefit, so we do it through training, we through it through example. My leadership team is our diversity team for the company so when
you find it regularly on the agenda for the senior leadership, it flows through the whole organization.
QUEST: Peter is with me now. She's a very impressive person.
VALDES-DAPENA: She is.
QUEST: This strategy of diversity and looking for the coders, we're getting a very good example tonight as the cybersecurity attack, cars and
the idea of the autonomous vehicle. Terrifying.
VALDES-DAPENA: Well, one of the reasons this is so important and one of the reasons that diversity is so important, the more angles and ways you
can look at something, the more vulnerabilities you might be able to find. Very soon cars are going to start communicating with each other. Over
wireless networks. That kind of thing opens up vulnerabilities, we need to be secure in that that's why we need more coders coming into this industry.
Not necessarily all of them going to Silicon Valley. Thinking hey this is an area where we need talent.
QUEST: Does the industry need those coders themselves? Or can they subcontract or outsource? To others there? Or a combination of both.
VALDES-DAPENA: It's a combination of both. Certainly, there are some areas that can be outsourced. Certainly, some of the coding today is
outsourced. There's some very unique things about cars and about specific brands of cars where it just makes sense to have people in house doing this
kind of stuff.
QUEST: If you're a coder, what's the attraction of going to Detroit, you know, go to work in, I can hear people writing to me saying high-tech
stuff? Going to work in an old-school industry versus something sexy?
VALDES-DAPENA: Well, part of the attraction there, first of all, cost of living is lower in Detroit than in San Francisco. You know there's a lot
of cool stuff going on. It's not an old-school industry. Cars have millions of lines of code. And you're dealing with sensors, that are
looking at the world, forming a picture of the world, telling the car in response what to do. The challenges are actually really fascinating,
interesting. I find that much more interesting than working on an app on a flat iPhone.
QUEST: The idea, and you've just talked about it. Cars communicating with each other. Cars receiving sensory information which the vehicle has to
interpret. And yet at the same time, on the lead story tonight, Peter, is crippling computers. We need to have the element of security.
QUEST: How, not panicked, but how serious is this being taken?
VALDES-DAPENA: I think it's being taken much more seriously now. Than it certainly has ever been before. People recognize as they build this stuff
in. We're seeing more and more sort of demonstration hacks to the cars. So far, it's fairly harmless stuff. Very often it's things where somebody
has to get into your car with a laptop. But clearly the potential is there and it's taken very seriously as we move into the network cars and the
autonomous driving scenarios.
[16:55:00] QUEST: My newsletter tonight is being published, coming out now, it is the daily newsletter, it is I'm writing about updating your
software, talking of that. You can sign up to it at CNN money.com/quest. It arrives just as the New York market closes. Just ahead of the Asia open
DAC. A Profitable Moment is after the break.
QUEST: Tonight's Profitable Moment. What does a British advertising company, French railways, Russian oil and gas company, a U.S. food group
and transport company and of course, a Danish shipping organization, what do they have in common? The answer is really very simple, they're all hit
by the latest cyberattack that's moving round the world. But the really significant thing I think we heard on tonight's QUEST MEANS BUSINESS is our
expert from Tel Aviv who basically says there are two components to cybersecurity.
One, you have to stop them getting in the front door. Well that's very good. But let's face it, we're all a bit lax on that and secondly, you
have to have a robust plan once they get in, and once your computer systems are compromised. That seems to be the point we're going to have to focus
on in the future. Because the reality and the ability of cybercrime is we're going to be hit at some point. It is not enough to simply say it
won't happen to me. The upshot is any company, any CEO that does not have a robust plan to handle if their company is compromised, the board of
directors should fire them tonight.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York, whatever you're up to in the hours ahead. Hope it's profitable.
We'll do it again tomorrow.