tv World Business Today CNN May 16, 2011 1:00am-2:00am PDT
there's my camera. ♪ and they called it puppy love ♪ >> oh, geez. ♪ oh, i'm very embarrassed >> you should. >> not the only one. that's done and marie osmond monday night. hello. i'm monita paul. the head of the international monetary fund, will answer charges today that he tried to sexually assault a housekeeper in a hotel. he has agreed to forensic testing ahead of his court hearing. an investigator tells cnn the imf chief accuser picked him out of a lineup at a police station. the chief prosecutor is
expected to ask for three arrest warrants in libya. they are said to be for those against crimes against humanity. a source says leader moammar gadhafi will be among those named. those living around the mississippi river, will leave for higher ground, as homes and farmland as residents have been ordered to evacuate. and two additional floodgates have been opened on the morganza spillway. the space shuttle "endeavour" has been cleared for launch today. and weather reports indicate a 70% chance of favorable conditions. "world business today" starts right now. good morning, from cnn london.
>> good afternoon, from cnn hong kong. you're watching "world business today." these are the stop stories on monday, may 16th. dominique strauss-khan in cuffs. it's crunch time for u.s. lawmakers, as the country's ballooning debt reaches its legal limits. and bankrolling bin laden. we'll investigate the terrorist networks money trail. pulled off a plane and arrested. that's how the chief of the monetary fund may be remembered if he's guilty of sexual assault charges. he is expected to appear in a courtroom in new york on monday to face charges of attempted rape, sexual assault and false
imprisonment. as further details of the arrest of dominick strauss-khan come to light. we go to john in brussels. the first, most obvious question is, what does this mean for the imf, given the fact it's so instrumental in helping countries like greece and portugal in their bailouts? >> it's a fair point. uh you have added a level of intrigue and complication. i came out of a background meeting. and one of the spokespersons said it will be on the formal agenda. but intensely discussed. you can't avoid the obvious. the international monetary fund is one of the two key players on the bailouts. in the taxi ride over, on french radio, it was a top story.
in a story that's used to having the european finance leaders here, they're not used to having sexual assault charges leveled against one of the major institutions in brussels. i should say this is a complicated agenda. one year after the bailout of greece. let's look at what they need to do. the portuguese agenda in the next few days. and mr. kenny talked to us about getting a lower interest rate to service the debt. and we were supposed to get an update on additional cuts for greece. it's becoming clear as the deficit grows in greece and the amount of payments due in june, that the existing package will be difficult to navigate. the layer of dominick strauss-khan, adding a layer of
complication here. >> what's it going to mean to the leadership race? his deputy is due to step down in august. that's likely to leave the top two positions vacant at this crucial time. >> yeah. a complication even before that. and that is what's going to happen in the next 24 to 48 hours. john lipske, will be holding a hearing to see what happens at the court hearings. and then, the deputy managie ii director will be in attendance at the two meetings. normally, at the top of the imf structure, you have a european leading. his term was supposed to end in november of next year. there was talk of him running for the french presidency. that's off the table. and the deputy resigned last
week, saying he's not going to renew his term at the end of august. and there's discussion on an emerge gent candidate stepping up. we go from the concept of a g-8 structure to a g-20. but they were hoping to keep a european at the international monetary fund. the toll, already $400 billion. >> john, thanks so much for the update. we'll go back to john later in the show, to be talking about what this means for the bailout recipients. >> it's the unwritten laws that the head of the imf tends to be european or someone from the usa. this could change. dominick strauss-khan's arrest
isn't gist calling into question his future at the imf. he is widely regarded as the french socialist party's strongest potential candidate when elections are being held next year. he's the only contender with a chance to take over for the current president. it's a bombshell in the political scene of his home country. let's go to paris. jim bitterman joins us. as it looks clear, dominick strauss-khan was seen as a front-runner for the presidency. what does this do to the presidential race? >> well, i guess you can look at the mpaper this morning and see the thunderclap. sources could not stop talking about this. it does throw the presidential race in disarray.
not only was he a leading candidate. according to opinion polls, he would have been the leading candidate. he would have easily beat, according to opinion polls, would have beaten sarkozy. he's out of the running, at least as far as a lot of the politicians and political analysts here are concerned. of course, there are other people moving in on the background to fill the vacuum. the psalm thing that john was talking about there with the imf. andrew? >> what is the reaction on the -- i know it's early in paris. but the reaction by normal people in france, if you've been able to talk to people. some politicians are suggesting this could have been a trap for dominick strauss-khan to walk into.
is there sympathy for him? >> there is some sympathy. you see people on the street and they express reservations about rushing to judgment on this. dominick strauss-khan has had a reputation of being a lady's man over the years, to say the least. and the imf went back to 2008 and was accused of sexual harassment. he was cleared of that. and they say he had lack of judgment in the way he handled the affair with the young lady. they summarized things when they said it's a surprise. but not all that surprising because there had been these rumors for years. and the socialist party, with some of the writers for the socialist party were saying this morning, if there's any good news in any of this is it's happening now and not three weeks before the election, where they would be at pains to find
someone to replace him. andrew? >> he's often described as charismatic. if you look at the major reports about dominick strauss-khan. he seems to have close relationships to some of the european leaders. what's the feeling that that is going to affect the e fktiveness, that they have such a delegate bailout packages. >> well, the imf has stressed all along, that it has to maintain the highest decorum. this is the lowest decorum. they go around the world preaching to heads of state. saying they have to maintain discipline. they have to be cautious in their approaches to banking and finance. and you have the head of the imf, in his own personal life, if the charges turn out to be true, apparently exercising the
opposite behavior. as far as the imf is concerned, it has to be humiliating. that word was used before describing the way that chance is. a couple of the politicians here said all of this is very humiliating for chance because it damages the image of the country. andrew? >> jim, thank you so much. jim bitterman joins us live from paris. nina, this story is rattling through the currency markets. what about the equity markets in europe? >> we'll come to the currency in a second. here's the picture, about 90 minutes into the trading session today. you can see, some of the indices really, really falling quite a bit. and look at that. france, down by 1%. what's going on, we have 19 stocks or auto stocks driving some of the early morning losses.
we've also we've also got a couple of stories in the mix. we also have the likes of the london stock exchange actually rising. and that's helping to counter some of the losses on the ftse 100. that stock's living after a rival bid for the toronto market, tnx. perhaps, it may back out of that particular transaction. let's talk about the currency markets. this is how things look on that front. we've got the dollar trading, as you can see at 1.41 -- the eu$1o trading against the u.s. dollar. it it's currently at 80.94. pretty downbeat on the equity market. at least in the first hour or so of trading. >> you're looking there at the
asian numbers, obviously. a down start to the week here. not a big help of what happened on wall street on friday. certainly, the uncertainty of what happens next in the euro zone and possible bailout. talk of restructuring the bank debt. creating uncertainties here. we had another blow to confidence here. goldman sachses in their portfolio. it caused japan and south korea, exporting countries. hong kong, down even more. 1.4%. shanghai, down by 1 .3%. and australia, down 1.3%. nina? >> to how things stood on wall street. this week brings quarterly
reports from jcpenney, and walmart. and the fed's last meeting they could give clues on how they plan to wind down. this is where the futures stand at the moment in premarket action. you can see all three of the indices currently trading down by 0.3% at the moment, in terms of their index futures. >> you're watching "world business today." coming up, playstation is back online for some users after nearly a month. we'll look at the ripple effect of the hacking outage. and we'll look how capitol hill plans to avert another financial crisis. ♪
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after it was brought down by hackers. a breach last month exposed personal details of some 77 million users. the gamers in europe and the u.s. will be the first to see a return to service. it will take a little longer in asia, though. it's making data protection a priority. >> i'd like to send my sincere apologies for the inconvenience the service outage has caused you. and want to thank you for all the patience you've shown, as we've worked through the restoration process. since the attacks on our networks, we've been working around the clock to bring game and media services back online. >> sony says the network will be available worldwide by the end of this month. taking quickly, a look at the stock. it was flat at the close in tokyo on monday. that security breach is a severe
blow to sony's reputation in the eyes of gamers and developers. a senior vice president says the network outage has cost capcom hundreds of thousands in revenues that were planned for in if budget. capcom is one of the biggest developers using the play station store. it develops titles to buy online and through that network, nina. the 14.29 debt ceiling is the limit that congress is allowed to borrow. while the warning bells are ringing on capitol hill, there's
not panic yet. president obama has warned congress it must agree to raise the debt limit. he says failure to do so trigger another reception. and disrupt the financial system. the national debt is climbing by the limit. and on monday, it's expected to hit the ceiling. that's the absolute limit the congress has allowed the u.s. to borrow. for the government to keep paying its obligations in full, congress must raise the debt limit. but both sides are staking out their positions. with republicans taking a hard line. >> without significant spending cuts, and changes in the way we spend the american people's money there will be no increase in the debt limit.
and the cuts should be greater than the accompanying debt limit that is given. prosecutor democrats say tax hikes should be included in the mix. and they caution tying the debt limit too closely with deficit reduction. >> we think we can get deficit reducti reduction, in the same time frame. but it would be folly, as i said before, if we don't get the agreement that we want, we're not going to raise the debt ceiling, come what may. >> reporter: treasury secretary, tim geithner, has vowed to take, vote, extraordinary measures, to pay creditors, including borrowing from federal pension plans. because of this, the u.s. will not default on its debt immediately. but geithner says he will run out of options in early august.
many believe they must act by then. and creditors will be watching every step of the way. creditors like china, that holds more than $1 trillion worth of u.s. treasuries. and japan. over the years, the u.s. has been forced to raise the debt ceiling 74 times since 1962, to pay for tax cuts, foreign wars and other spending increases. in fiscal year 2000, the debt has tripped since. not defaulting on debt would trigger a spike in borrowing rates and the confidence in the u.s. government to honor obligations. a high-stakes game is under way. and the debt clock is ticking. >> the deadline is closing in on bp today, as it tries to salvage its oil ambitions in the arctic
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[ female announcer ] positively radiant. and try skin brightening daily scrub, only from aveeno. discover the power of active naturals. welcome back. bp's dreams to explore for oil in the arctic are now nearing the 11th hour. it tries to prevent the collapse of the share swap with the russian company. right now, bp is trying to buy out its russian partners. "the wall street journal" says the deal could end up being worth more than $30 million. or more. joining us now is matthew chance. he's our moscow senior international correspondent. matthew, if this deal and deadline slips again, do you think the deal is going to
collapse? >> i think that's certainly a possibility. but not the most likely outcome. this is very important for all of the parties involved. it's important for bp because it represents a huge strategic investment for them after the debacle of the gulf of mexico oil spill last summer. more importantly, perhaps, it's crucial for the russians, for the kremlin, that want not just a piece of bp. i think they would be getting 5% of bp stock. they also need to have the arctic oil deposits underneath the arctic icecap, to keep as one of the leading oil
producers. >> all of the wrangling after this, after the deepwater horizon incident in the gulf of mexico. >> yes. of course. and this was one of the reasons why the ceo of bp, bob dudley, came out after he was appointed to that position in bp, and made this investment in russia. it was meant to be a step in the right direction for bp. a sign for investors they were going to turn the situation around. refocus their exploration efforts away from the west, perhaps. and focus on the vast oil reserves in russia. it seems to have gone belly-up, if you will. not least because tnk bp, get their way, that's the russian joint venture with bp, inside russia, for all of its share-swapping and investment in russia, bp would only get 50% of what it initially believed it was going to get. that would be a bad result for
bp. >> let's put this into context. that's worth $30 billion. that's significant money, even if you only get 50% of it. >> it is significant money, certainly. but you have to put this into context. that figure of $30 billion is not being put out there by people i've spoken to. originally, according to my sources, bp offered their russian partners $27 billion. tnk said they were interested in the region of $35 billion. that's the kind of ballpark area of money that perhaps is being discussed now to try and find a resolution to this situation. but we don't know. it's, by no means, certain at
this point. that that's what they're talking about. it's been reported in "the wall street journal." but the talking are taking place behind closed doors. >> matthew chance, our senior foreign correspondent, in moscow there. andrew? >> we're going to take a short break. when we come back, we will go back to our top story. the head of the imf is arrested hours before the meeting with world ministers. we'll see what it means for the debt crisis. and what the thoughts are on in the financial markets these days.
from cnn hong kong, i'm andrew stevens. >> and i'm nina dos santos in london. welcome back. the chief of the international monetary fund is in hot water. he was marched off a plane minutes before takeoff and arrested. he's been charged with sexually assaulting a chamber maid at a new york city hotel over the weekend. he's expected to appear in a courtroom to face charges of acemented rape, sexual assault and false imprisonment. >> we're hearing about his colorful past. let's look at his track record.
in the 1990s, he served as two years as france's finance director. and he had the backing of the man of the man he was tipped to challenge. he played a major role in coordinating the global response to the financial crisis of 2008-2009. and he's been a key proponent of global financial reform since then. >> strauss-khan's professional achievement seemed to blunt a series of sexual misdeeds. but this latest scandal has brought new light to the skeletons in the imf chief's closet. >> he was looked at after he had an affair with a member of his staff in 2008.
there was an enquirery. after all that happened, he did issue a statement at the time, saying he apologized for his actions. however, he did add that he was, quote, committed to going forward, to uphold, as he put it, the high standards that are expected of this position. so, if he is charged in this case, of course, that could present some clear difficulties. >> let's get the view from the financial community. harold wielden is a senior strategist with partners in london. we see the euro down for a seven-week low against the u.s. dollar. what in particular, is concerning the markets with what has happened with dominique strauss-khan? >> with all of the markets, they don't like being surprised. while this is an unfortunate,
regrettable and personal situation, affecting the imf leader, markets, obviously, have been surprised and they're reacting accordingly. my own view is it would be temporary, affecting the imf as an organization. above its leaders or any one individual. and indeed, so, too, does the european community and the ecb, all of them, rise to the occasion. and the unfortunate p.r. that surrounds there. >> he's been described in many reports of having a pivotal role in sorting out the european debt crisis. at that level, do you think the imf will not have as an
effective voice at the table as it had? >> today, as we stand, the answer has to be question. you're right. he has been a pivotal voice. he's done a tremendous job over the last four or five years. and indeed, over the past year, as the debt crisis in europe has unfolded. we did know he was going to stand down next year. there is a succession, you know, base going on here. there are a lot of -- the imf is a very, very large organization. no one person does anything other than perhaps lead at his level. it's the others who do the real work, the real negotiation and make the thing work. yes, he's pivotal. very important. i do wish to decry that. it can and will move on without him. >> speaking of the imf as a body, we heard in this show,
that dominique strauss apologized for an affair with an economist at the imf. there was no wrongdoing there. but perhaps it didn't look very good. do you think there's an issue with oversight, perhaps, at the imf itself? he's been involved with -- which wasn't a good public relations at best. do you think the imf could be called into question about how it feels with in topic? >> i think it's very unfortunate. he has a colorful past. he isn't the first and i don't suppose he will be the last. it's difficult in the oversight is a wonderful thing. another rule and implementation of rules to stand by. it would be absolutely fine. but somebody else will fail somewhere. and that is -- you know, we're talking about human beings here. this is where it all starts to
go wrong. yes, we've got to be more careful when you choose your potential successors or leaders of the great organizations, where they do hold a very high level of power. one has got to, i think, examine and re-examine every finite detail. if there's a blemish, i'm afraid they can't be there. >> thank you very much for joining us. >> thank you. dominique strauss-khan's arrest comes ahead of a busy week in brussels. we also have an eco meeting there. and the brussels economic forum that kicks off on wednesday. john, let's start by talking about, of course, the situation for some of these euro zone countries. we have the gdp figures coming
out next week. what's going to happen? >> a two-speed, two-tier europe is what the architects of the european union didn't want to see. you have the peripheral countries, portugal, ireland and greece, in deep recession. and the core countries, germany and france, growing at 2%. it might even be higher this year. there's a two-tier group in the peripheral countries, as well. you see ireland, likely to come in with a budget deficit, as we look at the graphic at 10.5%. then, greece at 9.5%. that number may move upwards. then, spain, which is a large economy, at 6%. and portugal, trying to put on the brakes at 5.9%. let's go back to greece. it's abundantly clear that the
package put together is going to be short in 2012 and 2013. that's a topic being taken up in brussels today. and it's a debt trap that researchers say greece cannot get out of. >> the cuts in public spending, having a devastating impact on demand. just pushing up undermining attempts to bring back up government spending. they're in a vicious circle. whatever they do at the moment, i'll makes the debt trap worse. >> while the european union will try to put off a position by greece, until an audit was done, which brings up the topic of dominique strauss-khan, they were going to try to make a decision in june. it is on the agenda, as they meet this afternoon and tomorrow. they are trying to put a firewall in front of spain because of the size of the economy. it did grow above expectations in the first quarter.
they can limit it, nina, to the peripheral countries on the agenda and leave spain with a big success at brussels. >> live on the scene for us in brussels. heading towards a quick break. stay with us.lerg to you. doubtful, you love me. hey, you can't take allegra with fruit juice. what? yeah, it's on the label. really? here, there's nothing about juice on the zyrtec® label. what? labels are meant to be read. i'd be lost without you. i knew you weren't allergic to me. [ sneezes ] you know, you can't take allegra with orange juice. both: really? fyi. [ male announcer ] get zyrtec®'s proven allergy relief and love the air®.
live from cnn hong kong and london, welcome back. you're watching "world business today." >> 90 minutes into today's trading session, it's a sea of red. and some of the indices are off of its index today. a little bit of an improvement. also, the ftse 100, off its lows of the day. it's mainly banking stocks and auto stocks that are leading the declines here. it's a similar situation to where you are, andrew.
in asia, things also fell overnight, didn't they? >> that's right, nina. there's a lot of uncertainty this morning, as the news about dominique strauss-khan broke. also, continuing worries about the strength of the u.s. economic recovery. we also had goldman sachs that are reweighing their portfolio for japan and korea exporters. you put all that together and you had that at the end of the trading day here in asia. the nikkei down 1%. in australia, down substantially for the australian market, down. we've seen a lot of volatility, not just in equities. but particularly in commodities. the interest rate rises hasn't helped the mood in the
investment community either. so, how does one invest in these hard times. nice to have you on the show. >> thank you. >> as i said, there's a lot of volatility. there's fears about the u.s. economy. there's interest rate rises in the emerging markets. commodities all over the place. what's one to do? >> i think it's about the risk/reward of this moment. a lot of strategists have it pencilled it. we've gone within a few% of the target for the year. now, really, the question is whether the earnings have been that good to get people to buy into it. or whether there's other concerns in the market. >> and you would say? >> there are the concerns that people need to be aware of. there will be better levels of buying into the market, before the end of the year.
>> staying in or getting out? >> it's a correlation one trade. you need to be nimble across the different asset classes. this is what a lot of the big global funds are doing. they're going into bonds. and now, i think a lot of them are thinking about what they need to be doing with their equity positions, as well. >> you look at the last few months, as well. the u.k. is slowing down. the euro crisis rumbles on. it doesn't add up to a bright outlook, does it? >> i don't think it does. but the question is whether we're going into a cyclical bear market? >> are we? >> i don't think we are. >> we're going to have to be
relatively patient. >> what are you talking about? >> i would be a buyer. 10% down from where we are right now. >> 10% down. okay. particular markets? >> if there is a slowdown in the commodities, if there is a reduction in inflationary expectations, for example, the u.s. inflation is down 100 basis points this month, then the markets that will benefit will be the ones that have growth and a slowing down of the inflation, which will probably be china and india again. it would be going back to the same sort of market we were in in june 2010. >> i can't let you go without asking your thoughts of the impact of dominique strauss-khan's arrest in new york. we heard up here in london, saying he thought it was the short-term impact. the shock of this rattling. and you? >> this is a key week for the
european situation. we've got the second bailout package for greece being associated right now. it's certainly very regrettable. this is not something that we wanted. it undermines confidence at a time when the euro is falling anyway. as the dollar rises, because the dollar is a global funding currency around the world, that causes people to take money out of risky assets. >> you call that a short-term impact? >> pretty short-term. >> nina? as authorities continue to piece together details about osama bin laden's life in abbottabad, many are wondering who was paying for it all?
you're watching "world business today." >> gutsy and courageous. those are the words of u.s. defense secretary, robert gates, praising barack obama's decision surrounding the raid of the osama bin laden compound. during an interview on the cbs news program, "60 minutes" he spoke of his own reservations and applauded the president. >> i worked for a lot of these guys. and this is one of the most courageous calls, decisions, that i think i've seen a president make. >> perhaps with in a decision casting a dark shadow on relations between the u.s. and pakistan. many questions remain about the death of osama bin laden and his life before that u.s. raid. let's go to stan grant now. stan, you've been looking into who may have been behind the bankrolling of the bin laden operation.
where is the money flow leading to? what have you been able to uncover? >> this is a big question being asked in the u.s., apart from the big question, mow did he come to be in pakistan? and what did pakistani officials know or not know about his presence here? but the u.s. officials are combing through a lot of the information that was preretrieved from the bin laden compound. they are looking at the golden chain of donors. who was keeping him afloat financially? we look at this operation over the years. it's cost an enormous amount of money to keep a terrorism like this going. if you look at the 9/11 attack. it cost about $500,000. it was carried out by money transfers and so on. but they've cracked down on the
cash chain and so forth. one clue coming from a taliban official in afghanistan, who says he was in reasonably close contact with bin laden. he claims that bin laden had face-to-face meetings with rich men from the gulf and from saudcy. that's risky business. you think he's able to carry out face-to-face meetings. it shows how much freedom he may have had. and how desperate he was to keep the money flowing, that he would put himself at risk by having these meetings. in the past, there's been allegations about various countries. these are some of the countries that are being mentioned, directly or indirectly filling the coffers of al qaeda and the taliban. and you look at the suits that have been launched in the united states since 9/11, those are
also raised questions about islamic charities and youth groups that may be receiving money from some other source and passing it on to al qaeda or the taliban. if you have someone like bin laden lying low here, he's living in this large compound. he has staff. he has security. he has his wife there, who porched it? how was it purchased? what about the bills that are being paid? the upkeep of the house. everyone who runs a household, knows you have to pay bills. and all of this leads to somewhere. that's what they're trying to uncover, andrew? >> i guess the treasure trove of information that the u.s. claimed they got from that raid in the computers, may go somewhere to answering that. stan grant, thanks so much. that's stan grant joining us live from islamabad. thanks for joining us. i'm andrew stevens in hong kong. >> and i'm nina dos santos in