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Employee Fights Back Against Bank; Brexit Vote: 99 Days Later; Martin:
Democracy Creates Economic Success; London's Restaurant Scene Booming Post-
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Alex Salmond, David Cay Johnston>
back with a vengeance to finish just over 6 percent higher. Investors had
feared Deutsche Bank may struggle to pay a settlement with the U.S.
government without a bailout. It is 99 days since the United Kingdom
shocked the world and decided to exit the European Union. Fifty-two
percent of voters said they wanted to leave and the debate over Europe that
had swelled in Britain for decades finally boiled over. A former Wells
Fargo worker says he is so disgusted with the bank's fake account scandal
he wants customers to close their accounts. The former first minister of
Scotland says that within the next two years his country will vote for
independence from the United Kingdom. Now while England and Wales chose to
leave the EU, 99 days ago, Scotland and Northern Ireland voted
overwhelmingly to stay. Is it possible that Trump really hasn't paid
federal taxes in at least a few years? Hillary Clintons emails continue to
cast a shadow on her campaign for President of the United States. >
Elections; Politics; Policies; Trade; Food and Beverage; Taxes>
[16:00:00] PAULA NEWTON, CNN ANCHOR: Nice way to close a Friday. Elizabeth Hurley there doing her best to combat breast cancer. Why to do out the week. You never would have predicted it. A 200-point gain to close the quarter. Not bad, it is Friday, September 30th. Helping lead the charge higher, Deutsche Bank bouncing back from fears of a Lehman style collapse.
Boycotting Wells Fargo, a former employee takes on the embattled bank urging customers to close their accounts. And 99 days on from Brexit, can you believe it? Top CEOs and political leaders map Britain's path out of the EU.
I'm Paula Newton and this is QUEST MEANS BUSINESS.
The trading on Deutsche Bank has left me all but speechless. I mean, you only have to look at the share price to get a sense of the drama that continues to unfold over at Germany's largest bank. Shares first tumbled to a record low before coming back with a vengeance to finish just over 6 percent higher. Investors had feared Deutsche Bank may struggle to pay a settlement with the U.S. government without some form of bailout.
Today, Deutsche Bank's CEO, John Cryan, called those fears unjustified. He wrote to staff, "Forces in the markets are trying to damage public trust in the bank. At no point in the last two decades has the balance sheet of Deutsche Bank been as stable as it is today." Quite a claim. European leaders are looking around wondering who is going to try and fix this mess. The ECB President, Mario Draghi, has denied his low interest rate policy is to blame for Deutsche Bank's problems.
And Germany's government has recently denied reports that it is working on a possible rescue plan for the bank. Now Italy's economy minister has called for a quick solution, as you might expect, saying, it's in everyone's interest for things to be resolved. Now if Deutsche Bank can't turn this thing around, it won't just be Germany's problem. Clare Sebastian joins me here in the studio to tell us more. Clare, this is what everyone's wondering, right? What is the trigger point and how do we know it is not overblown?
CLARE SEBASTIAN, CNNMONEY CORRESPONDENT: Exactly, Paula. John Cryan says is the market forces. But there are actually many other forces out here in play. Take a look here at the risks. There are lower rates. Mario Draghi denies it, but it has been easier, according to all of the experts, has been eating into Deutsche Bank's profits. It's that essentially the price they can charge for their loans, this is the core of their business. There is another risk, tighter regulation. Deutsche Bank very much relies on investment bank near the core of its business, and that is where the regulations have really been stepped up since 2008.
Legal punishments, we talk a lot about this. But it's not just the $14 billion fine from the Department of Justice for mortgage backed securities, Deutsche Bank has spent years paying for its past sins, everything from LIBOR rigging to violating U.S. sanctions. There's not just these external factors there's also capital in the bank. I'm going to circle that because that is absolutely key. All banks across the board have had to recapitalized in the wake of the crises. And many believe Deutsche Bank has just been too slow in doing it. It still lags behind many of its peers in terms of its tier 1 capital ratio. That's one of the key measures of how well capitalized a bank is.
And there is a reason why all this matters so much. Take a look. Deutsche Bank is huge, frankly. It's $2 trillion in assets. That is more than half of the size of the entire German economy. And another reason beyond that, it's not just its size, this is one of the most interconnected banks in the entire world. It is basically connected through billions of dollars in derivatives contracts to all the major banks around the world. You can see the European ones in blue. The American ones up here in red, and the Asian ones in green. Europe clearly the most exposed.
But the bottom line is, this bank is clearly too big and too interconnected to fail. So even if Deutsche Bank doesn't manage to recapitalize itself, doesn't manage to raise money on its own, most people think that either the German government or perhaps even the ECB that would be forced to step in. There is too much at stake otherwise, Paula.
NEWTON: Otherwise, but hey, those are dirty words on Main Street, aren't they, Clare? Too big to fail. No one wants to hear that. Is this in any way shape or form closer to the situation we had with Royal Bank of Scotland? When you start to think about what the German government could do.
SEBASTIAN: There's certainly merit in looking at that comparison, because a lot of people say, you know, this is the next demon. This could be something along those lines. But really, there are several options out there.
[16:05:01] And the Royal Bank of Scotland rescued by the U.K. government really gave the U.K. government a stake in what it was doing. They took over a certain amount in the company and they were really able to have a say, not only in how the company was run, but even things along the lines of CEO pay. Now these things are never as clear cut, as you and I know, Paula. They're still not profitable. They just had their eighth straight year of losses, but it's still better than having to bail out the entire financial system like we did after Lehman.
NEWTON: Clare Sebastian, thank you very much. That was pretty thorough, as thorough as it's going to get right now for us to get transparency on what is going on at Deutsche Bank.
Now the Dow enjoyed its biggest gains of the week off the back of that Deutsche Bank rally. We had triple digit swings every day this week. The Dow eventually closed 164 points higher. That means it closed the week slightly higher, despite the big losses on Monday and Thursday. Sounds like that market that can't make up its mind.
Now in Europe the late rally in Deutsche shares meant that the DAX was the best performer on Friday. Other banks weren't so lucky though, with financial stocks weighing in on that London market. Lloyd's finished almost 2 percent lower.
While the economic sky hasn't fallen since Brexit, the divisions in the U.K. and Europe are as deep as ever, 99 days after the historic vote. We'll speak to Wetherspoons' chairman and the Aston Martin's CEO to find out about the challenges lie ahead.
(COMMERCIAL BREAK)
NEWTON: Going back to our top story tonight. Deutsche Bank shares swung from a record low to their highest level in more than a week. All in the space of just one trading session. Charles Huber was a member of the Bundestag for Angela Merkel's Christian Democratic Union. And I will put the question to you. Is there any way that your government will bailout Deutsche Bank?
CHARLES HUBER, BUNDESTAG MEMBER, CHRISTIAN DEMOCRATIC UNION: I think this is a big question, and I am a member with the German parliament, and we already discussed that issue. And I think I just can't speak for now, from my opinion, I think we have at least to do something to save the Deutsche Bank. Deutsche Bank is an icon of the German economy, and I think we have to find a solution, either on the national or on the European level.
NEWTON: You've just said not so much there, which actually has huge ramifications for all of Europe. You know how Europe feels about this, and they are going to say, why are we, the Italians, the Spanish, the Portuguese, the Greeks, are going to say, why are we taking lessons from Germany about this? Why would there ever be a bailout of Deutsche Bank?
[16:10:00] HUBER: Good, the decision is not made yet. I just said, we have to find a decision and I think if there is no decision to bail out Deutsche Bank, if the Deutsche Bank needs some bailout. That's not clear yet. I think the investors still have confidence in the potential of the German bank. It's not very much clear if Deutsche Bank needs a bailout at all. But if you talk about the possibility, the option in the need, the German bank needs a bailout, I think we have to think -- and me I represent my constituency is inside of Frankfurt -- I strongly suggest to go into that direction and to bail the German bank out. But that's not the case yet.
NEWTON: And it's not the case yet, but that obviously has thrown a lot of the future of Deutsche Bank into question. You know, there have been a lot of accusations with the fact that Deutsche Bank didn't do what American banks did after 2008 and 2009. You know, everyone has argued that Europe needs more overtight over its banks, and they needed to clean up their balance sheets a long time ago.
HUBER: I don't want to -- I think the story about the Deutsche Bank, which is the story now we're talking about, has a back story as well. The back story as well is that the German bank was the first bank who was informed and who was knowledgeable about derivative banking in a sophisticated way. Sophisticated way like it happened on Wall Street, and it was our major actor on Wall Street.
Let me tell you one thing, if you would have asked a banker here who takes care of the private assets of people here, if you would have asked about the mortgage backed securities were, what credit defaults swaps were, what CDOs were, nobody would have given you an answer. If you would have talked about swaps, maybe they said it would have been, sorry to say, a bathroom cleaner.
It was our first and our major actor. But the thing was, it was the back story also contains that the CEOs were not very really accurately evaluated. Not very accurately rated as well. And the idea of subprime credits, I think I was at this time, you know when people took subprime credit, it sounds good. The name subprime sounds good, but it is still subprime. Ask a very simple technique, East African landlord, and I said - - he said, "You know, what I did, Charles?" I said, "What did you do?" "I bought with a couple friends, I bought an apartment house." I said, "You bought an apartment house and may have lived in the wrong country." If you as a landlord can buy an apartment house, I said, "Either your friends you're buying the apartment house with are a lot richer than you are or something is wrong with the apartment house." He said "No, Charles, they're all in the same income level." So the thing is, if you take -- if I, for example, if I buy an apartment here, I try to keep my interest rate stable not only for two years, but to keep it stable for as long as possible.
NEWTON: I think --
[CROSSTALK]
HUBER: ... low interest rate of the house.
NEWTON: I think if I hear you correctly, you're saying that you believe the German government needs to do what had t has to do to keep Deutsche Bank alive and well in the banking system. I'm sorry, were going to have to leave it there now. But we will continue to follow this story with you as we figure out more about Deutsche Bank's future in the coming weeks. Appreciate your time.
It is 99 days since the United Kingdom shocked the world and decided to exit the European Union. Fifty-two percent of voters said they wanted to leave and the debate over Europe that had swelled in Britain for decades finally boiled over. It pitted the young against the old, cities against towns, the highly educated against the working class. And it left the future of the European Project hanging in the balance. Here's a look back at that night in June as the U.K. went to sleep a part of Europe and woke up as a truly separate nation.
(BEGIN VIDEOTAPE)
DAVID CAMERON, FORMER BRITISH PRIME MINISTER: It is time for the British people to have their say.
BORIS JOHNSON, FORMER MAYOR OF LONDON: This Thursday could be our country's Independence Day.
HALA GORANI, CNN ANCHOR: It's 10:00 in the United Kingdom and polling stations are now closed.
NIGEL FARAGE, LEADER OF THE UK INDEPENDENCE PARTY: I'm not conceding, but my sense of this is that the governments registration scheme, getting the two million voters on, the 48-hour extension, maybe what tips the balance.
RICHARD QUEST, CNN ANCHOR: A night that many had feared, some had forecast, but now appears to be turning into a reality.
GORANI: Ok, here's was going on. It looks like the leave campaign, the Brexit camp, has gained an almost unstoppable momentum.
[16:15:00] FARAGE: Dare to dream that the dawn is breaking on an independent United Kingdom.
UNIDENTIFIED MALE: Already the pound is tanking. You've got the euro tanking as well against the dollar. That is questioning the whole European project. The markets need to know what David Cameron's thoughts are.
CAMERON: I think the country requires fresh leadership to take it in this direction.
QUEST: The people have spoken. The majesty of the process, whether or not you like the result, first time ever, a nation has voted to leave the European Union. It will be the smallest of majorities, and it appears tonight Brexit has won.
(END VIDEOTAPE)
NEWTON: Thank you, Richard, Brexit won indeed, and global markets plunged and the pound crashed. Britain's deep divisions were on display for the whole world to see. Now the ensuing Conservative Party infighting gave the country a whole new government, and it's second ever female prime minister. Now Europe is demanding answers, which the U.K. seems very reluctant to give. Quentin Peel is in London. He's an associate fellow with the Europe Programme at Chatham, thank you very much. One hundred days, it might as well be 100 minutes, and still do not have any clarity on how Brexit is actually going to happen.
QUENTIN PEEL, ASSOCIATE FELLOW, EUROPE PROGRAM AT CHATHAM HOUSE: Yes, that is absolutely right. It's a complete muddle. I think the government is still divided within itself. I think even those who campaigned for Brexit are divided. Half of them want a sort of total free trade existence with the rest of the world, and not sure what the relationship will be with Europe, but the other half want a sort of soft Brexit that won't be too painful. And it is looking increasingly as if that's simply won't be possible. It's either going to be reverse the whole decision, which looks extremely unlikely, or take a really uncomfortable exit.
NEWTON: I think what's been interesting in terms of watching the economy, we should say, the sky hasn't fallen in on the British economy. It's actually been fairly steady and stable. Do you think that the other shoe has yet to drop on that, and more to the point, is the uncertainty hurting it now? Doesn't Matter Which Way, Britain goes on this, hard or soft Brexit, the point is, get something done.
PEEL: Someone described this very nicely to me as the Wiley coyote moment. You know, when he's chasing the road runner off of the cliff, and he's hanging there in the air with his feet going around and round, but he hasn't fallen down yet. And I think that's where we are in the Brexit moment. We haven't left the European Union. Nothing has actually changed, but the uncertainty is clearly building up.
And we're seeing more and more big investors, we had Nissans boss yesterday, saying look, we are simply not going to take any new investment decisions until we know what this looks like. We're having overwhelming numbers from the city of London expressing deep concern about the way ahead for them, because they do not expect to be able to keep the same degree of access to the single market that they have now. And they're going to have to fight every bit of the way or they're going to have to move quite a lot of people out of London and into parts of the European Union.
NEWTON: we don't have a lot of time left, but tell me, from what you can tell in terms of the way the winds are blowing in Europe, is any kind of access to that single market possible without actually being able to keep its movement of labor, free movement of labor?
PEEL: I can't at the moment see any movement from the 27 other member states, which would say you can have access like you have at the moment, but you can close the doors to free movement and labor. I cannot see that happening. On the other hand, the degree of access, I'm not sure what it will end up with, but I don't think it's going to look very good. Even those in Europe, like the Germans, who I think want to do a good deal, are starting to express caution.
OK, the image of us suspended over a cliff waiting to see what happens, not so soothing, but unfortunately the reality. I thank you again. Quentin Peel there from London, appreciate it.
So far Britain's economy hasn't faced the much predicted cooling off as we were saying, in fact, consumer confidence has bounced back and is now above pre-referendum levels. And the services sector, which accounts for about 80 percent of the British economy, actually grew in July. On the negative side though, business confidence is at a four-year low. A recent survey found that three quarters of British CEOs have considered moving their headquarters out of the U.K. all together.
[16:20:00] Now, I spoke to Tim Martin, though a chairman of Wetherspoons, a pub chain in the UK and Ireland, and he is a leading voice among the Leave Campaign. And he told me the doomsday economic fears just haven't been realized.
(BEGIN VIDEOTAPE)
TIM MARTIN, CHAIRMAN, WETHERSPOONS: I think it was a massive amount of hyperbole, but essence of the lie was the mere fact the vote for Brexit would result in economic calamity, with house prices going down. Interest rates going up, unemployment immediately going up, and huge problems in every sector, that's proven to be wrong.
The strange thing, for anyone who's interested, is that 95 percent of economists, according to their own reckoning, agreed with that. The IMF supported it. The governor of the Bank of England, it was very strange they should make such wrong judgment.
NEWTON: As such a successful businessman in Britain, there is so much riding on Brexit, aren't you afraid that the other shoe is yet to drop on this though?
MARTIN: No, it won't. I think what people can't seem to do who criticized Brexit, who are worried about it, is look around the world as to what creating economic success. And its democracy. Look at North America, which has had democracy enshrined in its constitution. Versus South America, which has had a lot of problems. Look at Japan before it became a democracy and afterwards, or East Germany versus West.
So it's democracy that does it. And the great problem with Europe, which people can't seem to see through, is that is becoming more and more undemocratic. It's caused massive economic problems already in Greece and Portugal. Countries have lost control of their budgets and their interest rates, the key Democratic controls. There sleepwalking into an autocratic situation.
NEWTON: OK, but it's done now, Mr. Martin. It is Brexit. We talk about hard and soft, what do you want to see? What you think is best for Britain?
MARTIN: I think that people are over worried about the trade agreement with the EU following Brexit. And it's not within the power of the U.K. to get a deal with the EU if they want to be difficult over it. But we haven't got a trade agreement with the United States. We trade very successfully here. One of our biggest export markets. Your one of the few countries we've got a surplus with. And America trades very successfully with Britain as well. All the big American companies are trading over there. You don't need a trade agreement with the EU. People are too fixated on that. I think free trade would be great. But if the EU governments don't want it, not a problem for us.
(END VIDEOTAPE)
NEWTON: Now much of what Martin told me there in terms of the impact on his pubs, there's no sign of Brexit uncertainty actually hurting London's restaurant scene either. In fact, it's booming. Openings are 50 percent higher than last year. Nina dos Santos went to a Michelin star restaurant where success is still on the menu.
(BEGIN VIDEOTAPE)
NINA DOS SANTOS, CNNMONEY EUROPE EDITOR (voice-over): The Pied a Terre is across London's West End. Brexit hasn't brought the sour aftertaste some were expecting. And they've been cautious with their cash up until the summer vote. They're now feeling profligate once more. And for restaurants in the capital, business post Brexit is booming.
DAVID MOORE, FOUNDING DIRECTOR, PIED A TERRE: We find that up until the Brexit our slowest six weeks in the past two years. It was absolutely dead. And then bingo, back like nothing had happened. The uncertainty deterred people. The unknown of what was going to happen. But now that we've actually got Brexit, and were talking about what does that mean, it's not deterring everybody. Everybody's back on the expense accounts and businesses back to usual.
DOS SANTOS: Restaurants seem to be feeling reassured as well. With 50 percent more of them openings this August versus last year.
MOORE: Since Brexit, I've actually sold a business that I was offered quite a lot of money for. And I thought let's take that. And we have plans to open a new concept, which would be coming to the West End in the next three to five months.
DOS SANTOS: And it's not just the diners who are putting their money where their mouth is.
KALLUM PICKERING, SENIOR UK ECONOMIST, BERENBERG: It's been better than most people expected. I think it is fair to say the economy has slowed down. There's no doubt about that. But we've certainly not entered into a recession.
DOS SANTOS: With Brexit negotiations not even started, there's no sugar coating some of the risks the sector faces further down the line.
KALLUM: The long time implications of Brexit are mainly supply side issues. If we reduce migration, slower population growth, leads to weaker growth, less trade, less investment from abroad.
DOS SANTOS: In the near term the rising crossed prodigies from abroad could also see patron swallowing steeper prices.
[16:25:00] But for the moment, consumers and companies are finding that they can have their cake and eat it too. Nina dos Santos, CNNMoney, London.
(END VIDEOTAPE)
NEWTON: The head of Aston Martin remained neutral ahead of the referendum in June. Speaking with QUEST MEANS BUSINESS at the time, he warned that growth was likely to suffer, especially in the short term.
(BEGIN VIDEO CLIP)
ANDY PALMER, CEO, ASTON MARTIN: Generally speaking, there will be instability. Now the question is -- and this is the personal question, which I think you can't impose on anybody -- if you accept there is going to be some negatives on your industry and you accept there's going to be instability in the market, and it could cause up difficulties in the short term, are you prepared to trade that for sovereignty and immigration rights and et cetera, et cetera. And corporately I can't answer that for people.
(END VIDEO CLIP)
NEWTON: Andy Palmer, CEO of Aston Martin, joins me now live from London. A hundred days out, when you listen to yourself, and again you remained quite neutral on Brexit, where are we now?
PALMER: Well, you're right. As Aston Martin, we took a slightly different view of the rest of the industry. Probably because we're an independent British company, so we don't have the pressures, perhaps that other manufacturers have. That neutral view was because, you know, my own staff, 72 percent of them were saying that they were supporting the leave campaign. So it would have been extraordinary arrogant for me to have imposed a different will.
I'd anticipated a pre-Brexit, that there would be a weakening of the pound, and indeed there was. I also had anticipated there would be a short-term effect on volume in both the U.K. and in Europe. And in that context, we made a contingency plan to use the benefit from the weak pound to improve volumes in the United States. As it happens, hundred days on, we have seen a weakening of the pound. We have improved our position in the United States, but we have not seen a weakening of volume in the U.K. and in Europe. And in consequence with that, we're enjoying better profitability. So far so good.
NEWTON: So Brexit hasn't been biting yet. What do you see in terms of what's coming up on the horizon? Especially as it relates to uncertainty. Because let's face it, like I said, we're still no further in understanding what Brexit is going to actually mean for business.
PALMER: Exactly, look we live in a very heavy capital industry. If you're developing a new car, perhaps it's an investment of maybe a billion dollars. What the industry in general craves is stability and a stable outlook. And obviously whilst we're in the negotiations phase, no one can say what that brings. And you start to get lots of speculation about will tariff barriers exist or not? What will be the long-term 4X effect? And that speculation tends to cause hesitation in terms of investment. And that's not what U.K. needs and it's not what industry needs. We can speculate all day about where things will go, but the sooner we have clarity, obviously, the better.
NEWTON: In terms of actually wondering the kind of deal that Britain is going to see from this, -- you know, Alex Hammond, who were going to speak to in a few minutes, said that, you know, it looks like this is going to be the full English Brexit. If it is the full English Brexit, as there's no turning back, would you prefer those eggs soft or hard? I mean at this point in time, I hate to take this analogy, but it was a pretty good one. I mean at the end of the day people are saying, look, the hard Brexit doesn't help anyone and yet others are saying, that's not what we voted for. We didn't vote for something that looks like something we already have.
PALMER: Indeed, and I guess, I'm not going to become a politician, because I'm not a politician, I just make cars. And we'll adapt to whatever the scenario is. I think it's very clear from the Mrs. May government that Brexit means Brexit. The way that I interpret that is that we will be out of the single unit. That's my interpretation. Then it's into a discussion about what tariff barriers exist. For me, if you think about the fact of the cars made in Europe for European consumption, 20 percent of those cars come to the United Kingdom in one way or another.
[16:30:00] I cannot believe that in the context of sensible people sitting around the table that we will get anything other than zero tariffs. Because anything other than zero tariffs not only hurts the U.K. manufacturers, but it significantly hurts the German, the French, and Italian makers. And I've got to believe that they will be campaigning with their governments to ensure in both directions that there are zero tariffs. So that is my belief. Of course if there are tariffs, one hopes a that weaker pound will allow us to offset that, and of course, the perfect scenario for me, as a U.K. manufacture, is that we maintain a weaker pound. We don't have any tariffs and that we enjoy greater profitability.