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Quest Means Business

Bank of Canada's Mark Carney Picked for New Bank of England Governor; Reaction to New Bank of England Governor; Greek Bailout Delay; Catalan Elections; Dollar Falling; Deadly Factory Fires; Morsi Power Grab?; Can US Avoid Fiscal Cliff?

Aired November 26, 2012 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, HOST: It's an outside job. The new governor of the Bank of England comes straight across the Atlantic from the Bank of Canada.

A setback for the separatists. It was no runaway win for the breakaway Catalonia party.

And the life of Psy. "Gangnam Style" triumphs on social media.

I'm Richard Quest, the start of a new week and, of course, I mean business.

Good evening. It is the ultimate piece of financial head hunting: Britain has poached another country's top central banker. The governor -- or the next governor of the Bank of England will be Mark Carney, who is the current head of the Bank of Canada. It's the first time in the Bank of England's three centuries that a foreigner has been appointed, and much is being made --

(RINGS BELL)

QUEST: -- of that fact. Join me over in the library. Mark Carney will replace Sir Mervyn King on the first day of July next year.

Now, here's the interesting thing. Everyone had expected one of the deputy governors, Paul Tucker, to get the job. In fact, Carney had specifically, categorically ruled himself out of the running, almost saying "no" and "never."

But the UK finance minister, George Osborne, the chancellor, said today in the House of Commons in London that when it comes to the next person, there was no better candidate for the job.

(BEGIN VIDEO CLIP)

GEORGE OSBORNE, BRITISH CHANCELLOR OF THE EXCHEQUER: He is acknowledged as the outstanding central banker of his generation, and I believe he will bring the strong leadership and external experience that the bank itself needs as it takes on its heavy new responsibilities for regulating our banking system. In that respect, Mr. Carney will bring a fresh perspective.

(END VIDEO CLIP)

QUEST: That "fresh perspective," the Bank of England job is amongst the most important in the economic world. It controls the pound sterling which, of course, is one of the global reserve currencies. The bank now has new supervisory powers following the crash of 2008, 09.

The macro-prudential rule of the bank will be much further and deeper in the economy than previously. And, of course, it will have to kickstart the sluggish recovery.

So, why leave Canada for the UK? According to Mark Carney, the job at the Bank of England's one of the most important in international economics.

(BEGIN VIDEO CLIP)

MARK CARNEY, INCOMING GOVERNOR, BANK OF ENGLAND: This is a major challenge. It's a major opportunity. It's very important for the global economy that the UK does well, that it succeeds in this rebalancing of their economy, that the reform of the British financial system is completed. It's well-advanced, but it needs to be completed.

It's very important, obviously, for Canada, as we've talked many times in this very room, that the European transition contributes -- comes to fruition.

(END VIDEO CLIP)

QUEST: But Carney's already got a job, four years to a seven-year term at the Bank of Canada. So, he's got his existing job, he's got his to-do list at the new job in the Bank of England in London. As for Canada, he's been very-well respected for the handling of the financial crisis. The Canadian finance minister, Jim Flaherty, always welcome on this program, explained the strengths of Mark Carney.

(BEGIN VIDEO CLIP)

JIM FLAHERTY, CANADIAN FINANCE MINISTER: Monetary policy, inflation, the fact that with -- the governor has managed the issues for which he has been responsible, for which he is responsible, very well over the past five years. Canada has shone, relatively speaking, in the world during the period of time in which Governor Carney has served as the governor of the Bank of Canada.

(END VIDEO CLIP)

QUEST: If there's such a thing as a hotshot in the central banking world, then it is Mark Carney. The Bank of Canada -- he's the youngest governor since February 2008. In the G7, he's also a central bank governor, the youngest in the G7.

He is chair of the financial stability board, which is the organization looking at regulation and coordination between various countries. And Carney made his reputation from handling the financial crisis. Look at what he actually did.

The cut in interest rates at the start of the credit crunch, quite a dramatic cut. No other central bank is raising rates in quite the same way as the Bank of Canada is doing at the moment. He's an advocate of strong capital reserves for banks and, crucially -- crucially -- no bank bailouts were needed in Canada.

So, where was he educated? What's his CV, if you like? What did they like about him? Harvard and Oxford, as you might expect. He is fluent in French, that's not a surprise coming from Canada.

Here's the interesting thing: 13 years at Goldman Sachs, the investment bank. So, he is seen as comfortable in financial markets, he is respected by bankers and now, of course, from his experience in Canada, he has huge experience of dealing with a major central bank, an independent central bank.

Joining me now is Dan Conaghan, the author of "The Bank: Inside the Bank of England." Your first reaction when you heard that Paul Tucker hadn't got the job and Mark Carney had?

DAN CONAGHAN, AUTHOR, "THE BANK: INSIDE THE BANK OF ENGLAND": Well, Richard, it was sock, like I think everybody who had been widely tipping Paul Tucker who, let's not forget, has been there 32 years at the bank. As someone said to me, he's been biting his lip for 32 years, desperately hoping for that top job. I wouldn't be surprised at all if he leaves quite soon.

QUEST: He'll be gone by Christmas.

CONAGHAN: Well, and the word is he may even go to Goldman Sachs, which would, of course, be an irony given Mark Carney's background.

QUEST: The bank is in for a shock, aren't they, with Mark Carney? Or, as some commentators are saying today, is he just more of the same and similar? He's cut from the same central bank cloth. Oh, he may not be traditionalist in the Mervyn sense -- Mervyn King sense -- but he is a traditional central bank.

CONAGHAN: Well, I think he's a -- he's going to be a very different proposition for the bank itself, and I --

(CROSSTALK)

QUEST: Why? Why?

CONAGHAN: I spoke to people at the bank this afternoon, and they were feeling distinctly queasy about the arrival, as it said on your clip, a hotshot from the Bank of Canada.

But I think that if you look at his record in the Bank of Canada, he's been much more proactive about dealing with crises as they emerge, about putting things right and getting external advisors to help out, which of course is anathema to the bank. It's always been a black box in London.

QUEST: Do you think he opens the bank up, not just to those external advisors, but that he -- he sweeps a broom? I mean the court, calling him "Mr. Governor," and the liveried uniform, all the whole thing about it. It's time for a bit of fresh air in the Bank of England. Is he going to bring it?

CONAGHAN: I'm sure he will. I think he'll have to be careful not to sweep away all the traditions of this venerable institution, to avoid alienating some of his 1800 staff. But I think we're going to see a dramatic change in culture at the Bank of England.

QUEST: Yes, you see, you say that, "We'll see a dramatic change of culture." But he is an inflation target in the sense -- the same way the Bank of Canada follows an inflation target, exactly the same as the Bank of England's, 2 percent.

CONAGHAN: Yes, and their forecasting rate has been just as bad.

QUEST: As we heard from this -- and the Bank of England has been lambasted just in the last couple of weeks by several reports. So, there's not going to be a policy difference, is there, on monetary policy?

CONAGHAN: Well, I think he hasn't got a lot of wriggle room. We see -- we've seen a long-term deviation from the inflation target in the UK. I think he's going to have to tread carefully. But he's been described as not being pessimist, not being an optimist, but being a realist, and I think that's what we'll see is, we'll see a realist at the helm of the Bank of England.

QUEST: Does it matter? Let's sort of come out of the parochialism of the UK for a moment. Does it matter who runs the Bank of England? There's only two people who really matter, Ben Bernanke at the Fed and Mario Draghi at the ECB.

CONAGHAN: Well, I certainly don't think it matters in this day and age that he's not a Brit.

QUEST: No, but I mean, does he have much power? Does it really matter whether the Bank of England is -- isn't it a bit player these days?

CONAGHAN: Well, I -- the bank moves in mysterious ways around the globe and, indeed, even our regulatory system, the old FSA and the old tripartite was the model that, for example, the Middle Eastern countries have used for their regulatory system.

So, it still exerts a huge a mount of influence, if not necessarily in monetary policy, in at least central banking circles. I think it's given a lot of credence.

QUEST: All right, time for a bell. Good or bad decision, Mark Carney, in your view?

CONAGHAN: Good, and I think the markets will also agree.

(QUEST RINGS BELL)

QUEST: Thank you very much, indeed.

So, what do the markets make of it? What do the economists in the city make of the announcement of Mark Carney? Roger Bootle says Carney might be a dangerous appointment for the Bank of England. He's the managing director of Capital Economics. I asked him for his reaction and, like we've already heard, it was surprising.

(BEGIN VIDEOTAPE)

ROBER BOOTLE, MANAGING DIRECTOR, CAPITAL ECONOMICS: Frankly, I'm flabbergasted. Not that he isn't a good candidate. I'm sure he's fantastic and, indeed, several months ago, when these things were being debated, I and quite a lot of other people thought he would be jolly good for the job.

The real surprise is about the workings, quite frankly, of the British establishment. Because we were told some months ago that he was in the frame, then he ruled himself out.

And over the last few weeks, we were given to understand that there was a short list of candidates and we were sort of -- although it wasn't officially announced, it was filtered out who they were, and he was nowhere to be seen.

QUEST: So, what we're really going to look for in the next few days and weeks is whether or not he was basically dragoon. Did they go out and actually solicit?

BOOTLE: I think it's pretty clear they must have done. In fact, I think he's actually said that he didn't formally apply.

QUEST: He's got his hands full when he gets to the UK. What's his number one priority?

BOOTLE: Oh, I think first of all, he's got to stabilize the institution, because it's going to be a considerable shock. I think this is a slap in the face to the bank not to appoint the bank's own star candidate Paul Tucker, to appoint someone not just from outside the bank but outside the country.

It's essentially saying, look, we've got no faith in you as an institution. The first thing, he's got to stabilize the institution, let it regain its confidence.

He's of course got to pay close attention to the UK macro position. But then over and above that, he's got these new responsibilities of actually overseeing financial stability and the detail supervision of UK financial institutions.

QUEST: In that environment, do you think -- and this is the impossible question, but I'll ask it anyway -- they were right in their decision with Mark Carney?

BOOTLE: Well, I don't know, of course, what they knew, what information they had in front of them. The favorite was undoubtedly the internal candidate, Paul Tucker, who I know. He's a very capable man, and I'm surprised he didn't get the job. And frankly, for him, I'm very disappointed.

My own view, now, is that a lot depends upon whether he stays. If he stays, the combination of Paul Tucker, who's immensely experienced in the markets, and Mark Carney might be very good. If he doesn't stay, I think this will prove to be an extremely dangerous appointment.

QUEST: Dangerous?

BOOTLE: Dangerous. Yes, because they would have catapulted into the bank somebody for, all his abilities, we know he's very able, doesn't know the institution, doesn't know Britain that well, doesn't know the UK markets that well, and in the process, they would have lost the person who does know all those things very well.

(END VIDEOTAPE)

QUEST: That's Roger Bootle, who won the Wolfson Prize to plan for a European breakup. I also asked him about his thought on the picture in Europe, and we'll bring you those comments and developments on the latest crisis meetings from Brussels in just a moment. It's QUEST MEANS BUSINESS on a Monday, good evening.

(COMMERCIAL BREAK)

QUEST: Euro finance ministers are back in Brussels for the third week in a row, and the agenda's the same: the latest bailout plan for Greece and whether official lenders like governments should take a hit on the billions of dollars in loans.

The IMF says EU governments should accept losses on their Greek loans. Germany and others have so far rejected that, arguing it's against national and EU law. Olli Rehn, the commissioner, urged leaders to make a decision.

(BEGIN VIDEO CLIP)

OLLI REHN, EU COMMISSIONER FOR ECONOMIC AFFAIRS: It'll take a decision on the disbursement of the next tranche in order to enter the answer, indeed, that's still hanging over Greece. It's important for Greece, important for Europe, and I want to encourage all the euro area member states and the IMF to go the last mile in order to find an agreement.

(END VIDEO CLIP)

QUEST: So, the talking goes on. Roger Bootle, who you heard from earlier, won the Wolfson Prize, which was designed to create an orderly eurozone breakup. Roger says Europe's leaders are trying to muddle through this crisis, and the people are suffering the consequences.

(BEGIN VIDEOTAPE)

BOOTLE: There's a sense in which the European politicians just don't get it. I have exactly the same sense that you have whenever I go to Asia and I come back in a state of despair. It's as though these people haven't quite grasped the idea that Europe is really in fundamental crisis and is losing ground massively to the dynamic parts of the world.

QUEST: So, if they can manage to muddle through, is it a real crisis, is what I suppose I'm saying? Because nothing ever seems to get any better. We seem to be muddling through. So, where is the next moment where we've really got to watch carefully?

BOOTLE: Well, they're muddling through. I don't think we're muddling through. The underlying reality for people in Europe is extremely grim. GDP is contracting across much of the continent, unemployment is appallingly high, 25 percent pushing that sort of number in parts. Youth unemployment even higher. I don't call that muddling through. It's a disaster.

QUEST: And if we take Greece, which will eventually get some form of assistance, because if it does not, then once again, we're back to the question of whither the euro any further. If we take the Greek situation, do you believe that it gets better -- that it gets worse before it gets better again?

BOOTLE: I think yes, it's getting worse all the time. They may get given all sorts of dollops of money. In fact, I think the signs are that they are going to get given dollops of money. All sorts of concessions will be made to them. But for the ordinary Greek, I don't think things will get better at all. They'll continue to get worse.

(END VIDEOTAPE)

QUEST: The voters have spoken in Catalonia, and no one's entirely sure what they said. The Catalan president Artur Mas called a snap election to win support for a referendum on independence. Voters failed to deliver the thumbs-up he'd wanted.

Instead, they gave what looks like a bloody nose to Mas while still seeming to back the separatist cause. Al Goodman's our Madrid correspondent. He joins me now. What exactly did they decide?

AL GOODMAN, CNN MADRID BUREAU CHIEF: Hi, Richard. What they decided is they gave about two-thirds of the Catalan parliament to four parties that support independence. But it's all diffuse, and this man, Artur Mas, the incumbent president who called the snap elections trying to get a majority, he was six seats short when he called the elections.

Now he's 18 seats short. So, he no longer really is seen as being the leader towards this possible independence movement. Remember, independence wasn't on the ballot on Sunday. It was reelecting a president and a regional parliament. Richard?

QUEST: All right. Ah, but, you see the point is here, the independence movement hasn't gone away and some people still say that this was a -- vote for a referendum. So, the core question is, does Mariano Rajoy sleep more easily? Does he believe that this referendum issue has been put on the back burner for the time being?

GOODMAN: Yes, he does have it on the back burner for the time being, and he is feeling very good today, and he and his aids have been throwing all sorts of darts at Mr. Mas, accusing him of being irresponsible and not prudent in calling these elections and not keeping the eye on the ball to solve the economic crisis.

So, he buys himself some time, the prime minister here in Madrid. Remember, Madrid frontally opposes any independence, and the European Union has said that if Catalonia became independent -- if, if -- that they would have to stand in line to get back into the EU. They couldn't just automatically come in. Richard?

QUEST: Al, is it your judgment that we've heard the last of Catalonia -- serious noises for Catalonia independence for the time being?

GOODMAN: For the time being, yes. They have to get a government and figure out a lot of things. But no, they -- all of the parties since the vote has been counted late Sunday, that the key parties there are saying -- the winners are saying we want to go ahead with this, we just don't know how to do it just yet. So, there's going to be some time where it's going to be on the back burner, but it may come back up. Richard?

QUEST: Al Goodman. We want to do it, we just don't know how to. Many thanks, indeed. Al Goodman for us in Madrid tonight.

The Currency Conundrum for you, now. In 2006, South Korea confiscated a large number of one note because of forgery. Our question to you: what percentage of the 5,000 one note had to be taken out of circulation? One percent, half, or a hundred percent? The answer later in the program.

The dollar's falling against the yen. A dollar currently buys 82, a drop of half of one percent from Sunday. Those are the rates --

(RINGS BELL)

QUEST: -- this is the break.

(COMMERCIAL BREAK)

QUEST: Thousands of angry textile workers have been protesting in Bangladesh following the country's worst-ever factory fire, which killed 110 people. And now, the pressure is on global retailers to improve working conditions in such factories. Atika Shubert reports.

(BEGIN VIDEOTAPE)

ATIKA SHUBERT, CNN INTERNATIONAL CORRESPONDENT (voice-over): The fire at the Tazreen Garment Factory raged for hours as fire engines struggled to get through, but there was no escape on the lowest floors, and workers jumped from the nine-story building to save themselves. More than 100 people died.

Sadly, this is not uncommon in Bangladesh, the world's second-largest exporter of clothes. Between 2006 and 2009, 414 garment workers died in more than 200 factory fires, according to the country's fire service.

(CROWD CHANTING)

On Monday, thousands took the streets in protest, shutting down neighboring factories and demanding compensation and a full investigation into what happened. Parul Begum barely survived the Tazreen factory fire.

PARUL BEGUM, SURVIVOR (through translator): When we heard fire, we all rushed and were trying to get out of the factory. The factory worker broke a window and one of the workers pulled me through the window. Immediately, after the fire broke, we tried to run out, but the door was locked. When the floor became dark because of smoke, the boys rescued me.

SHUBERT (on camera): Well, this photo shows what remains of the factory. You can see rows of burned-out sewing machines. And this factor was making t-shirts and fleece jackets for brands that sold to big names like Wal-Mart. In fact, according to the company website, it had an annual turnover of $36 million a year.

On that website, you can find this. This is an orange notice from an independent assessor of Wal-Mart's, and it warns that the Tazreen factory posed high-risk violations in May of last year. It does not say what exactly those violations were, and it's not clear what action was taken after this notice.

SHUBERT (voice-over): CNN has asked Wal-Mart for a response, but has yet to receive a reply. In a statement to Reuters, Wal-Mart said the company was, quote, "trying to determine if the factory has a current relationship with Wal-Mart or one of our suppliers."

Bangladesh exports an estimated $18 billion in garments each year. It is a critical money-making industry that supplies world demand for cheap clothes. But in Bangladesh, that often means low wages and long hours in dangerously-cramped factories with poor safety records.

Grieving relatives and surviving workers of the Tazreen factory fire are now asking if the cost of supplying the world's cheap clothing is too high.

Atika Shubert, CNN, London.

(END VIDEOTAPE)

QUEST: In just a moment after this break, we head to Cairo, where a power grab from Egypt's first freely-elected president sparked protests in the streets, and there's now cries of a new dictatorship.

(COMMERCIAL BREAK)

RICHARD QUEST, CNN HOST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, the news always comes first.

(BEGIN VIDEO CLIP)

QUEST (voice-over): Egypt's first freely elected president is meeting with the country's highest court on Monday. Mohammed Morsi made a power grab last week declaring no court could overturn his decisions. The move has sparked protests in the streets and a spiral (ph) on Cairo's main stock index. We'll be talking more about this story after this news summary.

Activists say a cluster bomb from a Syrian warplane killed at least 10 children on a playground in a Damascus suburb on Sunday. CNN can't independently verify (inaudible) the authenticity of these pictures. Cluster bombs can release smaller explosives to cause maximum devastation.

The Israeli defense minister, Ehud Barak, said he's stepping down in January and quitting politics altogether, saying he wants to spend more time with his family. Barak's announcement comes after the recent conflict with Hamas in Gaza.

Police in southwest Germany say an explosion in a storage room may have caused the fire that killed 14 people and injured several others. The fire happened at a charity workshop for the disabled and amongst those killed were workers and a counselor.

Britain's government has announced the next governor of the Bank of England. He's the Canadian central bank head Mark Carney, who will take over from Sir Mervyn King. Many are surprised by the announcement, expected a current insider at the bank to be named.

(MUSIC PLAYING)

(END VIDEO CLIP)

QUEST: Cairo's stock exchange is making a modest recovery from Sunday's 9.5 percent fall after opening well into the red. The EGX 30 gained 2.6 percent by the end of Monday's session. The sharp drop came after President Morsi gave himself sweeping new powers.

Now the move sparked protests in the capital, outrage across the nation and a strike by judges. The index is still up around 40 percent for the year as a whole, boosted by the transition to democracy.

President Morsi's new powers are being called an attack on the freedom of the people of Egypt fought so hard to get. Reza Sayah joins us now from Cairo.

As this develops, Reza, bring me up to date, please.

REZA SAYAH, CNN CORRESPONDENT: Well, let's pass along, Richard, some breaking news that we just got in. According to a spokesperson for the Muslim Brotherhood, the Brotherhood has canceled their 1 million-man demonstration that was scheduled for tomorrow. According to them, they want to avoid any kind of clashes, any kind of violence.

And I think a lot of observers are breathing a sigh of relief because the stage was set tomorrow for an explosive situation. You had the opposition factions with their 1 million-man demonstration, the Muslim Brotherhood had their demonstration scheduled. But minutes ago, according to a spokesperson, that particular protest has been canceled.

Also tonight, at this hour, President Morsi, the Egyptian president, meeting with a number of Egypt's top judges, the Supreme Judicial Council. They're trying to work out their conflict. Remember, one of the decrees he announced last week essentially disabled the judiciary.

Many of these judges are leftovers from the Mubarak regime, bitter enemies with Mr. Morsi and the Muslim Brotherhood. We'll see how that meeting turns out.

It's important to point out that it's not just the judges that are taking on Mr. Morsi; it's a lot of other political factions that are behind us in Tahrir Square, factions representing women's movements, youth groups, liberals, minorities. They believe they've been sidelined in the all- important drafting of the constitution.

Earlier today, we spoke with a top adviser of Mr. Morsi in an exclusive interview. And we asked him about the controversy surrounding the drafting of the constitution.

DR. ESSAM EL-ERIAN, VICE-CHAIRMAN, FREEDOM AND JUSTICE PARTY: You have 78 (inaudible). And those 22 participated in every (inaudible). Their opinions was respected. They are in, not out.

SAYAH: But they're protecting they have quit.

Why not slow down and address their concerns?

EL-ERIAN: Because we are in (inaudible) about two years. And we must transfer to another era of a democratic country to have a constitution, to have election in a democracy, you are applying majority rule (ph). You cannot side with party.

SAYAH: But it's not just one faction that's opposing you. You have all these opposing factions that are usually divided, banding together --

(CROSSTALK)

EL-ERIAN: (Inaudible) divided. France is divided.

SAYAH: But let's talk about Egypt.

EL-ERIAN: (Inaudible) --

SAYAH: That doesn't make their process --

EL-ERIAN: -- division --

SAYAH: -- ideal democracy.

EL-ERIAN: (Inaudible). Division is now a universal mood (ph). And this time we need national unity. And to build our country, we invite all to participate.

(END VIDEO CLIP)

SAYAH: That was Dr. Essam El-Erian, a top adviser for Egyptian President Mohammed Morsi. And it really helps to put their position in focus, Richard, essentially saying they -- these moves that they've made are an effort to protect the democratic process and the principles of the revolution.

Obviously, the opposing factions disagree; that's why they're out here protesting.

QUEST: All right. As I heard about the Morsi measures and what he has announced, the one thing that came to me again and again, Reza, is why now? Just as Israel and Hamas are fighting in Gaza, just as Egypt and Morsi is playing a greater role and being seen as a world sort of leading statesman, why did he do it now?

SAYAH: Well, certainly they were riding a pretty good wave coming off the key role that they played last week in the declaration of the cease- fire. They got a lot of international acclaim. Maybe they made a calculated decision to try to ride that momentum into making this decision.

But certainly the response that they gotten domestically from these opposing factions has nothing to do with the international credit that they're getting. And I think another reason why they made this decision right now is this is a critical time for the Muslim Brotherhood, the political landscape is in their favor.

This constitutional assembly that's charged with drafting this constitution has dominated by Islamists with this decree. Now he seems to have absolute powers until the parliament is formed. But, again, their position is they're doing this to salvage the revolution and the opposing factions vehemently disagree.

QUEST: And of course, you're -- where you sit is where you stand, or whatever that phrase is, and people will see the same facts in different situations.

Reza Sayah, joining us tonight from Cairo.

And tonight on "AMANPOUR," immediately after this program, in 22 minutes from now, give or take, Egypt and democracy was one of the flowers of the Arab Spring. It remains fragile as a new winter of discontent -- Christiane's talking to one of the Egyptian president's angry opponents. That's "AMANPOUR" later.

The U.S. is hurtling towards fiscal cliff. And when we come back, we'll get some outside advice. If you've got Democrats and Republicans, how can you really play hardball and negotiate back from the edge?

(MUSIC PLAYING)

(COMMERCIAL BREAK)

QUEST: The change in Washington continues as the new administration or the existing administration gets ready for its new term. Barack Obama has named Elisse Walter as the new chairman of the SEC, the Securities and Exchange Commission.

Currently a commissioner at the U.S. financial watchdog, she'll take the leading role when the current chairman, Mary Schapiro, steps down next month.

Lawmakers in America have just 36 days to veer the U.S. economy away from the so-called fiscal cliff, the automatic spending cuts and tax rises which they place at the end of the year. If they do, they'll ram the U.S. economy clean off the road.

There are two sets of hands on the wheel, the Republicans and the Democrats are squabbling dangerously over the best route to take. And as Kyung Lah now reports, it might not be time to bring in more hardcore negotiators.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We cannot afford to extend the Bush tax cuts for the wealthy.

JOHN BOEHNER, SPEAKER OF THE HOUSE: Seven hundred thousand jobs would be destroyed.

KYUNG LAH, CNN CORRESPONDENT (voice-over): Two sides, ground into their positions. But they can meet in the middle. Just ask tough negotiators outside the beltway.

JACK TRIMARCO, RETIRED FBI HOSTAGE NEGOTIATOR: I'm the negotiator who knows how to deal with bad guys.

LAH (voice-over): He's not talking about politicians but crooks, literally. Trimarco was the FBI's negotiator in multiple high-profile bank hostage standoffs. He says he peacefully freed dozens of hostages over his 20 years with the agency. He negotiated seemingly impossible deals and says he never lost a life.

LAH: You have to plan for everything going wrong as a negotiator.

TRIMARCO: Yes. You've got to be ready for it. And to deal with it. And you've got to be flexible.

LAH (voice-over): But not too flexible.

The lawyer for Hollywood heavy weights like Harvey Weinstein, James Cameron and Tom Cruise knows about ugly divorces, public fights with studios and, yes, fair deals.

BERT FIELDS, HOLLYWOOD ATTORNEY: At what point is it better to have no deal than the deal that's being offered?

LAH (on camera): Do you have an appreciation for what Obama and Boehner are looking for?

FIELDS: Oh, absolutely. I sympathize with both of them. It's not fun for these guys, because there's too much at stake. It's fun for me, because the worst that happens is my client gets less money; not the end of the world -- although it may seem so to the client.

(LAUGHTER)

LAH (voice-over): Maybe you can't please everyone, but even children know: you have to cooperate.

UNIDENTIFIED FEMALE: Maybe you can work together, build together? Maybe you can connect it? What do you think?

UNIDENTIFIED MALE: Oh, yes.

UNIDENTIFIED MALE: Oh, Yes.

LAH: A daily lesson on the playground: working together sprouts even better solutions.

UNIDENTIFIED MALE: That's a great idea. Do you want to see my great idea?

LAH (on camera): Do you think these lessons on the playground really need to be transferred to D.C.?

PADDY LUDWIG, "THE NEIGHBORHOOD SCHOOL" OWNER: Absolutely. Absolutely. We need -- we need to find a way to work together, to figure out what's going to be acceptable to everybody. We've got to figure it out. Otherwise, I mean, we all lose.

LAH (voice-over): There's nothing surprising here, because maybe it's just that simple. So if they can do it --

(on camera): How old are you guys?

UNIDENTIFIED MALE: Five.

UNIDENTIFIED MALE: Five.

LAH (voice-over): Maybe the political playground can do it, too -- Kyung Lah, CNN Los Angeles.

(END VIDEO CLIP)

QUEST: Nearly a week of unrelenting rain has hit southwestern England and Wales.

(BEGIN VIDEO CLIP)

QUEST (voice-over): A saturated soil can't hold any more water. Floods have invaded hundreds of homes. Jennifer Delgado is at the World Weather Center.

Is there any relief for those flood-ravaged parts of the U.K.?

JENNIFER DELGADO, AMS METEOROLOGIST: Hi, there, Richard. Well, it is going to take a couple of days. We are going to see the heaviest rainfall coming to an end later tonight. And then tomorrow we're going to be dealing more scattered showers out there. But over the last couple of days, we have been talking about incredible amount of rainfall.

You can see on the radar right now, it's still lighting up through parts of the U.K., spreading down towards areas including Spain. But as we take you back in time, we've been dealing with several rounds of heavy rainfall. We started off on Tuesday. You start to see some of that rain, especially working into the southwest.

Well, we go through from Tuesday into Thursday; here comes another round. And then as we move into Saturday, here comes another system as well as into Sunday. And this has led to record rainfall. And you saw the video of the flooding there. Some of these locations have actually picked up a month's worth of rainfall in just one day alone.

And look at some of these totals out here. We're talking in some locations up to about 149 millimeters of rainfall with a monthly average of 79 millimeters. And look at those winds, up to 100 kph. When you're dealing with very strong winds, in addition to a saturated ground, that spells bad news. You see power lines coming down as well as trees.

Now we've been talking about the heavy rainfall there. Look at all these warnings that are in place, extending from the southwestern part of England all the way up towards the northeastern area. And that means we have a flood alert.

So listening to your local agency is going to be essential, because some of these flood warnings and watches out there, they're going to be in place as we go potentially into midweek.

And then as we go into midweek, we are going to see this area of low pressure shifting over towards the east. As it does, it's going to take that heavy rainfall with it. But behind that, we're talking about very cool temperatures.

And Richard, with the cool temperatures and with all the water out there, the other part of the story is we're going to be looking at icy conditions in addition to the very cold temperatures and in addition to the flooding out there.

Richard, a lot going on through parts of the southwest, just incredible rainfall amounts.

QUEST: And we can look -- well, I say look forward; we can rely on you to keep us informed.

DELGADO: Absolutely.

QUEST: Looks like it's giving us extremely unpleasant conditions in the days ahead in large parts of Europe.

Jennifer, many thanks indeed, we'll have more after the break. This is QUEST MEANS BUSINESS.

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QUEST (voice-over): Tonight's "Conundrum," in 2006, South Korea confiscated a large number of won notes. The answer is half of them, 50 percent were removed and replaced with new 5,000 won notes, featuring improved anti-counterfeiting measures -- 50 percent of the notes.

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QUEST: YouTube viewers have broken their 21/2-year Bieber fever. Now their temperatures are rising for this chap.

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QUEST (voice-over): "Gangnam Style" is definitely in style. The video by the South Korean rapper (inaudible) Bieber's "Baby" as the most viewed YouTube clip every over the weekend. "Gangnam Style" has now had more than 826 million hit. Bieber's "Baby" is on 805 million -- 826 million.

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QUEST: Streaming sites like YouTube, Vimeo and Spotify are changing the music industry, even for people like me. Global music sales fell in 2012 and now the big labels are cautiously optimistic that business will rebound next year, as Jim Boulden explains.

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JIM BOULDEN, CNN CORRESPONDENT (voice-over): The music world lives in hope that new acts can bring the industry back to health. Young artists like "X Factor" finalist Janet Devlin. Her debut album is slated to be one of the first releases in early 2013.

JANET DEVLIN, "X FACTOR" FINALIST: Some people think I'm going to come out with some Adele's 21 (inaudible) ballads and stuff, but definitely, no, but, I mean, I take a lot of influences from music I listen to and things.

It's quite quirky and different. Yes, there are a couple of (inaudible) songs about this -- just I don't think it's what everyone would expect, but I think they'll really like it.

BOULDEN (voice-over): Devlin is following the trend of relying on buzz from her videos on social media, plus presales from fans through Internet service PledgeMusic. She turned down offers from big labels to make her album.

DEVLIN: You've written a song and you've taken the time on it and you've created it and written it and then you take it to a guy that's got a lot less imagination than the producer, quite frankly, so they will -- may just not see a potential in the song and just throw it away.

BOULDEN (voice-over): But the record labels have been on a campaign of late to convince artists that they and the public are still relevant.

FRANCES MOORE, IFPI: There will be a percentage of artists who will be able to make a living online. But I think it's important to note that the Internet does (inaudible) doesn't necessarily transfer into commercial success.

BOULDEN (voice-over): The big labels have drastically cut costs to survive, but they say they have not cut the money invested in new talent. On average, a hefty 26 percent of global revenues. One in four of those signed to the top four labels are new acts.

COLIN BARLOW, PRESIDENT, RCA RECORDS UK: I think that because there's a lot of really exciting, fresh, new music that I'm hearing and it's a time when people have been more innovative and I think there's a believability to a lot of new acts that are coming along, where people are actually more prepared to be honest about they -- who they are.

BOULDEN (voice-over): And honest about where they come from. Love it or hate it, "Gangnam Style" is the thin edge of a K pop or Korean pop explosion, now the most viewed video ever on YouTube. Streaming sites have given more acts more access to global fans, with video views now seen as a benchmark for music.

But the industry says technology is also giving them access to new sales, not just video views.

MAX HOLE, COO, UNIVERSAL MUSIC: We now, albeit small, are getting revenue for our music and our artists in countries like Vietnam and Cambodia and Peru. And these were places where we really didn't make anything at all.

BOULDEN (voice-over): The industry acknowledges piracy is still hurting sales, but digital downloads have led to an explosion in singles, mainly for new acts and some from new markets, all reasons music sales could -- just could actually grow in 2013 for the first time in more than a decade -- Jim Boulden, CNN, London.

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QUEST: Tonight's "Profitable Moment," everything about the new Bank of England governor and its search has been historic. Back in August, the job was advertised for the first time in history. And now that search has produced the first foreign governor. Mark Carney has a lot on his plate.

In August, we asked our resident cartoonist Andy Bundy to draw for us what a Bank of England governor needed. He came up with this multi-headed hydra of responsibilities and roles.

So now we know who will actually replace Mervyn King and take on these challenges. His outsider status will raise eyebrows. We've seen before when top positions are filled, sometimes the candidate's passport accounts for more than the contents of their resume. Mark Carney's credentials are impeccable. Now he has to get on with the job.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.

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QUEST (voice-over): The headlines: Egypt's ruling party has called off a million-man march in Cairo on Tuesday. The Muslim Brotherhood says that's to avoid clashes. The rally was originally called to support the power grab by President Morsi. He declared last week that no court overturn his decisions. It sparked protests in the streets, a stock market selloff on fears of a new dictatorship.

Activists say a cluster bomb from a Syrian warplane killed at least 10 children on a playground in a Damascus suburb. CNN can't independently verify the authenticity of these pictures. Cluster bombs release smaller explosives to cause maximum devastation.

The Israeli defense minister, Ehud Barak, said he's stepping down in January and quitting politics altogether. He wants to spend more time with his family, he says. The announcement comes after the recent conflict with Hamas in Gaza.

And Britain's government has named the next governor of the Bank of England. Canadian central bank head Mark Carney will be Mervyn King's successor in the middle of next year.

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QUEST: Those are the stories that we're following for you. Now to New York, live and "AMANPOUR".

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