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Quest Means Business

UBS Gets $1.5 Billion Fine in Libor-Fixing Scandal; Banks Behaving Badly; Market Reaction to UBS Fine; Fiscal Cliff Talks; Economic Risks; Dollar Falling Slightly; One Billion Tourists; Age of Travel

Aired December 19, 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: A $1.5 billion fine for UBS over libor manipulation. Tonight, we speak to one of the top US regulators.

Gone in a flash after a user backlash. Instagram says it will not be selling your photos.

And Henry Kissinger called diamonds "a chunk of coal made good under pressure." We sort out the sparkling investments from the expensive mistakes.

I'm Richard Quest. We have an hour together, and of course, I mean business.

Good evening. It is one of the most significant scandals in global banking history. So says the US assistant attorney general. UBS, the Swiss investment house, is facing record fines, criminal charges, and even extradition of its former employees after nearly a decade of libor-fixing.

This is the final notice on its own from the British authorities, the FSA. It runs for some 40 pages. Well, what's in it all?

The bank will pay a $1.5 billion fine to Swiss, British, and American regulators after admitting fraud, bribery, and rate-rigging. US authorities called the bank's behavior "astonishing."

Senior management was found to be involved. Two former traders -- senior traders -- they've been named: Tom Hayes, Roger Darin are to face criminal charges in the United States, and they will need to be extradited, both of them, say the authorities.

The assistant US attorney general at the Department of Justice said their motivation was simple: to make as much money for themselves -- and never mind the bank -- as possible.

(BEGIN VIDEO CLIP)

LANNY BREUER, US DEPARTMENT OF JUSTICE: Make no mistake. For UBS traders, the manipulation of libor was about getting rich.

As one broker told a UBS derivatives trader, according to the statement of facts appended to our agreement with the bank, quote, "Mate, you're getting bloody good at this libor game. Think of me when you're on your yacht in Monaco, won't you?"

ERIC HOLDER, US ATTORNEY GENERAL: By causing UBS and other financial institutions to spread false and misleading information about libor, these alleged conspirators, and others that UBS manipulated the benchmark interest rate, upon which many consumer financial products, including credit cards, student loans, and mortgages, are frequently based.

They defrauded the company's counter-parties of millions of dollars, and they did so primarily to increase the profits and to secure the biggest -- bigger bonuses for themselves.

(END VIDEO CLIP)

QUEST: Bart Chilton says this settlement is the granddaddy of all fines from US regulators. It will be a definite deterrent to banks in the future. Bart is the commissioner for the Commodity Futures Trading Commission and he joins me now from Little Rock, Arkansas.

Commissioner, all right, it's a lot of money. The offenses, according to what I've seen, are described as the most egregious and the most serious to date because of their systemic nature. What was your reaction?

BART CHILTON, COMMISSIONER, CFTC: You're exactly right, Richard, I agree. They were systemic. This was going on. It's almost like some of these folks, you think, they wonder if having a conscience is nonsense.

But these markets, as you tried to describe, these things impact consumers all over the planet. If they -- if you purchase something with credit, these libor rates impact you.

QUEST: So, let's take this bit by bit. From the bank's point of view, a huge fine, but frankly, it's 20 to 30 percent of last year's profitability. So, why are you so sure that even a fine of this magnitude actually changes anything?

CHILTON: Well, I think that $1.5 billion, even for UBS, which is the 20th-largest bank in the world, I think $1.5 billion is a definite deterrent. It's serious, it's significant. Yes, it's a fraction of their profits, but that doesn't mean that it doesn't send a resounding message that you shouldn't mess with these markets. So, I think it will have a deterrent effect, Richard.

QUEST: OK. So, you think it's got a deterrent effect, but wouldn't it have been better to have at least banned them for a while? Let's have a few people in handcuffs heading off. I know that some are being extradited, but as in all these things, it's a case of deputy heads will go, when the top people and the top management need to have, perhaps, been arrested.

CHILTON: Yes. Well, our settlement is with the company, with UBS. And I can't speak to whether or not there's anything with regard to individuals. And of course, criminal prosecution, which was referred to in your clip earlier and by the Depart of Justice officials --

QUEST: Right.

CHILTON: -- that's up to them, putting people in jail. We're about fining people, and when we fine them, it can't be a puny penalty as all too often, Richard, has been the case. But I think, as I say, this is serious and significant money we're talking about.

QUEST: You would agree that in the 80s and the 90s, a lax regulation -- "a light touch," was the prevalent phrase -- has been shown to have been a disaster. And everybody, the media included, must take part of our blame. Can you assure me that the culture has changed?

CHILTON: I can't. I can tell you that that -- sort of laissez-faire attitude in the financial sector has gone on up until, really, just very recently. Even with the UBS circumstance, Richard, these guys were brazen. After we had been investigating them, the continued to do it. They were really out there, and very bold about it.

So, it is a concern in general that I have in the financial sector that there really needs to be sort of a corporate culture shift.

QUEST: Right.

CHILTON: It seems like these cases, whether or not it's last week, it was HSBC on a money-laundering settlement for $1.9 billion. These things are sort of coming at us like that vortex screen saver that we all have with the stars.

QUEST: So, you're right, we've had Barclays on libor, HSBC, Standard Chartered. Now, we've got UBS. And you know, although you probably won't admit publicly tonight on this program, that there are more settlements about to come with other banks. Maybe you will admit it. But the fact is --

CHILTON: I won't admit it, but I won't argue with you.

QUEST: Fine, good. We're agreed on that. The fact is, there's a culture in banking that has prevailed for decades that needs to change. Can the regulators change it?

CHILTON: Well, we can't do it by ourselves. We can do it with ensuring that these fines actually mean something, because what they're motivated by is one: their profit. That's first of all. And second, their image. And so, we can do it with the fines.

But I really think it's deeper than that, Richard. It goes to things like, who are you giving your bonuses to? Are they the high-flying big fish traders, or are they the folks who are doing your risk management for you?

What -- who are the types of people you're recruiting? Are they the people that might be the life of the party, or are they the guys that might save your bottom line at the end of the day?

So, I think there's a lot that can be done internally in the financial sector, but regulators have a big part in ensuring that when people violate the law, we are going to have big fines and ensure that they know we mean business.

QUEST: Commissioner, you and I will talk more about this. Thank you very much for making time for us in your busy day. Please come back again. You have a standing invitation on QUEST MEANS BUSINESS. We always like to see you on the program. Good to see you, Commissioner.

CHILTON: Thank you, Richard. Take care.

QUEST: Now, this scandal did not begin with UBS, and it won't end, as the commissioner has made clear. Barclays Bank was the first to come forward, held up its hands.

Barclays was fined $450 million by British and American authorities in June, 30 percent discount -- nice work if you can get it -- for coming forward first, but fell victim to a huge public outcry. Lost the chief and the chairman. The scandal have cost the jobs of Bob Diamond and the chairman and the COO, as well, Jerry del Missier.

A month later, the scandal hit the rest of Wall Street. The New York and Connecticut attorney generals -- that's attorneys general -- subpoenaed several top banks, including Barclays, UBS, CitiGroup, Deutsche, HSBC, JPMorgan, amongst others, RBS.

Eight days ago, the first libor arrests were made here in the UK. Three men, aged between 33 and 47, interviewed by the police, reporting restrictions are now in place. That obviously restricts what we can talk about on that.

Jim Boulden is not restricted from telling -- from talking about. Jim, just -- what can one say?

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes. Some of the words used in even what the FSA put out shows that it was systemic at UBS, that many dozens of people knew about it, that the e-mails were flying around without -- very -- without anybody really caring that, I think, that anybody would read these e-mails one day.

It just led to me -- it leads me to believe that so many people and so many banks knew what was going on, but for some reason, the high echelon says they did not.

QUEST: In a word -- in a word -- are we expecting more fines? He pretty much told us we are --

BOULDEN: Yes.

QUEST: Who's next?

BOULDEN: The Royal Bank of Scotland is next, probably in the new year. They've been negotiating what the fine will be. It's likely to be larger than Barclays, but obviously nothing like UBS's.

QUEST: RBS. Good.

BOULDEN: And then more arrests, as well.

QUEST: Of course.

BOULDEN: They must be coming.

QUEST: That's the more difficult for us to report --

BOULDEN: Yes.

QUEST: -- until the cases come up. Jim, many thanks, indeed. Jim Boulden joining us there.

Investors -- this is the irony of it all, Jim, this is the irony -- listen to this story. Listen up. Investors are not punishing UBS much.

BOULDEN: Not at all.

QUEST: The share price was off very slightly in today's trade. It's been in the black for most of the session. It's up more than 35 percent so far for the year. Jim, how can that be?

BOULDEN: Because they're pushing this stuff they say that happened in the past, they have relatively new leadership, and they say -- and they promise that they won't do it again.

QUEST: Jim Boulden with that. You'll have to wait for February for the full earnings reports.

When we come back, the president -- US president is pleading for resolution on the fiscal cliff. Mr. Obama says the stalemate is now more personal than political. So, after the break, the disasters if they fail to prevent going over the cliff.

(RINGS BELL)

QUEST: QUEST MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

QUEST: Thirteen days left to steer the United States' economy away from the fiscal cliff, and the president, Barack Obama, has urged Republicans to take the deal that he's offering, 13 days to go. Speaking at the White House, Mr. Obama said lawmakers needed to work together and do their jobs.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The idea that we would put our economy at risk because you can't bridge that gap doesn't make a lot of sense. So, I'm going to continue to talk to the speaker and the other leaders up in Congress, but ultimately, they've got to do their job.

Right now, their job is to make sure that middle class taxes do not go up and that we have a balanced, responsible package of deficit reduction.

(END VIDEO CLIP)

QUEST: That's the president. We're expecting John Boehner, the speaker of the House, to respond to that. We're expect that -- well, there you are. You can see the microphone, you can see the flags, but there's no speaker there yet. When that happens, we will bring it to you live here, of course, on QUEST MEANS BUSINESS.

While we await the speaker, Ken Rogoff is the professor -- oh, no, I beg your pardon. There is the speaker.

REP. JOHN BOEHNER (R), SPEAKER OF THE HOUSE: -- avoiding the fiscal cliff. The president's offer of $1.3 trillion in revenues and $850 billion in spending reductions fails to meet the test that the president promised the American people: a balanced approach. And I hope that the president will get serious soon about providing and working with us on a balanced approach.

Tomorrow, the House will pass legislation to make permanent tax relief for nearly every American: 99.81 percent of the American people. And then the president will have a decision to make. He can call on Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history.

(CROWD ASKS QUESTIONS)

QUEST: All right. That was short, sweet, and the important thing there is not the political rhetoric, telling the president to get serious, but the fact that the gauntlet has been thrown down.

The speaker of the House, there, absolutely saying he is going to Plan B, he's going to get the House to pass the tax cut for all -- to reverse it for all Americans, including the wealthiest, and call upon the president to actually veto it.

Now, Ken Rogoff is with me. This is -- I think the speaker's just gone nuclear almost, then.

KEN ROGOFF, FORMER IMF CHIEF ECONOMIST: Well, the whole thing is going nuclear in a sense. They're threatening to have this horrible outcome so that they can get their way. I'm not sure this won't go on into next year.

They've been talking, moving closer together, but at the end of the day, the speaker's got to sell it to the other people in the House, and I don't know where he is. Last year, that was the problem.

QUEST: All right. So, the speaker says that the House will pass legislation extending the tax cuts on income below $1 million. It is a -- it's a now straightforward who blinks first. How damaging -- we knew it was going to get to this, Ken -- but how damaging is it to the economy?

ROGOFF: Well, I think they're going to reach some resolution. It may go into next year. That way, the tax cut -- hike -- Bush tax cuts expire, and then everybody can say they voted for cut even if they let some people's taxes rise compared to where they are now. I think that's a significant possibility.

Then there's the debt ceiling. Let's not forget that the president needs to fold that in, because if he gets his way on this, and then he'll say, "Oh, by the way, we didn't agree to raise the debt ceiling. We're going to renegotiate everything."

So this is a long battle. I don't think this is something that's just going to go away. It's a power struggle. I think the president has to hang pretty tough. If you give in on this, you're going to be giving in every time. He's in office for four years.

QUEST: Right.

ROGOFF: The people in the House are in office for two years. He really holds a lot of cards. But then again, you could have said that last year.

QUEST: OK. So, and yet we do know, because Ben Bernanke said last week to us, that going over the fiscal cliff is -- even a slow decline down a slope will have a detrimental effect. And we're starting to see that already.

ROGOFF: Oh, but we're going to have some fiscal cliff here, because all of the plans involve some fiscal tightening. It's just a question how big. Even the more modest tightening that we'll see if they come to an agreement is still going to be 2 percent of income. It's pretty significant. If they don't, it'll be 5 percent of income.

But they're not just battling over that. They're battling over do we raise taxes? Do we cut social security, Medicare? And the fact is, both sides are going to have to give a lot before the coming year -- the next four or five years.

QUEST: Ken, you know that phrase, "between the devil and the deep blue sea." I'm just wondering, Europe's gone quiet. All right, I'm sure you'll raise a quizzical eyebrow at that and put me right that it's waiting to blow up again next year, but for the moment, Europe's quiet.

ROGOFF: My European friends are definitely enjoying watching the US fiscal cliff on TV instead of seeding themselves, there's no doubt about that. But at the same time, I think that Europe has time, thanks to Mario Draghi saying no more drachma, we're going to do what it takes.

But he can only do so much. He just represents monetary policy, and if they don't step in with the fiscal union, a banking union, and ultimately political union, it's still going to blow up. He's bought time, maybe even a few years, but I don't think we've begun to see the end of this yet. I don't think the political legitimacy is there for what needs to be done. I think there's a lot yet to come.

QUEST: Ken Rogoff, who is with us tonight from Harvard Kennedy School. We thank you, good to see you, Ken. We'll call -- I wish I could say this is the last time we'll talk about this, but you know and I know that it's far from it, and we'll be talking about it into the new year.

ROGOFF: Thank you, Richard.

QUEST: We'll also be talking about it at Davos, and I know Ken will be at Davos and we'll be able to get to it then. Yes, I said "Davos," first time I said it. We'll be there in January.

And now, a Currency Conundrum. Jersey's first bank notes were issued in 1797. Who issues the Jersey bank notes? Jersey the island, not New Jersey -- the Jersey, the island in the English Channel. Was it a wine merchant, a church, or the people? The answer later in the program.

Now, for the currencies themselves. The dollar is falling slightly against the euro and the pound. It's down a tenth of a percent. These are the rates --

(RINGS BELL)

QUEST: -- this is the break.

(COMMERCIAL BREAK)

QUEST: The one billionth tourist of the year cleared customs somewhere in the world last week. It could have been you. It could have been me on my trip through the Gulf. The point is, 1 billion tourism so far this year marks a record for international travel.

The UN world tourism organization, the UNWTO, compiled the statistics, and if you join me at the CNN super screen, you will see what I'm talking about.

First of all, bear in mind, 50 percent of all visitors, or tourism, as they call it, is leisure. The rest is business and other sorts. But where do they come and where do they go?

First of all, where do tourists come from? 53 percent of international tourism, cross-border tourism, is 53 percent from Europe, 22 percent Asia Pacific, 20 -- 17 -- well, you can see the numbers yourself.

And those numbers, obviously a lot of it is just literally crossing borders on short visits. It could be on business, it could be on vacation, it could be on government affairs. And where they go -- so, again, most of it is Europe. A large part of it is Asia Pacific, the Americas, and the Middle East.

Obviously, Europe has a disproportionate amount, it's because of people going from one country to the next. The growing area, of course, is Asia Pacific.

Now, why tourism matters is really interesting: 9 percent of global GDP is said to be from tourism. Look at the number of jobs, it says. Look at the amount of exports: 6 percent of world trade. Incidentally, this is all from the UNWTO itself.

This is why they believe it matters that tourism is so significant. I was talking about this to Taleb Rifai, the secretary-general of the UN World Tourism Organization. He says there's no doubt the age of travel is upon him, but I needed to know -- because obviously, we believe tourism is good -- what could go wrong.

(BEGIN VIDEOTAPE)

TALEB RIFAI, SECRETARY-GENERAL, UNWTO: Well, tourism growth is going to keep moving. What we should be concerned about is the impact of the 1 billion and the 1.4 billion and the 1.8 billion in the coming 10 and 20 years.

The impact must be one that is conscious, responsible, and reflects good on all people, the environment, and their culture.

One billion means any simple act multiplied by a billion, and you can imagine how an act in the right way can make travel and tourism a tremendous force for our good, and an act in the wrong way can go in the other direction.

That's what we should be concerned about, not the continuation of the growth of the industry, because the industry is going to grow. People are going to continue --

QUEST: That --

RIFAI: -- to move. This is a train that is unstoppable, and it's going to continue to move forward in the coming 10, 20 30, 40 years.

QUEST: That's two sides of exactly the same coin. What you're talking about is managing that growth. Too many governments, too many authorities, believe that tourism is a panacea for bad economics. Bring the tourists in and they'll spend the money, don't they?

RIFAI: Yes. Well, look. Tourism is, as we spoke many, many times before -- is an activity that can have tremendous impact on so many people around the world.

This morning, I woke up in my hotel here in Guatemala, and I found a little doll at my bed with a little meringue that I ate. That doll was probably made by an old lady who's making her living, her income from just selling this to hotels like the one I'm staying in. Multiply that by a billion, Richard, and you'll see the good effect.

Now, what governments need to do is to take tourism seriously and develop policies and procedures and behaviors, promote behaviors that, as I said, can turn this economics into something that benefits the small people and the ordinary people. That's our message.

QUEST: Why do you think governments are still, after all the time that you -- this has been so prevalent -- yes, they pay lip service to sustainability, they pay lip service to labor standards, they pay lip service to preventing of trafficking, but you know and I know there is still so much more to do. Why is it so difficult?

RIFAI: It's an historical thing we carry from before. Tourism is still thought about as an activity that is the domain of the elite and an activity that can happen just by itself. It's not so central, not so important to people's lives. But this is changing so dramatically, and it's the fast pace of change that people, governments, and even the public in general, are not coming to terms with.

And it's a natural thing. We understand it and we have to deal with it. People don't realize how important this industry is, and I, again, I don't need to repeat all that we talked about. It's a huge -- it's a true revolution.

I'm quite confident, as you will know, and I expressed this to you many times, in 30, 40 years, people would look back at this time and age and say this was the age of travel.

(END VIDEOTAPE)

QUEST: That's Taleb Rifai, the secretary-general of the UN World Tourism Organization. He was talking to me from Guatemala City, for the -- which of course is for the end of the Mayan calendar in Friday, which to some is also the end of the world. And it's generated a lot of tourism in its own right.

Coming up next: why a few short words in the Instagram terms of conditions have been changed and tweaked, because apparently, it didn't mean what we thought it all meant. Or maybe it did, and they've just decided it's time to go back.

(COMMERCIAL BREAK)

(MUSIC PLAYING)

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

(BEGIN VIDEO CLIP)

QUEST (voice-over): Barack Obama is charging his vice president with leading the government's response to the shooting rampage in Connecticut. The president says while no law would eliminate gun violence, it's time to take concrete action. And he says evidence shows the majority of Americans support closing any legal loopholes on gun sales.

South Korean voters have elected their first female president. The conservative candidate Park Geun-hye won just under 52 percent of the vote. Park has promised to usher in a new era of happiness. She has a long list of challenges ahead, including boosting the country's slowing economy and lowering the unemployment rate.

Pakistan has suspended its polio vaccination program after the deaths of more health workers. Three workers were fatally shot on Wednesday in Peshawar. Five others were killed the day before. Pakistan is one of just three countries worldwide where polio remains a serious threat.

Two former traders at the Swiss bank UBS are facing criminal charges in the United States in connection with alleged rate rigging. The bank itself has been fined $11/2 billion by regulators in Switzerland, Britain and the U.S. The American authorities have called the bank's conduct astonishing.

(MUSIC PLAYING)

QUEST: Last night we talked a great deal about Instagram and their supposed offer, saying that they were going potentially sell your photos online. They had the right to, well, anyway. After its new terms and conditions got a very cold reception, Instagram is now trying to add a fresh glow to its public image.

This -- so we decided to give the Instagram terms and conditions their own treatment. Here's the raw image, as you can see, if you look over here. You could actually sort of see exactly the Instagram terms and conditions. There about 30 or 40 pages of them. And today Instagram tried to apply a rose-colored effect.

Remember what they said: Instagram said that they had the right to sell your photos without compensation to you. Well, they have put a now slightly more rose-colored tint on it, thank you and we're listening, addressing specific concerns, interpreted we're going to sell.

This is not true, according to the blog entry in from the cofounder Kevin Systrom. It's all been a terrible, terrible misunderstanding. That's one Instagram filter. Let's add another filter. A sound effect, look at this one.

You agree that a business or other entity may pay us to display your username, likeness, in connection -- in other words, time and again they seem to be suggesting that the fit over all we've heard today is more filters being put on, which, frankly, were fairly clear terms and conditions which were obvious. Let's talk about this with Shelly Palmer.

Shelly, good to see you. I'm just going to get the relevant terms and conditions from me desk here. It said that they had the right to use it without compensation. Now they're saying they never had any intention of doing that.

Do you buy it?

SHELLY PALMER, AUTHOR: Yes, I do, actually.

Richard, if you knew how the compliance wonks at companies like Instagram, like Facebook, who now owns Instagram, if you knew how the compliance wonks actually got down there, and you can kind of tell the legalese without compensation to you, OK; I get it.

The practical problem is that what this really says to me is that these are companies that are really struggling to understand how they are ever going to make money. And I think that's important for investors, and it's important for all of us. At the moment, Facebook is worth what you pay for it, and so is Instagram. They're trying to figure out what else they can do.

QUEST: Do you believe that they weren't trying to create a photo stock -- because, let's face it; there's enough of those in the world -- trying to use pictures to sell for people to use in magazines or rather they were trying to work out something more sophisticated, how future online advertisers within Instagram might use the material?

PALMER: That's exactly right. If you think about what Mark Zuckerberg calls his social graph, if you think about this word-of-mouth advertising concept, this idea that you're more likely to trust your friends, the idea that a business could invade your trust circle, could invade the place you keep your most sacred and trusted photos, the photos of you doing the things you love, you're passionate about, your friends, and somehow make a business out of that, that's really what they're thinking about. It's insidious and awful.

Everybody got it. The idea that it's going to be stock photos or they're going to (inaudible), that's nothing. This is really much worse.

QUEST: Oh, ah, that was my point.

PALMER: Much worse.

QUEST: That's my point. So they are basically interpreting it, we're back with the filter, that we're going to sell -- it's not true. What you're saying is what they want to do is far more mendacious and potentially damaging to our privacy. Look at that; no, look at that growl.

PALMER: I don't -- I don't know if it's our privacy, to use a British version of the word privacy, or if it's just that they are just trying anything they possibly can to make a little bit of money and they want to cover themselves. This particular little bit of terms of service just sounded like a compliance officer covering their butt.

But what it really tells me is that they're struggling to figure out how to monetize Instagram. They want to make sure that if they do something like have the flower arrangement that you've just made and taken a picture of, now be sponsored by 1-800-FLOWERS or if the piece of -- the wonderful food you just made and you're showing your Cuisinart in the photo, if Cuisinart wants to sponsor that -- though none of that's happened yet -- but the idea is that if they would have the right to charge for this without paying you, or as they lovingly put yesterday, without compensation to you, there's no way anyone was going to stand for that, Richard.

Nobody under any circumstances is going to put up with that. You will -- you'll absolutely delete your account beforehand. They heard that loud and clear.

QUEST: Shelly Palmer, who always talks great common sense on QUEST MEANS BUSINESS, joining us without compensation, in case you start getting ideas. (Inaudible). Shelly, good to see Shelly as always.

It's the stuff of nightmares for any airline chief executive. Why the head of Qatar Airways is none too happy with his brand new Dreamliner fleet. This is QUEST MEANS BUSINESS. (Inaudible).

(MUSIC PLAYING)

(COMMERCIAL BREAK)

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QUEST: Today's "Business Traveller" update, Boeing is facing increasing criticism over its electrical problems in the new 787 Dreamliner. Three of the new planes are, as they say, AOG, aircraft on the ground.

They grounded a United Airlines flight that was forced to make an emergency landing earlier this month. And yesterday they found problems in a second plane. Qatar Airways has grounded one of its Dreamliners last week.

Now only 35 -- only 40 of these planes -- I beg your pardon -- have been delivered. And three of them are on the ground with problems. That's about 7 percent of the fleet. Boeing's chief exec, Jim McNerney says these are the normal squawks -- teething problems, I think -- on a new airplane. Qatar's chief executive, Akbar Al Baker, isn't buying it. He says it's a situation that's unacceptable.

AKBAR AL BAKER, CEO, QATAR AIRWAYS: We're not happy with what happened to us. We pay a lot of money to get our airplanes. We have waited three years and when we get an aircraft that, from day one, has developed a technical problem, regardless if it is a new program or not, it is unacceptable.

QUEST: So when Boeing says these are teething problems, these are, complicated --

(CROSSTALK)

BAKER: I disagree with him. This is not any more teething problem. This program is three years late. At the same time, they have a machine, a number of machines, already flying for the last 14 months. So the teething problem should all be cleared. You cannot wait indefinitely to have teething problems.

QUEST: So it's not a teething problem; it's either systemic or it's just badly made.

BAKER: I should not blame everything on Boeing. They have been let down by their subcontractors and the suppliers, by inadequate workmanship and substandard materials being used.

They have a quality problem and this quality problem should be resolved. I think they had three long years to resolve quality problems. They should not continue this quality problem. I know that it is a very sophisticated airplane. It is state-of-the-art airplane. It is a completely brand-new technology in this airplane. But they had enough time to sort it out.

(END VIDEO CLIP)

QUEST: Akbar Al Baker, the CEO of Qatar Airways, talking to me.

Coming up next, a girl's best friend.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: (Inaudible) perfect earring to do (inaudible) for 600,000 pounds.

QUEST (voice-over): How to get the best bling for your buck. In a moment.

(COMMERCIAL BREAK)

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QUEST (voice-over): Today's "Currency Conundrum," who issued Jersey's first banknotes in 1797? The answer, the wine merchant. Hugh Godfrey (ph) and Company, the notes were made due to shortage of silver currency on the island and then it became known as the Jersey old bank.

(END VIDEO CLIP)

QUEST: Now Christmas is just around the corner. If you've still got a few guests and presents that you've got to buy for, that diamond for someone special, well, if you are buying diamonds, I do need you to remember the four C's. They are crucial to the proceedings.

The first C is, of course, the cut. The second C is the clarity. The third is the color and the fourth is the carat weight. Keep all those in mind and you won't go wrong. Vashi Dominguez is the founder and CEO of diamondmanufacturers.co.uk, and told me that if you buy them right, diamonds, well, he says, are a great investment.

(BEGIN VIDEO CLIP)

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QUEST: There is a $20 bill. We know that has value (inaudible) because the Fed prints it and we all accept it.

VASHI DOMINGUEZ, FOUNDER AND CEO, DIAMONDMANUFACTURERS.CO.UK: Yes.

QUEST: You're telling me that that is worth 50,000 of these?

DOMINGUEZ: Absolutely. Yes.

QUEST: I am a complete and utter cynic. Over the years, over the years I've heard too many people tell me that diamonds are an investment and they are not. Tell me why I'm wrong.

DOMINGUEZ: I think you're wrong because the diamond market are look - - is looking very positive. Demand is becoming stronger every day, supply is becoming shorter. If we take 1- to 5-carat diamonds over the last five years, they've produced an annual compound return of 11.6 percent.

QUEST: Let's be absolutely clear here. You are not talking about the diamond that is in somebody's -- most people's engagement or wedding ring?

DOMINGUEZ: It is those diamonds, but unfortunately the diamonds that are in most people's engagement and wedding rings, they've been purchased at the high premium price already. So although the value of those diamonds is increasing, those people are not going to be able to realize any return on their investment.

QUEST: So which diamonds do increase in value?

DOMINGUEZ: The same diamonds, but you have to be able to buy them at true wholesale prices.

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QUEST: Tell me about this one.

DOMINGUEZ: This is an 8-carat round diamond with an eye color, so it's near colorless.

QUEST: That's kind of vulgar; a bit out of the way.

DOMINGUEZ: So the vulgar bit in wholesale, you're looking at around $200,000.

QUEST: Isn't the problem there's no standard?

DOMINGUEZ: Absolutely, yes. That's the biggest problem. And that's what some of the biggest diamond companies are trying to work very hard at in the last decade. They're trying to bring some funds, some diamond funds, so that people can purchase diamonds as a commodity. The problem you have is that (inaudible) 6,000 variations, creating a standardization is almost an impossible challenge.

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QUEST: Which one do we go for?

DOMINGUEZ: (Inaudible) from an investment perspective, I will go for this. You can have the perfect earrings. So you can buy (inaudible) for 600,000 pounds.

Then you know --

QUEST: Six hundred -- well, so this is 600,000 pounds?

DOMINGUEZ: Yes.

QUEST: So it's worth about $1 million?

DOMINGUEZ: Yes. That's correct.

This is a matching pair. Finding one diamond like this is very, very difficult. Finding two exact matching diamonds is almost impossible.

QUEST: And the diamond that you would give your partner? Which diamond would that be?

DOMINGUEZ: That goes down to personal taste. In my case, if it was down to me, I would be giving the round brilliant.

QUEST: And which diamond has the most bling value?

DOMINGUEZ: The most bling value will be the heart-shaped.

This you're looking at 1.2 million pounds, or around $2 million for the stone itself.

QUEST: So here we have it, the QUEST MEANS BUSINESS Guide to Your Diamond.

The best investment. The one for love and ultra-bling.

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QUEST: We weren't searched when we left. But I have to tell you, when you got that sort of wealth of diamonds in your hands, particularly the small ones, and you just think nobody would notice.

Believe me, they would have done.

Bitter cold conditions in parts of Europe; temperatures are dropping well below freezing. Meteorologist Jennifer Delgado, who I suspect has lost complete interest in the weather and is working out how she can get somebody to buy her one of those diamonds.

JENNIFER DELGADO, AMS METEOROLOGIST: Oh, you know what? I'll buy it for myself.

But it was fabulous. Maybe you can just take one for me for the holidays.

But, Richard, the weather in Europe is getting very interesting, especially parts of eastern Europe, where we are looking at very cold temperatures out there. In fact, temperatures are running about 10 degrees below average for this time of the year.

To give you an idea of how cold the conditions are, here's a photo coming out of Moscow. You can see a woman bundle up just nicely, Richard. I bet she probably has a pretty nice diamond, too.

And let's go to some video coming out of Ukraine, where we are hearing reports where the weather has proven to be deadly there with the temperatures being so cold. Reportedly nearly 3 -- or I should say 2 dozen people have died. You see people digging out of the ice and the snow and the snow has been coming down.

Back over to our graphics, we want to talk more about Ukraine and the weather in parts of Kiev for the December average, the average high should be 0 with the average low should be 5. But high temperatures since Monday have been 10 degrees below average or colder. That's -10 and yesterday was as cold as minus -17.

So if you think it's cold in your part of the world, it's pretty bad through parts of eastern as well as southeastern Europe.

And this ridge of high pressure is responsible. It's pulling in all that cool air, even affecting eastern parts of Poland as we go through the next couple days. The temperature and the forecast not looking good. Look for Warsaw as well as Kiev. Look at those high temperatures, Richard, -14 for a high and then for Moscow, -24 for the overnight low on Thursday.

As we can show you, more of that snow setting up anywhere you're seeing in purple we're talking 25 centimeters and now we go over to Colorado and we show you this video here.

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DELGADO (voice-over): And Richard, I think you're kind of a big skier. Well, look what's happening there, lots of snow, blowing around. We're seeing wind gusts potentially up to about 100 kph and we have blizzard warnings in place for six different states.

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DELGADO: Quickly back over to our graphic here, Richard, we're all still looking at a lot of travel delays out there for London as well as Glasgow, 11/2 hours to 2 hours due to winds, but no snow.

QUEST: Wind, no snow. I like skiing; I'm just very bad at it.

Jennifer Delgado, we thank you. I will be back with a "Profitable Moment" (inaudible).

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QUEST: Tonight's "Profitable Moment," the final LIBOR reports on UBS are well worth reading. You'll want to wash your hands with some strong disinfectant afterwards. The F.A. says pervasive culture of manipulating LIBOR. C.S. Lewis once said, "Integrity is doing the right thing, even when no one is watching."

The banks say this practice is in the past. The regulators say they're on top of the issues. It's time they proved it. Each night on this program, we celebrate the free market and modern capitalist system. There are some moments when even our faith is shaken. Sweeping austerity, unemployment around the world at the moment. We need proof that the world's financial system is one we can trust.

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: President Barack Obama is charging his vice president with leading the U.S. government's response to the shooting rampage in Connecticut. The president says while no law would eliminate gun violence, it's time to take concrete action. And there's a majority of Americans support closing any legal loopholes on gun sales.

South Korean voters have elected their first female president. The conservative candidate Park Geun-hye won just under 52 percent of the vote. Park has promised to usher in a new era of happiness.

Pakistan has suspended its polio vaccination program following the deaths of more health care workers. Three workers were fatally shot on Wednesday in Peshawar. Five others were killed the day before.

Two former traders at the Swiss bank UBS are facing criminal charges in the United States in connection with the alleged rate rigging. The bank itself has been fined $1.5 billion by regulators in Switzerland, Britain and the United States. The regulators say that they are determined to stamp out this sort of behavior.

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QUEST: You're up to date with the news headlines. Now to New York, "AMANPOUR" is live.

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