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Quest Means Business
At Least 50 Killed in Tianjin Blasts; China Reassures Markets on Weak Yuan; IMF Calls China's Devaluation a Welcome Move; Greek Lawmakers Vote on Third Bailout; Greek Economy Grew 0.8 Percent in Q2; Thousands of Migrants Stranded in Kos; Gadget Makers Work to End Slave Labor
Aired August 13, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: US stocks post modest gains as investors keep a cautious eye on the Fed. It's Thursday, August the 13th.
Beijing scrambles to reassure investors that it's currency and economy are safe.
At this hour, Greek lawmakers are debating a crucial and controversial bailout.
And a Tinder relationship that just couldn't last. The dating company dumps its CEO.
I'm Maggie Lake in for Richard Quest, and I mean business.
We begin in Tianjin, China, one day after the city was rocked by massive explosions. At least 50 people are dead and the number of those
missing or critically injured is in the hundreds. The exact cause of the explosions is a mystery at this point. Large parts of the city have been
left in ruins.
The devastation is clear when you see it from above. Take a look at this video shot from a drone early on Thursday. You can see a number of
fires still burning many hours after those huge blasts shook the city. CNN's Will Ripley was one of the first international reporters at the
scene, and he says people are concerned the danger is not over.
(BEGIN VIDEOTAPE)
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: Right now, we're about a mile from the epicenter of the explosion, and even from this distance and
even as night has fallen here, you can still see how much damage there is.
This is someone's living room window that has been propelled down onto the street. Most of the windows of this building are shattered, and the
glass has been raining down on the pavement, especially when there's a big wind gust.
The shifting winds are also of concern for folks who are worried about the air quality. There are several air monitoring stations up around the
city right now because that plume of smoke that we've seen throughout burning uncontrolled throughout the past 24 hours or so.
That smoke plume is pushing chemicals, dangerous and toxic chemicals into the air, and city officials do acknowledge that the levels of
contaminants are higher than normal and could potentially be dangerous if there's long-term exposure.
They say if you just breathe it for a short period of time, there's not as much of a risk, but obviously, that's little comfort, especially for
parents with children. So, you see a lot people wearing these protective masks, face masks.
You can see the security officials over here trying to get us to move away from the building, and so we'll just step over in this direction here.
We should point out that the Chinese government is trying to control the message a bit here. We were interrupted during a live shot by some
civilians earlier in the day, but there were also uniformed officers in the group as well.
And social media posts about this tragedy have been deleted from some of China's major social media sites. This is not an image that Beijing
wants to show the world. This is an economy that's driven by industry.
But there have been concerns for many years about not only the working conditions and the safety of people working at these factories, but also
the fact in this specific city, there have been concerns raised that some of these factories with toxic chemicals are simply just too close to
people's homes.
And so, the fact that you can have an explosion -- a series of explosions -- and this much damage from a mile -- more than a mile, from
two kilometers away. It certainly is a troubling sign and something that the central government and the government here will have to address.
Will Ripley, CNN, Tianjin.
(END VIDEOTAPE)
LAKE: Staying in China, Beijing is scrambling to reassure investors that its currency is not permanently on the slide, although it did allow
the yuan to drop for a third straight day. Losses this Thursday were not as steep as the previous two days.
Stocks in Asia headed into the red at first, extending their sell-off, but they rebounded after China's central bank called a rare press
conference. The deputy governor said the yuan will recover and insisted the devaluation was not a ploy to boost exports.
(BEGIN VIDEO CLIP)
ZHANG XIAOHUI, ASSISTANT GOVERNOR, PEOPLE'S BANK OF CHINA (through translator): When other elements in the economy and accumulated
discrepancy are corrected, and judging from China's current account, an effect that we have always insisted on a prudent monetary policy, the yuan
will be on the rise in the future
(END VIDEO CLIP)
LAKE: The IMF says China made the right decision this week to let the exchange rate become more market-driven. It wrote, "Greater exchange rate
flexibility is important for China as it strives to give market forces a decisive role in the economy and is rapidly integrating into global
financial markets."
Eswar Prasad was the head of the IMF's China division. He is now a senior fellow at the Brookings Institution, and he joins me from Ithaca,
New York. Eswar, thank you so much for being with us today. So, is this a move toward a more open market model, or is this really a ploy to boost
exports and devalue the currency dressed up as that reform that everyone's been waiting for?
[16:04:57] ESWAR PRASAD, SENIOR FELLOW, BROOKINGS INSTITUTE: Well, China is ostensibly doing exactly what the world wanted of it, especially
what the US and the IMF wanted of it, which is to have a more market-driven exchange rate.
The trouble is that they are doing it at time that is convenient for China, because the yuan is on a trend to depreciate, and market forces want
to push it that way. And this is not so convenient for the rest of the world economy, and that's the problem.
But it's a very astute move to do the devaluation and the increase in flexibility of the exchange rate at this time, because on the one hand, it
mollifies domestic critics in China of this move. Because there are many people in China who don't want a flexible exchange rate. But because it's
been accompanied by devaluation, which helps China's exports, it's seen as a good thing.
But the move also defangs international critics, because after all, this is exactly what the world wanted, and China is giving it to them, just
not at the ideal time.
LAKE: Right. A good time for China. The question is, can they handle it? This is -- their credibility is going to be on the line here,
and we saw what happened with equity markets. Even when they were intervening, and in some cases, quite aggressively, they weren't able to
sort of easily control it.
They do have a lot of money in their war chest, but are they going to be able to manage this transition when it comes to the currency?
PRASAD: This highlights a somewhat schizophrenic approach to reforms. I think the Chinese policymakers' hearts are in the right place. They do
want free markets to operate when it comes to the equity markets or to the exchange rate.
The problem is, they still want to maintain a semblance of control and stability. If that doesn't happen, it looks like they're losing control of
things, and that could spin out of control and damage them.
So, we've seen this whip-sawing effect where essentially they give the markets some room to play, but then not go too far. And because the market
doesn't quite know what to make of this, when exactly they will intervene, how they will intervene, that creates more volatility in financial markets
rather than less.
And that's exactly what we are seeing right now, very similar to the way events played out in the stock market just a few weeks ago.
LAKE: And Eswar, that's exactly what I heard from traders today when we asked them about that. They feel very uneasy because they don't know
what's going to happen and they don't know where they're going to pick and choose to still intervene, which I think tells us all they've got a lot of
work to do when it comes up to building that particular angle of credibility.
A lot of people have said intended or not, this is going to spark a currency war, a race to the bottom. Do you believe that will happen? What
does this mean for other emerging market countries out there?
PRASAD: One level would argue that this is a defensive move by China, because after all, the US dollar has appreciated by more than 20 percent
over the last year relative to the euro and the yen, and the renminbi has ridden up along with the dollar.
In fact, Chinese yuan is the one currency that has depreciated by only a very modest amount, about 2 percent before this week, over the last year
relative to the US dollar.
And there is every likelihood that with the US Fed likely to hike rates later this year or early next year, the dollar could become even
stronger, so the Chinese just wouldn't want to have even more appreciation of their currency when their economy is weak.
But the problem again is that markets are not able to read the signals very clearly, and this is leading to a lot of overshooting of the yuan in
one direction, which potentially could get corrected in the future, but in the short term, it does create a lot of instability and volatility. Which
is what the Chinese are now trying to control by saying that they won't let it go too far down.
LAKE: That's right. The Chinese authorities working hard to be able to say that their currency can be a reserve currency for the world. This
was one of the steps that they needed to take. How far do they have to go? How much closer are they getting to that?
PRASAD: This definitely takes them a step closer, because among the criteria that the IMF said were necessary for the yuan to be included in
the IMF's special drawing rights on SDR basket, one would be a more flexible exchange rate.
Second would be freer market-determined interest rates. And in fact, they took a step to liberalize deposit rates paid by banks just last week.
Full liberalization they've committed to do later this year, and they're opening up the capital account, which means making it easier for money to
flow in and out of China.
So, as far as the major conditions the IMF has laid out, it's certainly progress in the right direction. Whether they will make it there
by the time the IMF makes its decision in November is unclear, but certainly all the signs are that the Chinese want to do everything in their
power and as quickly as possible to satisfy the IMF.
And I suspect the IMF will have little choice at this stage but to go ahead with allowing the RMB into the SDR basket.
LAKE: And that will be a change for all of us. Eswar Prasad from Brookings, thank you so much for joining us today.
PRASAD: My pleasure.
LAKE: Well, a big vote this hour in Athens. Greek lawmakers are deciding whether to back a new bailout. What it means for Greece and the
wider eurozone next.
[16:09:44] (COMMERCIAL BREAK)
LAKE: Greek lawmakers are voting on a third bailout deal right about now. It is a controversial and potentially painful trade-off, but the
Greek government and the eurozone both say it is crucial that it succeeds.
It has to be signed off in the next week before Greece has to make its next big payment to the European Central Bank. The finance minister has
been telling lawmakers how important it is to back the deal.
(BEGIN VIDEO CLIP)
EUCLID TSAKALOTOS, GREEK FINANCE MINISTER (through translator): If tomorrow there is no agreement at the eurogroup about the agreement that we
discussed with the institutions, then Finland will not vote, and we will be forced to accept a bridge loan. Whoever wants to risk this is welcome to
vote against our request for an emergency plenary session.
(END VIDEO CLIP)
LAKE: CNN's Clare Sebastian is following the story and joins me now. So, Clare, they're debating it. Is there a chance it won't pass?
CLARE SEBASTIAN, CNN PRODUCER: Maggie, in a word, no. We do expect this to pass tonight. Essentially, their backs are up against the wall. I
mean, they've been fighting for this -- at first they were fighting for no bailout, now they were fighting for a bailout. But they're really in a
corner. They have to pass this.
That's not to say it won't be without fireworks, though. There are serious opposition within the ruling Syriza party. One of the
parliamentarians today coming out with a statement calling for a unity movement against the bailout. That was signed by 11 other Syriza MPs.
So, Alexis Tsipras will be relying on support from the opposition parties, but yes, we do expect it to depart. That, as you heard the
finance minister say, will take us to the eurogroup meeting tomorrow where the European leaders are expected to endorse the deal.
Germany, though, a little bit of a wild card. We haven't seen specific endorsement from Germany yet on the bailout deal. The finance
ministry saying that they will be going to that movie with questions.
But they're running out of time. There's a payment next week, this time next week, August 20th. The Greeks owe $3.5 billion to the ECB, so
they really have to do something.
LAKE: They have to get it done. And there's a sense that nobody wants to go back to the crisis situation and environment we were in just a
few weeks ago.
We also had today some interesting data come out that showed that the Greek economy was growing. How is that possible against a backdrop that
we've all been witnessing?
SEBASTIAN: Yes, Maggie, you're very right. I think of sunlight in an otherwise very gloomy picture. Don't get too excited, though. This is the
second quarter, the three months of June, so before the capital controls, before the Greek banks are closed.
There's very much a sense there that a lot of Greeks might have seen the capital controls coming and might have, very frankly, been going
shopping. They wanted to put their money somewhere other than cash. So, that might have led to that surge in the three months to June.
We do see that there are some forecasts reported from the EU today saying the Greek economy will contract 2.7 percent this year, that it will
not start growing again until 2017. And don't forget, this is an economy shattered by years of recession.
LAKE: Yes.
SEBASTIAN: Twenty-five percent unemployment, they've lost a quarter of its GDP in the last seven years. So, it's a very small chink of
sunlight in an otherwise very grim reality.
LAKE: Right. And no one's really hanging onto that. And in fact, I think we all know that the Greek people have been through so much, and this
big vote's coming up. We're actually getting some feedback on the ground, people talking about how they feel about it. Have a listen to this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): I see more misery coming, that is all. I think people will rebel. The European Union wishes to have
slaves. I'm against this. I want us to return to the drachma and to immediately exit the EU.
UNIDENTIFIED FEMALE (through translator): I think the new measures will be very harsh, at least based on what I have heard so far. I believe
that at the end of the three year period, many Greeks will be on the brink of destruction and will face many problems. I don't know how we will be
able to escape all of this.
(END VIDEO CLIP)
LAKE: It's extraordinary. You can understand why there is that feeling. And yet, no one -- everyone wants to stay a part of the euro, and
this is a terrible situation for people.
SEBASTIAN: Yes. I think you have a situation on the ground there where those who voted for Syriza are feeling let down, and those who didn't
are finding their worst fears coming true. This bailout deal brings in more austerity, we're seeing reforms to the pension system, more tax rises.
This is actually going to add to the pain on the ground.
[16:15:08] Plus the fact that the capital controls have devastated small business there, and we're expecting more layoffs over the next few
months. People are extremely worried there on the ground.
LAKE: I think it's really worrying for young people, too. You're talking about some of these projections that a lot of people are
acknowledge are rosy, you're looking at a generation of Greeks, unless things change drastically, that are facing this kind of economic distress.
Which is why I know a lot of people are saying some sort of debt relief has to start getting on the agenda. Clare Sebastian with the latest
for us. Thank you so much, Clare.
LAKE: Now, about 300 kilometers from Athens, a crisis -- another crisis, you could say -- is unfolding. Up to 7,000 refugees are in limbo,
and some were in temporary detention on the Greek island of Kos.
Authorities have been using a football stadium and even a cruise ship to house the migrants. As Ian Lee reports, the situation is reaching a
breaking point.
(BEGIN VIDEOTAPE)
IAN LEE, CNN INTERNATIONAL CORRESPONDENT (voice-over): They wash up on Europe's shore, dazed, cold, and frightened. Every trip, every arrival
for migrants in cramped boats, a potential catastrophe. Up to 1,000 people a day make the watery journey to the Greek island of Kos.
FIRAS, SYRIAN REFUGEE: We are doctors, graduated from economy, medicine, we are all students and graduated, but there's nothing left for
us, just war, just bombs.
LEE: For many, this is what they leave behind: rubble, death, and destruction. Promises of a better life in Europe often met with
disappointment. On Wednesday, chaos broke out at a stadium turned makeshift shelter after authorities locked in 2500 people with limited
food, water, and shelter from the son. Riot police struggled to control the situation.
(CROWDS SHOUTING)
LEE: Dozens of people needed medical treatment, according to Doctors Without Borders. The most vulnerable in all of this, the elderly,
pregnant, and of course, children.
The European Union approved 2.4 billion euros to deal with the migrant crisis, of which Greece will receive almost half a billion. Desperately
need for an island that's more used to dealing with disorderly tourists than refugees.
MOHAMMED ZACHEE, SYRIAN REFUGEE: The government just, the procedures were given to me very quickly, and the way that is very hard to hear. We
cannot stay here, because we have some women, children, and they are all sick.
ERASMIA ROUMANA, UNHCR REPRESENTATIVE: Well, it is the responsibility of the national authorities to have this in an organized manner and to deal
with the issue of refugees. Because this will continue.
LEE: Roughly 124,000 migrants have made the voyage to Greece so far this year. And as the wars continue to ravage their homelands, so will the
boats packed with refugees.
Ian Lee, CNN, London.
(END VIDEOTAPE)
LAKE: It is so hard to watch that. Now, officials say more than 2,000 people have died so far this year trying to cross the Mediterranean.
Still, thousands continue to make the perilous journey.
The short sea crossing from Morocco to Spain is among one of the most popular routes. Along the central Mediterranean, where tens of thousands
attempt the dangerous crossing from Northern Africa to Italy. To the east, we see people fleeing civil war in Syria and are seeking refuge in Greece.
Once they are in Europe, many move north to Germany or France, and from there, some continue to Scandinavia or the UK. The numbers you see
there show the official count of asylum seekers in each country in 2014. This year's figures are expected to be even higher.
For thousands of migrants, the island of Kos is a gateway to Europe. Stella Nanou of the UN High Commission for Refugees is there. She joins me
on the phone now.
Stella, we keep seeing this is an unprecedented crisis, we've never seen these numbers, and it's hitting countries that are, frankly,
struggling to support their own. You have there -- you are there right now. What are you seeing on the ground?
STELLA NANOU, UN HIGH COMMISSION FOR REFUGEES (via telephone): This is indeed the case, because the numbers have increased. In Greece, people
who arrive on the Greek islands, mainly refugees, have increased by 750 percent in comparison with last year. So, what we see here is a
humanitarian emergency happening in Europe, which requires an urgent Greek and European response.
Now, with regard to cost, there have been, indeed, tensions lately in relation to the registration procedure of new arrivals. But now, it seems
that things have calmed down. Almost all Syrians have been processed by now, with several of them already departing from the island of Kos.
And now, police are proceeding with registering other groups, like Afghans, Iraqis, and Pakistanis. And --
(CROSSTALK)
[16:19:59] LAKE: Stella, I just want to jump in for a second. This is not happening overnight. This did not just happen today. We have been
watching this for months and months, and everyone keeps saying a solution is needed by the international community and the Europeans, and we just
don't see one.
We continue to see towns like this overrun, local officials unable to help, and these migrants in desperate situations. When are we going to
have a unified answer that gets help to everyone involved?
NANOU: UNHCR has been last year warned that the situation is going to escalate and that measures should be taken in order to have adequate
reception procedures in place, adequate registration procedures in order to deal with the increased flows.
Unfortunately, this has not happened. Registration services remain inadequate. Reception is fractured and not covers the needs, and we see
this situation in calls with thousands of people leaving in rafts under very difficult living conditions.
They stay in parks, they stay in abandoned hotels, they stay in public areas, and among them, there are also vulnerable cases. We see families
with very young children, we see elderly people, pregnant women, people with disabilities. They are exhausted. They are people who have fled
atrocities in their countries, they are refugees, they flee war, they flee persecution --
(CROSSTALK)
LAKE: So, Stella, where --
NANOU: -- and human rights violations.
LAKE: -- where is the money going to come from? That's what's holding this up, let's be frank. No one wants to be the one to open the
pocketbook. Where is the money going to come from?
NANOU: It's a matter of money, indeed. It's a matter of financial support to Greece. But it's also a matter of meaningful solidarity on the
part of the EU towards Greece and other countries that are on the front line.
For example, solidarity in terms of technical expertise, in terms of sending more human resources, in terms of creating even more legal ways for
people in need of international protection to move in a legal way within Europe through relocation schemes. It means more flexible family
unification procedures. These things don't cost very much.
LAKE: Right, and that's a very good point to make, Stella. And I know the UN going to do everything it can to weigh in where you do have all
of that experience. We certainly hope that help gets to the people that we've been watching on the television, especially those young children and
families. Stella Nanou joining us from Kos. Thank you so much, Stella.
Now, you probably don't spend much time thinking about what's inside your cell phone or your computer. Maybe you should to make sure it was not
produced by slave labor. We look at what business is doing to try to halt such abuses.
(COMMERCIAL BREAK)
LAKE: Some of the world's biggest tech companies are taking a closer look at the materials used in their products. A lot of the materials that
are used to make phones, laptops, and tablets include many that come from parts of the world where slave labor is rife. Intel CEO Brian Krzanich
told me the company is trying to eliminate slavery, starting in the Democratic Republic of Congo.
(BEGIN VIDEOTAPE)
LAKE (voice-over): Semiconductors power the smartphones, tablets, and laptops that have become indispensable parts of our lives. But few of us
stop to think about what goes inside of our gadgets. Brian Krzanich, CEO of chip giant Intel, is trying to change that.
[16:25:03] BRIAN KRZANICH, CEO, INTEL: The complex electronics products, you've got to remember that the materials that produce those come
from all over the world, and in some cases, like these conflict minerals, they come from areas that are ravaged by war and internal conflict. And
so, there is a choice, and you should ask questions about what is inside the products that you're buying.
LAKE (on camera): What was your reaction when you first learned about he conditions in some of the places that supplied your company?
KRZANICH: A group of us went on and researched more about just what was going on in the Democratic Republic of Congo, and it was atrocious,
especially at that time. The slave labor, the working people literally to death in these mines.
This is a unique place where the materials that we're talking about -- tin, tungsten, gold -- they are really right on the surface. You don't
have to have the classic mines like we think of. And so you can literally use child labor or any kind of labor you can drum up to collect it, and
it's quite profitable for them.
LAKE (voice-over): Intel's goals, spurred by US legislation, was to create an extensive tagging and audit system. The company will only source
from mines determined to be conflict free, and they have worked with smelters and refiners around the world to verify the origin of material.
KRZANICH: We can do our part, right? We're engineers, and engineers are taught early in their education that you solve complex problems by
breaking them down into pieces. And so, that's what we did here.
We worked through and understood how much of the materials we get come from the DRC, where are the smelters. We broke it down by material and
said these will be a little bit easier, right? Gold was going to be a little tougher because we don't buy as much gold as, say, the jewelry
industry, so our influence was lower.
When you run a company like this, you look for places where it's unique to your company that you believe you can make an impact. The real
key here is that if consumers get behind this and make choices based on this, then it becomes important to everybody in the supply chain as well.
(END VIDEOTAPE)
LAKE: Intel CEO Brian Krzanich. Now, there are around 21 million slaves in the world today, and at CNN and other organizations fighting
slavery, we will not be satisfied until that number is zero. If you want to find out more, go to our website. You can find out how to spot if
someone is being trafficked and what you can do to help. That's at cnn.com/freedom.
Now, the skies are getting more and more crowded. Reports of drones getting to close to airplanes are skyrocketing. The potential dangers
coming up.
(COMMERCIAL BREAK)
[16:30:03] LAKE: Hello, I'm Maggie Lake. There's more of Quest Means Business in a moment when the FAA warns of the danger from drones. We'll
get a view from the cockpit and a Tinder relationship that just couldn't last. The dating company dumps its CEO.
First, the headlines this hour. Officials in China say at least 50 people killed when explosions ripped through warehouses in the northeastern
city of Tianjin. Hundreds more people are missing or critically injured including dozens of firefighters. Authorities are still trying to work out
what caused the blast. ISIS claimed responsibility for one of the deadliest attacks in Baghdad in more than a year. Dozens were killed when a truck
bomb exploded at a crowded vegetable market in a shia-dominated (ph) area in east of the city. Greek officials are meeting with their EU counterparts
in Athens. They're trying to figure out what to do about the number of migrants arriving on the tiny island of Kos. Aide groups were alarmed after
saying thousands of people were locked in a sports stadium in intolerable conditions this week. Swedish prosecutors say they're dropping an
investigation into claims of sexual molestation and coercion by the Wikileaks founder, Julian Assange because too much time has past since the
accusations but they will continue to look into the allegation of rape. Assange's lawyer says it is regrettable things have gone this far.
(BEGIN VIDEO CLIP)
THOMAS OLSSON, ATTORNEY OF JULIAN ASSANGE (THROUGH TRANSLATOR): The reason we're in this situation is that the prosecutors haven't for several
years accepted Assange's offer to be interviewed at the embassy and no reasonable reason has been given for their position. He has been granted
asylum at the embassy. And if he leaves the embassy, he will lose his asylum status. So based on the circumstances in this case, it would have
been the only logical and natural step to take.
(END VIDEO CLIP)
LAKE: Beijing is scrambling to reassure investors the yuan will stabilize after letting the currency weaken for a third straight day. In a
rare press conference, the People's Bank of China said the currency would likely recover because of the strong economy and Beijing's healthy
finances.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE (THROUGH TRANSLATOR): When other elements in the economy and the accumulated discrepancy are corrected and judging from
China's current account and the fact we have always insisted on a prudent monetary policy, the yuan will be on the rise in the future.
(END VIDEO CLIP)
LAKE: Stocks on Wall Street eked out a tiny gain. This is the Dow at the close, a gain of just five points, just made it into depositor's
column. The Tesla shares had a good day. They were up nearly 2 percent, off their best of the day, but they managed to hang on to those gains. The
electric car company is looking to raise money from a new stock offering. Tesla says it will sell more than 2 million shares to the public to help
fund expansion. CEO, Elon Musk, has expressed interest in buying up a chunk of that stock for his own portfolio. CNN's Paul La Monica is with me now.
So Tesla offering this new stock, what -- for expansion. What does that mean? What are they going to do with it?
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: It sounds like that Tesla is going to use some of the proceeds from this offering to help fund
things like the Gigafactory, which they need to build more batteries, so that they can then build the Model 3, the new car that will come out after
the Model X. That's the crossover that's coming out next month. Model 3 is supposed to be the, quote/unquote, "cheaper, more affordable Tesla." That
is what Musk hopes will propel Tesla into the echelon of mass market auto companies like a GM and a Ford. So we'll see if that works out. I think
they're also going to be spending more on their energy initiatives, the batteries that they've started to sell, the small businesses and some
consumers.
LAKE: So the investors must have faith in them because usually it is bad news.
LA MONICA: This is very interesting. Yes. I mean most of the time when a company sells more stock and it's a stock as hot as Tesla, the knee
jerk reaction is, "Oh, you're going to be diluting your existing shareholders and people sell." I think the combination of it is still a
cool company and people know from the release what they're going to be spending on. That was one reason. But then they also have the show of faith
from Musk buying some of the shares himself. I think that's why the stock did go up today even though probably most other companies wouldn't be able
to get away with it.
LAKE: Putting his money where his mouth is. And meanwhile, also in the finance sector, interesting deal between Goldman and GE, maybe somebody
-- not so much of a Goldman-esque type deal.
LA MONICA: Yeah. Goldman just announced that they're going to be buying about $16 million in deposits from GE Capital. I think it's
interesting here for two reasons, one, it makes Goldman a little bit more traditional bank-like.
(CROSSTALK)
LA MONICA: . which is not something you would associate with the fabled (ph) vampires of Wall Street like now they're taking deposits. I
mean what's next, the savings and loans? You know, it could be (inaudible) of rural America. Somehow I doubt that. But then you have GE which is
unwinding GE Capital. GE, it's General Electric. But let's be honest, they were a bank for a pretty long time. That was the dominant part of the
earnings and that's why they got into such financial trouble in the financial crisis because they weren't a real industrial anymore. Now,
they're going back to those roots. We'll see if it works for them.
[16:35:21] LAKE: It is a sign of the changing times, right? People going back to their roots. All right. Thank you so much, Paul La Monica.
Great to see you.
LA MONICA: Thank you.
LAKE: Now, the number of drones in the skies over the U.S. is sky- rocketing. The Federal Aviation Administration said so far this year pilots have reported seeing 650 drones. That's compared to just 238 all of last
year. The unmanned devices can pose a hazard to aircraft. Earlier this week, planes landing at Newark Airport in New Jersey, had to contend with a
drone.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Runway 4 right, landing (ph) caution. Drones reported at about 3,000 in your area.
UNIDENTIFIED MALE: Drones reported in your area at 3,000 at 14 miles final (inaudible), Runway 4 right, clear to land.
UNIDENTIFIED MALE: Tower United 107, heavy drone 2,500 feet.
UNIDENTIFIED MALE: Use caution, drone was reported at 8 miles final at 2,500 feet by the heavy jet in front of you,
UNIDENTIFIED MALE: Drone was reported 8 mile final at 2,500 feet off the left side, Runway 4 right, clear to land.
(END VIDEO CLIP)
LAKE: The drones are increasingly causing all sorts of problems in the skies worldwide. This week, a Brussels Airline plane landing at Ben Gurion
Airport in Tel Aviv nearly crashing to a drone. They came within 100 meters of each other. Last month helicopters trying to dump water on a
freeway fire in Southern California were delayed when a drone flew in their way. And in January, a drone crash landed on the White House lawn. Joining
me now is Les Abend. He is a commercial pilot and CNN aviation analyst. This is worrying. I mean, so far, thankfully, there's not been a major
incident, but how much should we be concerned before we see an air disaster because of one of these near misses?
LES ABEND, CNN AVIATION ANALYST: Sure. I don't want to reassure the public that once -- as you said, there haven't been any incidence,
accidents, anything involving the airplane. I mean we've gone, we've observed these things happening. The airplane is a vulnerable part.
There's no doubt about it. We have flight controls. We have the wind screen. We have the engines. One drone at a time.
LAKE: Yeah. And we have one right here.
ABEND: Yeah.
LAKE: They are giving me as small as this. It was quite light.
ABEND: It's quite light. However, they can be much bigger. And you know, that can cause some damage. I mean you're going to impact something
an object moving -- big object moving at very fast speeds. It could go into the engine.
LAKE: That's the real concern.
ABEND: Well, it is a concern. But however, we're trained to fly with an engine shutdown. So it is a critical phase when we're doing the
approach or doing a take off situation. However, unless you put together a gaggle of these drones, like the gees -- the flock of geese that brought
down U.S. Airways back in 2009, you're really not going to run into major problems. It is an issue that keeps multiplying and I just think it's a
lot of irresponsibility.
LAKE: Yes. Les, how hard is it -- I mean we've seen -- some of them being small, some of them are white. I mean it's not like you get a lot of
notice when this is coming out. How difficult is it for pilots to try to want to avoid one of these if they see it coming. I would imagine it it's
almost when it's up on that you realize that this thing is that close.
ABEND: You're absolutely right. It's very difficult. We're focused -- especially during the approach phase, we're focused on instrumentation,
listening to the controllers. We're not expecting a drone.
LAKE: I think you're supposed to be paying attention to those.
ABEND: Well, exactly. And you know, seeing something that size coming at us that quickly, it's difficult. Can we do an evasive maneuver?
Absolutely. Do we want to do an evasive maneuver versus, you know, falling flight attendants around in the cabin? We might have to strike that
object. But so far me personally I haven't run into that. However, you know, I have had colleagues that had that.
LAKE: And what should -- I mean we already have a situation where they're not supposed to be flying near the airport. What needs to be done
do you think from your perspective and your colleague's perspective to try to keep everyone safe and make your job easier? It's so difficult already.
ABEND: It's a good question. And as we know, we have talked on air. It's 400 miles -- over 400 feet and 5 miles from an airport. What really
should be done is we need to regulate it, both (ph) the FAA step up the process. I think what we need to do is license these folks. This is going
to -- this is not going to make the very responsible radio control people happy because they fly a hobby and do a very nice job of it and they've
always been responsible leaders. But I think we should start licensing people and that registering these drones that are so readily available.
They purchase it on the Internet. They have to prove that they have a license.
LAKE: And how about some lessons too because we've heard people don't realize once they can get to a certain point they can kind of get out of
your control and jerked off. And you know, people don't even know where these things are.
ABEND: That's.
LAKE: . even if their intentions are in the right place. Definitely a learning curve for all of us. Les, thank you so much for coming and I
feel a little bit better after talking to you.
Now, more relationship drawn at Tinder. I'll show you the changes at the top and why this was no grateful breakup.
[16:40:11] (COMMERCIAL BREAK)
LAKE: A big breakup at Tinder after five months together. The dating app is cutting ties with its CEO, saying, they're not a good match.
Christopher Payne is leaving. Tinder has gone back to its old flame and founder, Sean Rad. He has been serving as company president. The
announcement comes a day after Tinder hit the headlines for sending out a barrage of angry tweets. That was a response from an article in Vanity
Fair which said, Tinder users are often looking for easy hookups. Business correspondent, Samuel Burke, has been following the story, the drama. I
don't know. What we should call it, Samuel? It's been some kind of tough week for Tinder?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Absolutely. When they sent out those 30 tweets, that's an avalanche of tweets. You suspect that
someone like Donald Trump is doing that these days but not necessarily a company like Tinder who are supposed to be matching up great couples,
Maggie. So when that happened, a lot of people were surprised. They're publicly traded company like IAC, which has a major stake in Tinder. It's
not typically how a PR situation is handled. So now, it looks like along with the mishandling the situation, now, the CEO is out. When you don't
like something on Tinder, you swipe left and that's what they did with Chris Payne. He was only there for five months. So he's not into long-term
commitments, if you can just stick around for five months. What they describe it is as not a good fit. That's what one board member told Re/Code
(ph) and.
LAKE: This is not an unknown. He had experience.
BURKE: Not an unknown at all, formerly at Microsoft, Amazon and eBay. And when you fly, you know, Gogo Internet on airplanes, he's a board member
there. So he has a lot of experience and it's revolving door in Silicon Valley. He'll end up somewhere else I suspect.
LAKE: Yeah. He probably will. But what does this tell us about what's going on at the company? I mean he was brought in to take them to
the next level as they mature and sort of make it into a money-making platform? Does this give us an idea of what's actually going on there and
are people happy Sean Rad is back?
BURKE: And it's interesting you mentioned the money making because they did implement a premium plan under his leadership which wasn't there
before. But if we swipe again, we come back to Sean Rad. Now, he is the one who invented Tinder. And when he left, he does have a past relationship
and he was very bitter about how things ended. His co-founder, there was a sexual harassment lawsuit against the co-founder of Tinder.
LAKE: So there's a baggage there.
BURKE: Some baggage there. Now, of course, he wasn't accused of doing anything in terms of sexual harassment but was named as part of the
lawsuit. So he was taken out and he was shocked. He's talked about it. He was just about to go on stage, got a call from IAC, which as I mentioned
owns Tinder. And all of a sudden, he was out of the company, but a lot of people wondering where he would end up. He created this app which is so
popular. Maggie, Tinder has 85 percent of the market share when it comes to mobile dating apps. That's incredible. Just look. OkCupid is the next
contender, also owned by IAC, has 9 percent of market share and Zoosk with just 3 percent. So it shows you he knows how to create something that's
very good, very strong and very valuable. Some people say -- there are reports that Tinder has a valuation of $5 billion. Some analysts that
talked about it (ph) are a bit skeptical.
(CROSSTALK)
[16:45:14] LAKE: Is he here to stay though or is this sort of a temporary holder or until they find a more permanent match?
BURKE: It's looking a little bit like Twitter in that sense that we saw Jack Dorsey pushed out of his own company. Now, he's back as CEO. A
lot of people think that's temporary, but we just don't know when it comes to Sean Rad. But a lot of people suspected if he didn't end up as CEO of
Tinder again that he would go somewhere else. He's been sought after in Silicon Valley. So we'll look and see. But if he's not there, I think
he'll be somewhere else.
LAKE: Well, OK. So this is obviously to be continued on this particular one it seems. Samuel, thank you so much for that.
LAKE: Now, to South Korea where a business tycoon has been pardoned again. The head of SK Group was serving a second jail term for fraud when
he was told he could go back to work. As CNN's Kathy Novak reports powerful Korean business groups known as chaebol are stirring some discontent.
(BEGIN VIDEO CLIP)
KATHY NOVAK, CNN CORRESPONDENT: Chaebols are everywhere here. According to HSBC, the total revenue of the top five conglomerates is
equivalent to roughly 70 percent of South Korea's GDP. If you spend a day in Seoul, it's not hard to see why. Let's hop into our Hyundai van and I'll
show you. Now, I'm check an e-mail on my Samsung phone, but the country's number one chaebol is so much more than electronics. There are Samsung
hospitals, life insurance policies, hotels, even this trendy art museum. For lunch on the go, there's Lotteria, the fast food chain of another top
five chaebol. Lotte started with this, gum. Now, it's department stores, apartment buildings, and it's building Seoul's tallest skyscraper. The
conglomerates are not giant legal entities. They're groups tied together through a complex system of cross holdings and the ruling families wield
enormous power even though they hold very few shares in the many companies. So as we stop to fill up at a service station of the third biggest chaebol,
SK Group, I wonder what people here think about the fact that its boss, Chey Tae-won, is receiving his second presidential pardon for financial
crime convictions.
UNIDENTIFIED MALE (THROUGH TRANSLATOR): We need to create more job opportunities by releasing these business leaders. So from this perspective
I support special pardons.
UNIDENTIFIED FEMALE (THROUGH TRANSLATOR): There must be a restructuring of chaebols. I don't think they have done positive things for
the Korean economy.
NOVAK: The debate is often between those who believe chaebols are vital for the economy and others who think they have too much power.
MICHAEL BREEN, AUTHOR OF THE KOREANS: There's a Korean saying to the effect that as a tree grows large, the other trees whither in its shade.
The other trees don't get the sunlight. That's what happens in Korea. For every Samsung, there are a thousand small companies that never made it.
NOVAK: Still there are plenty who think they are a part of life. And if you can't beat them, work for them. Kathy Novak, CNN, Seoul.
(END VIDEO CLIP)
LAKE: A day no cold war could ever see coming. The flag will fly at the U.S. Embassy in Cuba for the first time in five decades. We'll look
ahead to the big day. First, a highlight for (inaudible).
(COMMERCIAL BREAK)
[16:50:08] LAKE: It will be a historic day in Cuba tomorrow. The U.S. Embassy is set to reopen. The stars and stripes will be raised over the
embassy in Havana for the first time in 54 years. It is another milestone in the normalization of US-Cuban relations. Patrick Altman joins us live
now from Havana where the celebrations are already underway. And Patrick, it looks like you have a bird's eye view where you are already, everyone
getting the preparations in place for what is going to be a huge event.
PATRICK OPPMANN, CNN CORRESPONDENT: Absolutely, Maggie. If you have a second, let's just show you what's going to happen tomorrow. We're going to
pan down the camera right here. It's going to get down to ground level where you see a podium, you see a flag pole and there are preparations now
to get everything ready in the final hours for Secretary Kerry's visit tomorrow morning. He'll come in through the front door, speak, unveil the
new embassy sign, the new seal and raise the American flag that hasn't been seen here over this embassy in 54 years. And of course, Cubans are very
excited about it. Conveniently enough, it's carnival season and we went to the party to talk to Cubans how they feel about the renewed US-Cuban
relations.
(BEGIN VIDEO CLIP)
OPPMANN: They play with heart and on a shoe string budget. We're at this carnival that isn't an over the top affair like Rio or Mardi Gras.
Those lavish festivities are beyond the reach of this island's battered economy. But perhaps this year Cubans are in the mood to celebrate just a
little more. The procession of floats begins down the street from the newly reopened U.S. embassy.
We want this, Johandy (ph) says, of the restoration of relations between the two countries and we hope it continues like this. He says Cuba
has a lot of love for the United States.
Despite the easing of travel restrictions there don't appear to be many Americans in the crowd. They can consider themselves invited to next
year's.
The Americans should come and enjoy carnival here and then invite us to theirs, dancers, Maurice and Dotty, tell me.
U.S. and Cuba are engaged in a diplomatic dance. Neither side completely sure where it will leave you.
UNIDENTIFIED MALE: (Inaudible) between their country and the United States is a little bit like the conga, take one step forward, one step
back, you don't go fast, but eventually you get to where you need to go.
OPPMANN: The clear is a restoration of relations is a hit with many Cubans like Francisco who proudly wears his American t-shirt.
We should have done this a while ago. If we are neighbors why are we always fighting, he asks. Let's act like neighbors and be at peace.
Carnival is supposed to be a beautiful succeeding (ph) dream. But in Cuba there is new hope of waking up to their reality.
(END VIDEO CLIP)
OPPMANN: And Maggie, you know, there'll be tons of security around this area. We're expecting thousands of Cubans to come and see this
historic moment in the history between their two countries, not everyone is exactly onboard with the changes. Fidel Castro who happens to turn 89 years
old had an editorial in the Cuban-state run press where he said the United States owes Cuba millions of dollars in be compensation for, of course,
decade-long embargo. But for most Cubans you talk to, they're excited to see these warming relations and to receive Secretary Kerry, the highest
official to ever come to Cuba since the revolution. Maggie?
LAKE: Yeah. It's hard not to see all that enthusiasm. It's so contagious, Patrick. I think we caught you dancing for a minute there in
that standoff (ph). But you know, you may -- you may have a good point. There are these legal issues, unless the honeymoon is over. Property
rights, you know, what's past due and a lot of claims like that. Is there the risk that expectations are too high going into this?
OPPMANN: Oh, absolutely. I think a lot of people, both in the U.S. and Cuba sort of feel like everything is solved and this is just one step
and much longer process. It's called normalization. We're talking about Guantanamo. We're talking about property rights. We're talking about the
really tough issues and U.S. officials have said this is a really complex, complicated part, but at least they're talking and they're doing something
they haven't done in so many decades, which is sit down in a professional way that governments do across the world and try to work out these issues
and that's expected to begun soon after the U.S. flag goes up over the building behind me tomorrow morning. Maggie?
LAKE: And I supposed, as you said, even if people's expectations are a bit high, there is a sense this is a new chapter and a new beginning for
the Cuban economy?
[16:54:59] OPPMANN: Oh, absolutely. I think most Cubans were born after the revolution. They have known -- they never known anything but
embargo, shortages, scarcities. It really is a very tough existence for people. So any change is regarded as hope and we're already seeing American
visitors, really tourists pouring in here. People wanting to see how they can do business. It's quite tough you have to partner with the Cuban
government in most cases. All the same though. There is a sense of a new beginning, new enthusiasm, and it's just a question of how the Cuban
government will take advantage of really an incredible opportunity to leave the past behind.
LAKE: That's right. And let's face it. This has been moving more rapidly than any expected. Perhaps change isn't that far out of reach.
Patrick Oppmann, we'll be speaking to you all day tomorrow. Patrick, thanks so much.
And you can join us Friday when the American flag is raised in Havana for the first time in more than half a century. That starts at 2:30 p.m.
in London, 3:30 Central European Time, right here on CNN.
Well, after a weak fills of shockwaves from China and panic (ph) performances on the market, stocks mostly decided to head for higher
ground. I'll bring you a check on the markets right after this.
(COMMERCIAL BREAK)
[16:59:11] LAKE: Let's have a final check on the market. In Asia stock, markets reacted positively to comments from the People's Bank of
China. Officials there insist the yuan will stabilize. Shares bounced back after two rocky sessions. The Shanghai ended almost 2 percent higher.
With a mix bag in the European markets, stocks in London were down slightly making three straight days of losses. Energy stocks were a drag on the
(inaudible) had a six-year low. Shares in Germany were up. Athens finished down slightly. We are watching that. So it's happening right now
in Athens.
Meanwhile, Wall Street couldn't quite hang on to earlier grants. (Inaudible) about 70 points that one day you can see that chart at one
point in a day. But despite some upbeat, numbers on U.S. retail sales and jobs claims the Dow finished flat. It was up just 5 points.
And that's Quest Means Business. I'm Maggie Lake. Thanks so much for joining us.
END
