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Quest Means Business
Kurdish Militant Group Claims Ankara Terror Attack; U.S.; Warplanes Strike ISIS Target in Libya; Lagarde Wins Second Term as IMP Head; Draft UK-EU Deal is "On the Way" Tusk: Deal Struck Between UK and Europe; Apple versus FBI; U.S. Tries to Force Apple to Unlock iPhone; Joh McAfee: I'll Decrypt iPhone; Yahoo! Forms Committee to Explore Options; Deal Struck Between UK and Europe; Key Presidential Contests in South Carolina, Nevada; Overlap on Economic Policy; Liberal Economists Question Sanders' Spending Plan
Aired February 19, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
PAULA NEWTON, HOST: And it is a weak end to a strong week. For stocks, who knew as trading comes to a close on Wall Street, stocks had some legs this
week. It's Friday, February the 19th.
(BEGIN VIDEO CLIP)
NEWTON: A new deal between Britain and Europe is in sight as leaders remain locked away in Brussels.
John McAfee says he'll do what the FBI can't decrypt on that phone in San Bernadino. One billionaire and the other crusades against the billionaire
class but when it comes to trade, Bernie Sanders and Donald Trump have remarkable similar policy.
(END VIDEO CLIP)
NEWTON: I'm Paula Newton and this is "Quest Means Business."
Tonight a new deadline looms over the summit in Brussels. It's now 10:00 p.m. in the Belgium capital. Now in the past hour the Czech Prime Minister
said a draft agreement on Britain's future is in his words on its way.
Now E.U sources tell CNN exclusively the leaders want the summit finished by 8 local time but not tonight of course, Saturday morning.
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NEWTON: British Prime Minister, David Cameron, has scrapped plans to meet with his cabinet in London on Friday night after pulling an all-nighter on
Thursday. He hoped to have a deal to show for his efforts by now with better terms for Britain's place in Europe. Instead, he spent the day
bouncing from meeting to meeting to meeting trying to thrash out this agreement. The Prime Minister of Belgium made it clear Europe can't wait
much longer.
CHARLES MICHEL, BELGIUM PRIME MINISTER: (As translated) There will be no second chances, it's now or never. There is a will to straighten out
relations between Britain and Europe, we're going to do it by reinforcing Europe's capacity to face up to different challenges, security, economic,
geo-political, but it has to be concluded now.
(END VIDEO CLIP)
NEWTON: CNN's Money European Editor, Nina dos Santos is extending her trip to Brussels as well. You know I hate to say I told you so, Nina. Everybody
knows I'm on the record saying that look, they weren't going to leave there without a deal. What do you know about the kind of deal that seems to be -
being really hashed up there hour by hour in Brussels?
NINA DOS SANTOS, CNN MONEY EUROPEAN EDITOR: Well for any of us who've covered these E.U. Summits, and you know them yourself quite well Paula,
they really do bleed into one day, into the next, and well into the night.
So far, those 28 heads of state and government to the E.U are actually sitting finally around the same table after more than two days' worth of
endless bilateral negotiations. They are finally around the dinner table and it's taken four attempts to get them around that table already today.
They were originally supposed to settle everything over breakfast but now of course we're at a 10pm dinner.
What we're hearing from Donald Tusk's spokesman is that there is draft negotiation that he's hopeful could be close to the final draft negotiation
on the table in front of these government members. And then obviously they will also have their own legal team that will have to hammer out the detail
of that particular agreement before they can put it through the Europe parliament, decide how to enshrine this into Europe law and then David
Cameron can take it back to the U.K.
What we know now at this hour, is that David Cameron has had to cancel a cabinet meeting that he was planning on holding this very evening, hoping
to go back with that document. But so far, he's made it very clear to E.U. leaders that he is not going to take back to Britain a deal that he doesn't
believe in.
But obviously at the same time, we're also having rallies taking place, Euro skeptics or anti-E.U. rallies, putting the pressure on Mr. Cameron to
get this deal done but a deal the U.K. wants.
Let me just remind you what the sticking points are. And basically they remain the same. Still, a lot of contention over this issue of an emergency
brake on benefits awarded to migrants in the U.K. The U.K. originally wanted those migrants to be locked out of the system for as long as 13
years. A number of the European countries from the former Eastern bloc countries are very against that. It seems they might have found a
compromise for seven years there.
France still holding out, trying to get more information about the safeguards for the city of London and then Greece at one point threatened
to torpedo the whole deal saying they could veto this legislation it if they didn't get confirmation from other E.U. states that everybody would
keep their borders open so that migrants wouldn't just get stuck in a backlog in Greece.
So again, those are the tense negotiating points but people hopeful that they're going to have a draft negotiating agreement signed off this
evening. As we were saying before, we understand here exclusively at CNN that this building is set to power down by 8:00 a.m. tomorrow morning. So
either way, whether there's a deal or no deal, that is supposed to be the plan.
[16:05:00]
NEWTON: Nina, thanks for the update. I have no idea how long you're going to be there this weekend. I have a feeling the politicians don't know how
long you're going to be their either. Nina dos Santos there continuing to follow the developments in Brussels.
And we want to let you on something here, today's menu for the politicians in Brussels earlier was artichoke to start, veal for the main and of course
Bavarian cream for the dessert.
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NEWTON: Now unfortunately, the catering situation today has been fairly fluid. As you can see they had to scramble up some meals. What was supposed
to be a congenial English breakfast ended up getting replaced by an English lunch. And then got pushed to an English dinner. The problem was - the
problem is they may just have too much on their plate.
First, they have to wade through the entire forest crazy mess of the E.U. benefit system. They're all just trying to get through that. And European
countries are unhappy with Britain's plans for an emergency break for those benefits. And then you put the issue of banks on the table. France is
unhappy that Britain's banks may get a pass from new E.U. rules.
And finally, there's a risk of an old-fashioned Euro fudge over the migrant crisis, with Greece saying it could block any deal unless Europe agrees to
keep borders open. And it's all proved too much for German Chancellor Angela Merkel, who ducked out, wait for it, ducked out of that Summit for
some good old Belgian French fries apparently from one of the local shops there.
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NEWTON: Now, the stakes in the "Brexit" debate are high, as we've been telling you. We have all the facts you need on our brand-new international
website, that's cnnmoney.com/international. And we'll be right back with more "Quest Means Business."
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[16:10:00]
NEWTON: Uber says its losing $1 billion a year in China.
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NEWTON: The CEO Travis Kalanick made the comment to tech website Beta Kit. Now the car hailing company is facing stiff competition in China from Didi
Kuaidi firm backed by a Alibaba in Tencent. Now Uber already operates in more than 40 cities in China and says it will expand to 100 by the end of
2016.
NEWTON: In japan, new government guidelines looks to threaten Airbnb.
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NEWTON: It would make it illegal for owners to rent out their homes for periods shorter than a week. Japan is Airbnb's fastest growing market with
more than 21,000 listings. Will Ripley reports on why some people in Japan aren't welcoming the company.
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WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: Breakfast in Tokyo.
UNIDENTIFIED FEMALE: We are making pancakes.
RIPLEY: A cooking lesson for Canadian student (inaudible) on a nine-day Japanese vacation.
UNIDENTIFIED FEMALE: They're really precious moments because i get to be with my host.
RIPLEY: Financial adviser (inaudible) rents out a room in her apartment for around $40 per night using website Airbnb.
UNIDENTIFIED FEMALE: The room is almost full all the time.
RIPLEY: She averages ten guests' a month from all over the world.
UNIDENTIFIED FEMALE: We give them a local experience like cooking together. At the same time, we get inspired by the guest.
RIPLEY: That cultural exchange is part of the Airbnb sales pitch. The $25 billion rental site boasts 60 million guests, 2 million listings in 34,000
cities. But here in Japan, Airbnb faces challenges. Short-term rentals often violate local law. Most people don't speak English. And on this
island nation, many are unfamiliar with foreigners, never mind hosting them in their homes.
Some communities are banning vacation rentals altogether. Tokyo's (inaudible) has upscale amenities, prime views, and strict residents only
policy.
So essentially what you're saying is you don't want this place to turn into a hotel. Exactly, says the resident representative, (inaudible). A hotel is
where the public stays. We want to keep this place exclusive.
Airbnb's catching on in Japan. At least 21,000 listings since 2010. The number of guests up 500% from 2014 to 2015. The biggest draws, a good
location, clean comfy bed and WIFI. So this is the guest room? (inaudible) say the most common complaint about foreigners in Japan, noise. But quiet
courteous guests have actually made friends with their neighbors.
UNIDENTIFIED MALE: That kind of guest change Japanese mind.
UNIDENTIFIED FEMALE: Yes, that's right.
RIPLEY: (inaudible) started a business managing dozens of listings and selling local art to tourists. With 8 million visitors expected for the 20
Tokyo Olympics and a record number of foreign tourists this year, a small but growing number of Japanese are listing their homes. Around some tables,
hosts and guests profiting from the experience.
Will Ripley, CNN, Tokyo.
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NEWTON: China's richest man, Wang Jianlin, made his fortune in property and now he's out to conquer the worlds of sports and entertainment and not just
in China.
His group, Dailan Wanda, has already made high profile purchases like legendary studios and AMC cinemas in the United States. Wang spoke to CNN
money Asia Pacific editor Andrew Stevens.
(BEGIN VIDEO CLIP)
ANDREW STEVENS, CNN MONEY ASIA-PACIFIC EDITOR: Want Jianlin is fast becoming the international face of Chinese business. Whether speaking to a
packed house at a Hong Kong business forum, rubbing shoulders with the Hollywood elite or joining the top table at a storied European football
club, China's richest man is making waves, joining Alibaba's Jack Ma as one of the country's best known business leaders.
Wang's Dailan Wanda group is China's biggest private property concern. But it's been expanding and diversifying its empire internationally. I sat down
with Wang in Hong Kong recently to talk about where the company goes from here.
WANG JIANLIN, CHAIRMAN WANDA GROUP: (As translated) currently our real estate business is not growing much. We're developing two major sectors.
First is cultural industries including entertainment, sports and tourism. The second is financial industries including corporate financing, new
online loan, online/offline integration, releasing our own (inaudible) card, the first multi-function financial card et cetera. his is our two
major sectors for development.
STEVENS: You said Mr. Wang, very clearly that you would be making five acquisitions, substantial acquisitions in 2016. Three of those will be
offshore, overseas. What areas are you looking? What type of business are you looking at buying?
[16:15:07]
JIANLIN: (As translated) All are sports or entertainment businesses. They will be substantial at least $3 to $5 billion.
STEVENS: Do you have targets identified?
JIANLIN: (As translated)We would not release that, but there is some progress that we expect to compete within this year.
STEVENS: Why sport?
JIANLIN: (As translated) There is basically no sports business in China at this point and the Chinese government has just released a policy to develop
the sports business. To grow it into a 5 trillion R&B business within 10 years. That is close to 800 billion U.S. dollars and slightly larger than
the current side of the sports business in the U.S. now.
There are a lot of preferential policies for sports related businesses such as priority to obtain land, IPO and bank loans et cetera. We think this is
the golden decade for sports business in China. We go around the world to acquire good sports companies and competitions that can be brought to China
and linked up with China's demand.
STEVENS: Is your diversification program linked to the fact that China's economy is slowing down and you need to spread your businesses further, not
rely on just property?
JIANLIN: (As translated) It's about not putting all the eggs in one basket. It's because we think if we want to become a first-class company in the
world, it has to be a multinational enterprise. Not just staying in one country. I could reach 100 billion U.S. dollar turnover, even if I only
conduct business in China, but I think that will not help with our company's branding and transition. Therefore, we do not have any budget
caps in our investments in the overseas markets. Whenever we come across a good company, we can always consider to acquire it.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
NEWTON: As crude prices crash to around $30 a barrel, reminder that oil volatility is nothing new. Christine Romans has a look at the biggest boom
and bust for black gold.
(BEGIN VIDEO CLIP)
CHRISTINE ROMANS: Oil is not for the faint of heart. Black gold has made fortunes for some but its price volatility leaves destruction in its wake.
Here are some of the biggest oil booms and busts of the last century.
[16:20:05]
ROMANS: One of the earliest oil price shocks of the transportation era was the west coast gasoline famine of 1920. Demand for oil was surging as more
people started driving automobiles. Consumption almost doubled from 1915 to 1920. That led to a shortage in gasoline. Autos were out of commission and
horses back in style.
After 1920, oil production in the U.S. Boomed in Texas, Oklahoma, California. That meant no more shortages. Increased supply and falling
prices down 40% between 1920 and 1926. Then toss the great depression in the mix. Prices fell another 66% by 1931.
After World War II, people were demanding more petroleum-based product and buying more cars. The price of oil increased 80% from 1945 to 1947.
In 1960, OPEC was founded. The coordination of supply from these countries led to relatively prices for the next decade. Just after Syria and Egypt
attacked Israel in 1973, OPEC announced an embargo on all oil exports to countries viewed as supporting Israel including the United States. Oil
prices doubled and then doubled again and drivers waited in long lines just to fill up their tanks.
Iran was one of the largest oil producers in the world in 1978 but the revolution in that country hurt production and the country has never fully
recovered. The price of oil already historically high pretty much doubled again. And in the U.S. the lines for gas were back. If you haven't noticed
already, when there's conflict in the Middle East, oil prices go up. That's what happened in 1990 and again when the U.S. invaded Iraq in 2003.
Growing demand for oil was booming at the beginning of the 21st century. China was guzzling crude and the U.S. economy was in a bubble. Despite
signs of a global recession under way, oil peaked at $142 a barrel in 2008. It helped put the brakes on the economy just before the financial crisis
brought it all crashing down.
And today too many players pumping too much oil and concerns about China's slowing growth have sent oil prices into a tailspin. How will this bust
stack up with others from the last 100 years.
(END VIDEO CLIP)
NEWTON: 16 months since the tragic crash in the Mojave Desert, Virgin Galactic is pushing ahead with plans to send tourists into space. Richard
Branson's company is said to unveil a new version of the Virgin Galactic Spaceship. The firm is being coy with when it will do that, saying only
that it will be very soon.
CNN digital correspondent Rachel Crane gets a look at what's to come.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: This is the vehicle that is going to take many hundreds of regular people into space for the first time.
RACHEL CRANE: Richard Branson's Virgin Galactic wants to be the world's first commercial space line. That is the first company to take regular
people into space on a regular basis. And this is the spaceship they say could do it.
Spaceship two, Serial two was constructed here in the Mojave Desert in this secreted hanger.
UNIDENTIFIED MALE: We're really looking forward to getting it into the air where it belongings and eventually into space. Head back and we're
accelerating.
CRANE: (Dave MacKay) is Virgin Galactic's chief pilot. He's been training inside of the simulator hundreds of times waiting for a real spacecraft to
fly again.
DAVE MACKAY, CHIEF PILOT, VIRGIN GALACTIC: After roll out, we expect in the next couple months to be in flight test. Of course that's hugely
significant.
CRANE: That's because Virgin Galactic has not had a vehicle since a tragic accident in 2014 left its spaceship in pieces and killed one test pilot.
RICHARD BRANSON: We're going to learn from what went wrong.
CRANE: The NTSB ruled the cause of the accident to be human area. Spaceship Two, Serial Two was already in development at the time of the
crash but not nearly ready to serve as a replacement.
MACKAY: When we began this journey, we knew it would be hard and it has been hard. The number one thing is that we're going to test fly this
vehicle. We're going to test fly Spaceship Two and we're going to make sure we understand what happened.
[15:25:03]
CRANE: Virgin Galactic have made several updates to its new and improved spacecraft.
MACKAY: The actual accident was caused by a control being moved when it shouldn't have been done and we've implemented a new system which prevents
that ever happening again.
CRANE: But building a spaceship and adding those new features has taken time. Spaceship Two, Serial Two, has been under construction for more than
three years.
MACKAY: I believe that the future of this vehicle will be powerful to the future of humanity.
CRANE: This is how it works. The mothership, White Knight Two, carries the spaceship 50,000 feet into the air. Then it separates and blasts off at
more than three times the speed of sound, reaching between 50 and 62 miles above earth. The six passengers onboard will experience about six minutes
of weightlessness.
MACKAY: And at this point or very shortly we're going to allow the customers to unstrap and they can float around.
CRANE: More than 700 customers have already paid $250,000 for a seat when Virgin Galactic eventually starts commercial operations.
MACKAY: It's a sensational experience of course but it's more important than that. It's the first step in opening up space to the wider population
of the world.
(END VIDEO CLIP)
NEWTON: The Department of Justice says Apple's refusal to help the FBI is based only on a desire to protect its brand.
(BEGIN VIDEO CLIP)
NEWTON: Cyber security expert John Macafee has offered to open the iPhone in question so Apple doesn't have to do it and I'll be talking to him.
That's up next.
(END VIDEO CLIP)
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[16:30:00]
NEWTON: Hello, I'm Paula Newton and these are the top news headlines we're following for you this hour.
(BEGIN VIDEO CLIP)
NEWTON: A Kurdish militant group has claimed responsibility for a deadly attack in Turkey's capital Ankara. Wednesday's bombing killed 28 people.
The Kurdistan Freedom Hawks or TAK said the attack was revenge for Turkey's military operation in southeastern Turkey and threatens further attacks.
You're looking at the aftermath of air strikes against ISIS in Libya. U.S. warplanes struck overnight. A senior ISIS operative from Tunisia may have
been among the 41 people killed. The U.S. official said advanced firearms training was taking place there. A possible indication that a terrorist
attack was being planned. >
Christine Lagarde has won a second five year term as Managing Director of the International Monetary Fund. She ran unopposed for the top job. Lagarde
called for financial cooperation and laid out her priorities for the next term.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: I believe that we can do a lot in terms of support in terms of lending, in
terms of programs. But I would hope that in the coming years we can also move into being more into prevention. More into anticipating changes, and
capable of advising countries to equip themselves with macroeconomic policies and other policies by way of structural reforms for instance. To
deal with the changes that are ahead of them.
(END VIDEO CLIP)
NEWTON: A draft agreement between Britain and the European Union is on its way, according the Czech Prime Minister. Leaders are extending talks in
Brussels over Britain's future in the EU. But the British public due to vote in the coming months on where to stay in the EU.
British Prime Minister David Cameron says some progress has been made.
(BEGIN VIDEO CLIP)
DAVID CAMERON, BRITISH PRIME MINISTER: Well. I was here until 5:00 this morning working through this, and we've made some progress. But there's
still no deal. And as I've said I'll only do a deal if we get what Britain needs. So we we're going to get back in there. We're going to do some
more work, and I'll do everything I can.
(END VIDEO CLIP)
NEWTON: We're going to continue now with those developments ongoing in Brussels. Gideon Rachman is the Chief Foreign Affairs Columnist at the
Financial Times. He's says Britain would be making a mistake if it left the EU now. You know, I find your column quite refreshing, but you
understand how unpopular this would be in Britain. Of course you know that. Basically you're saying look, Britain needs to be all in, and
Britain needs to be all in because it needs to have a voice in Europe.
GIDEON RACHMAN, CHIEF FOREIGN AFFAIRS COLUMNIST, FINANCIAL TIMES: Yes, well I mean I think that that's been the debate for many years. Actually
what I argued in the column is that in a funny way the British debate is stuck in the early `90s. When Europe wasn't in turmoil and it was really
purely a kind of economic question. But now with the migrant crisis, with a spillover from the Middle East, I think that the whole political
situation in Europe is highly unstable. And it's in Britain's interest to be part of the European Union. Which for all its flaws attempts to try to
kind of create consensus among democratic nations in Europe. And if we walk away we'll actually damage the EU, which is the major forum for
international cooperation in the EIU. So I'm really making a political as much as an economic argument.
NEWTON: Now you may have you wish here. Perhaps they are listening to you. If you would just indulge me here and standby. Our Nina dos Santos
is there in Brussels and perhaps has word of some type of an agreement. Nina, what are you hearing?
NINA DOS SANTOS, CNN MONEY, EUROPE EDITOR: Yes, actually it's interesting. Just in the last couple of minutes you may have seen me examining my
Blackberry and my phones. We do have, I believe Donald Tusk, the President of the European Council, which convenes these meetings. He's running them.
Now are tweeting apparently that there has been a deal struck. Now this tells us what the Lituanian President, Dalia Grybauskait? has tweeted just
two, three minutes ago saying that the deal is done, "The drama is over." And one of the thorniest opponents to David Cameron throughout the course
of the last few days over the issue of an emergency brake applies to migrant benefits, has been the Czech Prime Minister. He has now also
tweeted that there has been compromise. That they have agreed to limit the term of those benefits to seven years. David Cameron originally want
migrants to the U.K. locked out of the benefits for 13 years. They've seem to have come to a compromise. The Czech's wanted only five. Seven
maybe on the table here. So the Czech Prime Minister is confident is seems. At least according to these statements just made in the last few
minutes on Twitter that a deal may have been reach that David Cameron can take to his Cabinet and to the British people.
NEWTON: Nina, from what can you tell us so far -- and I know it's not even early hours, it's early minutes here. But in terms of him trying to take
this back to Britain, what did he not get?
DOS SANTOS: Well at the moment we haven't actually seen any copies of the draft text. So I've seen a number journalist Tweet pictures of what looks
like a draft text with various bits crossed out. Referring to things like explicit save guards to Britain's sovereignty when it comes to closer
integration for the European Union projects. And as I was says that compromise of the seven years is also -- seem to be Tweeted in these, I
should stress, as yet unconfirmed pictures that we're seeing floating about on Twitter on this draft text. But I should caution here, Paula, you know,
we also have a lot of draft text that continue to circle here on the floor throughout the course of these meetings. And they get revised repeatedly
as these leaders got into that bilateral negotiations and their big multilateral negotiations, which is what's going on right now.
The real issue for David Cameron is that he need to go back to the U.K. To his own government to appease euroskeptic MPs. This is his one chance to
try and get his stable in order back home. And so this deal has to be strong enough to appease them.
[16:35:03] A lot of people thinking it probably won't be. But either way when this deal gives him the right to call a referendum, perhaps in the
23rd of June. That's why he wanted this deal this very weekend. Why the timings were so urgent for him. And a lot of people across the U.K. will
probably have forgotten the finer print of all of the tense negotiations that have been happening here.
The fundamental question for the British people is do they want to be inside the European Union or not. And that hangs on a whole bunch of
intangibles. Basically whether the U.K. feels European or not. It doesn't necessarily hinge on the kind of minutia that's being discussed
here over the last two days.
NEWTON: Yes, and important point. Our Nina dos Santos is going to step away for a moment and try and get more details on that deal. Nina we thank
you for the update. And we want to bring back Gideon Rachman now. Who is the chief foreign affairs columnist for the Financial Times.
You know we're not getting many detail there Gideon, but from what you can tell, and look, a lot of this has already been floating out there. If
wanted to try and make a argument to the British people, I mean this is an incredibly divisive topic right now in Britain. What do you day to them?
RACHMAN: Look I think that Cameron has got a problem. Because frankly, this deal doesn't amount to all that much when you think of the very high
ambitions of the eurosceptics in his party. Initially they want to regain control of Britain's borders and some assertion of the supremacy of British
law over EU law. Now they haven't even got close to that. And the stuff that Cameron has got, as your correspondent was saying, pretty technical,
pretty hard to explain.
So I think the only way that the pro EU camp can win it is by not focusing on the details of this agreement that's been struck tonight. Even if it
did take 48 hours to hammer it out. They're going to have to make the case for EU membership really from fundamentals. And I think they will make a
primarily economic case. As I said in my mind it's really largely a political question. But I think for ordinary voters they'll want to know
what the economic risks and benefits are. And I think Cameron will run a, you know, it's too risky to leave campaign. He will make an argument that
basically Britain is reasonably prosperous and that it would be a huge gamble if we left the EU. And that probably is right.
NEWTON: How much does it worry you though in terms of timing. We've discussed that we're going to be a few weeks away from many more migrant
trying to get to European shores and being successful. You discuss in your own editorial (inaudible) in weeks. You need to appeal to more than what
is going to be happening in headlines over the next few weeks don't you? If your David Cameron.
RACHMAN: Well I think you're totally right. Yes, I mean I think you're right. The migrant crisis makes this potentially a very bad time to have a
referendum, because borders and immigration are probably the strongest card for the let's get out the EU camp. There isn't much sign that they're
going to be able to control migrant flows. And indeed as the weather improves you may get, you know, hundreds of thousands more people moving
towards Europe.
That will create A, an impression of Europe in chaos, and B, a fear that these people will eventually more to the U.K. at a time when migration is
not very popular. So Cameron is really just going to have to cross his fingers that the worst won't happen on the migration crisis, or he'll have
to come up with a fairly convincing argument why Britain will somehow be immune to this. But I think the anti-camp will very much play on the
migration issue. No doubt about it.
NEWTON: Gosh, it's going to be a bruising few months and this after the Scottish referendum. Gideon we will continue to speak to you and check in
with you. I appreciate you indulging us with so much time.
Now the Justice Department says Apple's refusal to help the FBI is base only on a desire to protect its brand. Cyber security expert Joh McAfee
has offered to open the iPhone in question so Apple doesn't have to. I'll be speaking to him next.
(COMMERCIAL BREAK)
[16:40:00]
NEWTON: In the fight between Washington and Silicon Valley over privacy. The Obama administration is turning up the heat on Apple. The U.S.
Department of Justice has asked a judge to force Apple to comply with an order to help unlock an iPhone used by one of the San Bernardino shooters.
Justice Correspondent, Evan Perez is in New York. You know, it's one question we've been asking a lot. Look Apple says it's going to fight this
in court. A lot of people think it could be a Supreme Court case eventually. But in the meantime does Apple have to do what the U.S.
government wants it to do?
EVAN PEREZ, CNN JUSTICE CORRESPONDENT: Well, Paula, one of the things that happened today was simply that the Justice Department tried to speedup this
process. Apple, they know that Apple has made a public comment. Tim Cook put out a letter to customers. And what the Justice Department tried to do
today was say well that's their response, judge you need to force them to act and force Apple's hand.
We just had a little call with Apple executives and they're, frankly, outraged at the Justice Department's tactics. And especially the charge
that you just mentioned earlier, which I that Apple's position on encryption is simply because of profit motives. That they essentially --
they care more about their companies brand and their marketing than about the safety of the American public. That's something that these Apple
executives on this call were very offended by.
They say what the Justice Department is trying to make them do is to create an entirely new product. Which is a piece of software, so they can break
into this phone. They say that software does not exist, and the current law that Justice Department is trying to use, it doesn't really say that
you can force a company to create a product. What they called it was a kin to creating a nuclear bomb of software simply because this software once
it's used on this one cell phone, will be able to be used on others as well, Paula.
NEWTON: And Evan Perez I know you will continue to stay on top of this. And the Justice Department continues to be busy on this case. Appreciate
it Evan.
John McAfee says he'll decrypt that phone so Apple doesn't have to create this so-called backdoor we've been talking about. Now the founder of the
anti-virus software company wrote in an opted, his quote, "I will free of charge decrypt the information on the San Bernardino phone with my team.
We will primarily use social engineering, and it will take us three weeks." John McAfee is running for President of the United States as a member of
the Libertarian Party. He joins me know on the line from Memphis, Tennessee.
You know I should add that you have said that if you can't do it in three weeks, you will eat your shoe live on TV. Why do you think you can do
this?
JOHN MCAFEE, FOUNDER OF MCAFEE: (via telephone) Well any good hacker can do this. Here is issue. What the FBI has asked Apple to do is to create a
backdoor into their encryption. Now is madness from any number of standpoints. Any backdoor that is created is always discovered by hacker
and our foreign enemies. So if you put a back into the IOS product, then within a month every hacker on the planet will have access to that
backdoor. The Chinese will have access. The Russians will have access. And none of us that have iPhones will be safe. Sure, the FBI will be able
to listen to us and monitor us, but then so will everyone else in the world. This is what they're missing. Their saying that we're only going
to use it on that one phone. That's insane. We know that's not true. If that was it, that they would just say, "Well, why don't we have somebody
decrypt it?" Like I'm offering. Give us the phone, we will decrypt it. We don't put a backdoor in it. We simply take it apart look at it. Tell
you what's in it and give it back.
NEWTON: But John, what we're confused about is if you're saying you can do that, why hasn't the FBI or quite frankly, Apple tried to do that without
creating the backdoor?
MCAFEE: (via telephone) Ok, the FBI has not done it, because I do not believe within the U.S. government there exists the talent to do so. Think
about it. Most of the great hackers -- and hacking by the way is an innate talent. It's much like -- you can go to the Julliard School of Music and
they're not going to create a Mozart or a Bach. These people are born with innate talents. Just like certain mathematicians can multiply 2, 1,000
digit numbers in their head instantly. It is an innate talent that people are born with. Hackers are the same thing. These people are not going to
work for the government. They're usually isolated. They're asocial. Many of them have tattoos on their face, and they want to smoke weed while they
work. The federal government is not going these people.
[16:45:00] So a federal government is 20 years behind the Chinese and behind the Russians, because they do not have the talent within the
government to do this. And yet I know hundreds of people who can decrypt that phone for them. So I think the government is running an end run here.
A ploy in order to get a facility to spy on everybody with an iPhone. Why else would they want this?
NEWTON: OK, but I want to be clear on something. We need to be clear on something here. Why wouldn't Apple do it? You haven't answered that
question. Clearly they know these hackers and they know the hacking community. They know you.
MCAFEE: (via telephone) Yes. I have no idea. They have not. It's because the federal government had not asked them to do this. But what I'm
doing is forcing a hand here. Because then OK, you want Apple to put in a backdoor, because that's the way you want to access the data, because you
say the data is critical. Well, let's not worry. I can do it myself. I'll do it in three weeks. Give me the phone. There not going to accept
that. Because that's not what they want. They don't want what's in this phone. They want to know what's in every phone.
NEWTON: Have you contacted the FBI? Have you contacted the police in San Bernardino? Have you contacted the Justice Department?
MCAFEE: (via telephone) I have tweeted them all, but my article has gone viral. You know, 3 million people have read it. I guarantee the FBI has
read it. And if they do not know my phone number then there's something wrong with the FBI. So and I have (inaudible) them and said here I'm
available, either yes or no. Nobody responded to me.
NEWTON: And so John, I just need a quick answer to this. Have you done this already? On other phones.
MCAFEE: (via telephone) On other phones, many other phones of course it's a trivial thing to do. It's a trivial thing. Any good hacker -- when I
say trivial it does take time of course. But any great hacker can do it. I'm sorry that's just the reality of the world. There is no such thing
unfortunately as unbreakable encryption. It does not exist.
NEWTON: John, I'm going to have to leave it there, but I do invite you to come back on this program and let us know. We'll watch for your
information on your tweets and other things you write to see if the government does indeed take you up on your offer. Appreciate it.
Now Yahoo says its board is forming an independent committee to explore strategic options for its non-Alibaba business. That basically means what
you and I know what Yahoo to be. Earlier this month it announced plans to lay off 15 percent of its staff. I want to bring in Max Wolff now. He is
the Chief Economist at Manhattan Venture Partners. He's from New York.
You know, Yahoo remains for me and I think for a lot of people in the market and elsewhere a complete puzzle. In terms of trying to sell it,
what is the endgame there? Because then all you're left with is Alibaba. I know that this is going to return to shareholder value, but what would
this move really look like if it was succeeded?
MAX WOLFF, CHIEF ECONOMIST, MANHATTAN VENTURE PARTNERS: Yes, that's a great question. The Alibaba that most western and American user know and
the Alibaba that investor are excited about are two different products. So really something called Yahoo Japan is still very popular there. And
Alibaba the huge ecommerce giant of China, are what investor are excited about. In fact Yahoo's market cap right now about $28 billion is actually
give zero value that isn't Alibaba and Yahoo Japan. So investors want Alibaba and Yahoo Japan -- we tried that but it looks like the tax
authorities here would take a third of the value there is we tried to sell or if we say Yahoo try to sell it.
But Yahoo still is the sixth or seventh most visited site to lots of areas in the West, still have some value. What we're seeing now is a pressure
against Marissa Mayer who is supposed to turn the company around 3.5 years ago. To say look we can't the Asian assets that people are excited about,
so we'll sell the rest and we'll capture value that way. So she doesn't get into a nasty public fight with activist investors who are fed up with
waiting to get their money out of this particular opportunity.
NEWTON: Just quickly though. Will Yahoo disappear? Do you think this is really a crisis?
WOLFF: Yes, it's definitely a crisis of leadership. The company has been in trouble for a while. It won't disappear. It's way too popular. Lots
of people use it. It's the number one news site for lots of people around the world and in the U.S. It's not going anywhere, but it's not growing.
In fact it's shrinking, and that is the cardinal sin in tack.
NEWTON: All right, we thank you we'll obviously continue to follow that saga at Yahoo. Appreciate your insights there.
And we will be back with much more of QUEST MEANS BUSINESS in a moment. But first a highlight from "MAKE, CREATE, INNOVATE".
[16:50:00] (COMMERCIAL BREAK)
NEWTON: Recapping out breaking news this hour. Donald Tusk President of the European Council has tweeted that EU leaders have now reached with
Britain. David Cameron has just tweeted. That this deal will give special status in the EU. And that he will take it to his cabinet on Saturday.
TEXT: David Cameron, I have negotiated a deal to give the U.S. special status in the EU. I will be recommending it to the Cabinet tomorrow.
Press conference shortly.
NEWTON: Now some key contests are taking place this weekend in the United States Presidential race. South Carolina is set to vote in the Republican
primary, as Democrats caucus in Nevada. Now the results in South Carolina could have a huge impact on the Republican field.
Democrat Bernie Sanders and Republican Donald Trump certainly disagree on whether walls should be built to keep Mexicans out the United States. But
when it comes to the other aspects of their economic policy, the two are surprisingly very similar. They have very similar protectionist ideas.
Both can candidates are largely against free trade deals. Sanders and Trump both strongly oppose the TPP. They call for punitive tariffs against
countries that manipulate their currency, in particular China. Both have attacked the behavior of some big companies. Sanders wants to stop U.S.
corporations differing tax on profits of offshore subsidiaries. Trump want to penalize companies that outsource jobs.
Sanders came under fire this week from fellow democrats who say the economic benefits of his spending plans will not stack up with some of the
projections he's sited. Several economists who have served in advisory roles to the Democratic President said in a letter that, "No credible
economic research supports economic impacts of these magnitudes. Making such promises. undermines our reputation as the party of responsible
arithmetic." One of the signatory is Austin Goolsbee, He is currently a Professor of Economics at the University of Chicago, Booth School of
Business and he joins me now live.
My Goolsbee, you have been on this program many times and normally it is straight down the middle with you on economics. To me in terms of what
I've read, this comment from you and the others seems politicized. Why now? And why is this a firm economic argument, not a political one?
AUSTAN GOOLSBEE, PROFESSOR OF ECONOMICS, UNIVERSITY OF CHICAGO: Well, I almost think the opposite, frankly, and thanks for having me back it's fun
to you guys again. In this case the Sander's versus Clinton within the Democratic primary has played out a little bit on predicable lines, except
that it struck us that the Sanders approach began to sound a lot like the Republican candidates do about their tax plans. Where they say the tax
cuts will generate so much growth that they'll pay for themselves. This is not a critique of the plans. This is a critique of the numbers. It's a
plea that we use reality based numbers and report the actual cost of things.
NEWTON: But you know what I mean by it being politicized. Some people would say look, take his ideas and say how could we get halfway there? How
can we get three quarters of the way there? Are you saying the arithmetic says that you just have to through it all out? Principally, as you know,
free health care for everyone.
GOOLSBEE: Well, my only point is if you talk the healthcare example. It's fine to say I want to have single payer healthcare. It's not fine to say
people are going to pay $500 and get $5,000 free and there won't be any costs associated with doing it. And is essentially what the numbers were
saying. Or that they would generate 9.7 percent real GDP growth in the year 2016 from his tax stimulus plan. The numbers were just so out of line
that our plea is just lets dial it back.
[16:55:00] Not assume crazy things and let's have a legitimate debate about each person's program. Plus, say what they actually cost. Give real
estimates and let the American people choose.
NEWTON: Right. So you're afraid that he wasn't -- and the professors that he has inside. The comments weren't coming clean with all the numbers. I
want to ask you something though. With so many Americans having tough times because they haven't seen their wages rise. He makes some very
compelling arguments. Do you worry sometimes that, you know, voters really want to vote with their hearts this time, not their head. And they're
saying look we're a rich country. We'll work hard, these are the social values we want to see in this campaign. This is what we want to make
happen.
GOOLSBEE: I think you're right. Look, I think you're right and you clearly if you look at the Republican side or the Democrat side there is a
populist dissatisfaction with wages, with globalization, with a bunch of things that's manifesting in different ways in the two parties. But
there's going to be a close race between Hillary Clinton and Bernie Sanders. I'm not disputing that. It's just one of the things we said in
the letter. The CEA chairs are not especially partisan. People is not especially partisan job. All of us who signed it are Democrats and we said
the more you play into this promising of things that are really outside the pail of possibility. The more disillusioned you make people. The more the
people say, "Wait a minute, you promised me 9.7 percent GDP growth. You promised me in this case wages that would rise up to $80,000 a person."
And then when those don't come through they say, "Politicians always lie." And you know you can never believe any numbers, therefore say whatever you
want.
NEWTON: I totally understand what you're saying. We'll see if the American people continue to follow this as they are on the economic side of
things. And please come back soon there is much more to talk about in this election.
GOOLSBEE: You bet.
NEWTON: And we will be right back with more QUEST MEANS BUSINESS in just a moment.
(COMMERCIAL BREAK)
NEWTON: And that's Quest Means Business. We turn now to the headlines we're following this hour.
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