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Quest Means Business
President Trump Says U.S. Isn't Ready To Make A Deal With China And He Suggest Trade Talks Next Month May Not Happen; Hong Kong's Leader Warns Hong Kong Protests Could Have A Greater Economic Impact Than The SARS Outbreak; U.K. Economy Goes Into Reverse And That Is Stoking Fears Of A Brexit Recession; El Paso Shooting Suspect Says He was Targeting Mexicans; President Trump Says there is Tremendous Support in Congress for Gun Background Checks; India Relaxes Lockdown in Kashmir for Friday Prayers. Aired 3-4p ET
Aired August 09, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:00]
ISA SOARES, CNN INTERNATIONAL HOST: A turbulent week on the market is coming to a close. The Dow has bounced well off the lows of the day, and
here is what investors are watching today.
President Trump says U.S. isn't ready to make a deal with China and he suggest trade talks next month may not happen. The U.K. economy goes into
reverse and that is stoking fears of a Brexit recession. And Walmart responds after a massacre in its store, not by banning guns, but by pulling
violent video game displays. It is Friday. It is August the 9th. I am Isa Soares, in for Richard Quest, and I, too mean business.
A very good evening to you. Happy Friday. Tonight, a roller coaster week for Wall Street ends with one final drop. I am going to show you what the
big board is doing. The Dow, two tenths of one percent, stocks really set to close low once again after comments from Donald Trump broiled the
markets. We will show you those comments then play out those comments in just a bit.
The U.S. President dampening hopes for a trade deal with China, now that news hit trade sensitive stocks the hardest. Tech stocks like Apple, as
well as Amazon, as well as manufacturers like Caterpillar -- all down. Let me show the markets. Dow, how it is down. There is the S&P and the NASDAQ
-- all retreating, all off their session lows in terms of stocks.
And here is the moment Wall Street turned low. I want you to listen to this. President Trump talking tough several hours ago, in fact, early this
morning. He told reporters the U.S. isn't ready for a trade deal with China signaling next month's trade talks may not even happen. Take a
listen.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: What happened and what is happening with China now? We have an open dialogue. We'll see whether
or not we keep our meeting in September. If we do, that's fine. If we don't, that's fine. But it's time that somebody does what we're doing.
(END VIDEO CLIP)
SOARES: Joining me now from Cambridge, Massachusetts is Robert Lawrence, Professor of International Trade investment at Harvard University. Robert,
thank you so much for joining us here on QUEST MEANS BUSINESS. You heard there what -- from President Trump once again, saying the U.S. is not ready
to make a deal with China. This, of course, as China has lowered the yuan once again today. Where do you see this tit-for-tat going? Where is the
next step?
ROBERT LAWRENCE, PROFESSOR OF INTERNATIONAL TRADE INVESTMENT, HARVARD UNIVERSITY: Well, I'm not sure on the next step, because this is quite an
unpredictable exchange. But I am quite pessimistic that we're going to see a resolution in the short run.
I don't think it's at all clear exactly what the United States actually wants from these negotiations. And so I think it's very difficult for the
Chinese to give the United States an agreement.
SOARES: With that in mind then in that case, what is the biggest fear? What's your biggest fear here?
LAWRENCE: Well, my, my biggest fear is that we are seeing disruption now spreading, and we're seeing it affect financial markets, and ultimately the
real economy.
So we're seeing -- and then for the long run, my biggest fear is a kind of a process of de-globalization.
SOARES: And Robert, we're just showing the Dow Jones, and how it is doing right now, almost down two tenths of a percent. It's been really listening
very closely -- the traders have -- to what President Trump has been saying when it comes to China.
We've seen swathes of the tariffs and branding China currency manipulator. Do you think that President Trump is running out of options here? His
arsenal is running thin? Where does he go next?
LAWRENCE: Well, I don't know if he has to come up with something new all the time. He seems to be able to so far. But I think resolving this is,
is a much greater challenge than coming up with some new sort of form of pressure.
He seems to be trying everything he can think of. But ultimately, I don't think this is going to be very effective until he is clear exactly what we
want.
SOARES: How damaging in that case then Robert is this for companies like Huawei that perhaps are being used like as a pawn in this trade war?
LAWRENCE: Well, I think very, very damaging in the short run. I also think it is damaging to the many companies say whose supply Huawei because
what we're doing is undermining a market for American products. And in the long run, they're going to find, they're going to create their
alternatives.
[15:05:14] LAWRENCE: So I think we're -- the same is true for farmers. We're undermining markets for American farmers in China. So, I think in
the long run, this is going to be damaging, both to the Chinese, but also to American companies.
SOARES: Very quickly, Robert, from a political point of view, do you think that this impasse benefits President Trump as we look ahead to elections in
2020?
LAWRENCE: Well, I think, unfortunately, it could. You see, if he were to come to an agreement and then it turns out that our trade deficit with
China actually grew, he could then be vulnerable to an attack from the Democrats.
Whereas at the moment, it's good for him because he looks really tough. But at the same time, he is also causing a lot of economic disruption. And
as long as the U.S. economy remains strong, that's something he can live with.
But if we see a weakening in the U.S. economy, and indeed if the markets continue to be as unsettled as they are, I think that could be damaging to
him.
SOARES: Very important perspective there. Robert Lawrence, I thank you very much for taking the time to speak to us here on QUEST MEANS BUSINESS.
Have a wonderful weekend. Thank you.
I want to turn now to Hong Kong because we've seen three days of sit-ins kicked off at the airport there marking the 10th week of protests. Hong
Kong's leader warns the protests could have a greater economic impact than the SARS outbreak, if you remember back in 2003. Take a listen.
(BEGIN VIDEO CLIP)
CARRIE LAM, CHIEF EXECUTIVE HONG KONG (through translator): The downturn is so rapid that some people have described its arrival as a tsunami.
Compared to the economic downturn that we dealt with caused by the SARS and the economic storm that came afterwards, I am afraid the situation this
time is harsher.
(END VIDEO CLIP)
SOARES: Well despite this, protesters just don't seem to be deterred. Our Ben Wedeman has this report from the airport.
(BEGIN VIDEOTAPE)
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: We're in Hong Kong International Airport where much of Friday you had these demonstrators in
the arrival hall. There are now thousands of people. Here it is 10:30 at night, Hong Kong time. But what you have is people have been coming here
writing little pieces of paper to express their support for the protest movement in the territory.
In addition, you have people further on, they are waiting to chant as people come out of the arrival hall itself. And they will chant "Free Hong
Kong" and whatnot, very free, Hong Kong, various other slogans.
This is not a protest targeted at the airport or intended in any way to interfere with the airport's operations. However, we have learned that
China is very unhappy with the situation in Hong Kong and the Civil Aviation Authority in China has put out a notice that they believe that
some of the crew members of Cathay Pacific, the flag carrier of Hong Kong have been participating in these protests.
And therefore as of midnight, Friday, Hong Kong time, they're expecting Cathay Pacific, to stop sending those crew members who participated in the
protests and going forward, the Chinese authorities expect Cathay Pacific to provide the names of all the crew members to be approved by the Chinese
authorities before they fly to Mainland China.
This protest here at the airport is expected to continue from Friday into Saturday and Sunday. But there will also be protests in the territory
itself. Some of them have been approved by the police, but many others have not received permits.
Nonetheless, they will probably go ahead. This is the 10th consecutive weekend of mass protests in Hong Kong. Those protests beginning exactly
two months ago, on the ninth of June, and there is no sign that they're about to end.
I'm Ben Wedeman, CNN reporting from Hong Kong International Airport.
(END VIDEOTAPE)
SOARES: Yes, the British economy has weathered three years of Brexit uncertainty relatively unscathed. Today, alarm bells are finally ringing.
The U.K. is now one step away from recession after second quarter GDP showed economic activity shrinking for the first time in almost seven
years.
Manufacturing was the biggest strike. The production sector shrunk by 1.4 percent. The contraction comes after strong growth, if you remember in the
first quarter. That's when businesses basically stockpiled before the previous Brexit deadline.
[15:10:08] SOARES: The pound failed sharply on the news hitting its lowest point against the dollar since 2019. While in a statement, the U.K.
Treasury said it is determined to provide certainty to individuals and businesses on Brexit. The Institution of Directors says larger firms are
better placed to survive.
(BEGIN VIDEO CLIP)
TEJ PARIKH, CHIEF ECONOMIST, INSTITUTE OF DIRECTORS: Some of them might have the wiggle room to make some investments, even to make contingency
plans for Brexit. The bigger challenge I suppose are for those smaller enterprises, who certainly have very little space to invest right now, but
are also suffering from elevated costs.
And therefore, it's a challenge to really kind of assist them to get ready for whatever type of Brexit that happens on October 31st.
(END VIDEO CLIP)
SOARES: Bianca Nobilo joins me for more. Bianca, what is clear, sticking with the numbers, is the lack of clarity when it comes to Brexit, a lack of
uncertainty is beginning to vibrate when it comes to the economy. So what is the government saying or Boris Johnson saying or the Treasury Secretary?
What are they saying relating to these numbers?
BIANCA NOBILO, CNN CORRESPONDENT: Well, the lack of clarity with Brexit, as we both know is nothing new, but it is getting more pronounced.
Even today, we had this exchange of letters. We have Boris Johnson, underlining the preparations for a no deal Brexit were his top priority in
a letter to the Civil Service essentially.
Then Jeremy Corbyn, the leader of the opposition also wrote the Civil Service, asking essentially for it to be precluded. That Boris Johnson
could allow a no deal Brexit to go through in a period of time where a general election had been called. All of this is being discussed because
Boris Johnson only has this wafer thin working majority of one.
SOARES: One.
NOBILO: But then in actual fact, he has got a working majority one, but actually, there are rebels within the Conservative Party that offset that,
so it's less than one. So the fact that the leader of the opposition and the Prime Minister are saying diametrically opposed things when there could
be an election in a couple of months' time and no one knows how that would turn out just underscores exactly why businesses have these justifiable
concerns.
SOARES: Absolutely, they are nervous. There is no clear plan. There's no strategy and they worry about what -- they're worried about a no deal
Brexit.
Talk to us about what the opposition, not just Jeremy Corbyn from Labour, but also the Liberal Democrats. Are they getting together? Are they
creating a plan to try and go against Boris Johnson at all?
NOBILO: We saw this happen effectively at the Brecon by election, which was held about a week ago, and I think -- and the Liberal Democrats won
that seat. They've had something of a resurgence because they've taken an unambiguous position when it came to Brexit. And that's what people have
been craving, whether its economic manifestations of the uncertainty or political ones, people want a party that knows where it stands on this.
SOARES: Unlike -- unlike Labour.
NOBILO: Exactly. Well, Labor has taken this as policy of not wanting to isolate its leave voters in key constituencies, but then also wanting to
challenge the government policy and suggest that they could potentially support a second referendum because that's what their membership wanted.
And then the Conservative Party under Theresa May, it was never entirely clear where she was going to go. And that's part of the reason that the
uncertainty is now so pronounced because under Theresa May, even though the government had a policy, they weren't really believe that Theresa May was
going to affect a no deal Brexit.
Boris Johnson is an unknown quantity in that respect. There are some who know him well that say, "Oh, he wouldn't actually do it if it came down to
it." But then there are others who say, "Yes, he will." And that's what all of his rhetoric has underlined since he became Prime Minister.
But what is sure, Isa, is that Theresa May, in some of her last days of being Prime Minister continued to warn that those who wanted a no deal and
those who wanted to remain in the European Union that were both voting against her deal that one of them was going to be wrong.
So even though we're in this position of uncertainty now, there will be a reckoning, one of these things is going to happen. Either there will be a
no deal or there's going to be an extension, which leads to some form of clarity on potentially a second referendum.
SOARES: I would have thought as we get closer to that deadline of October 31st, that there will be -- we'd have more clarity, but in fact, it's quite
the opposite, isn't it? Bianca Nobilo, thank you very much. Have a wonderful weekend.
Now the U.K.'s GDP reports sent the FTSE falling closing with a mild loss. Have a look at European stocks, as you can see, they are all closing lower.
Xetra DAX down one and a quarter of a percent, but look at the FTSE MIB, down almost two and a half percent.
The Deputy Prime Minister Matteo Salvini called for fresh elections, and we will keep on top of the FTSE MIB for you and a story out of Italy.
Now, through a financial crisis, boom times; and now with the economy once again, one man has now ruled Russia for two decades. Vladimir Putin's
enemy number one, Bill Browder is here on the show after a very short break and Goldman Sachs prepares for fight as Malaysia charges 17 of its current
as well as former employees in the 1MDB scandal. We will bring you both of those stories after a very short break. You are watching QUEST MEANS
BUSINESS.
(COMMERCIAL BREAK)
[15:17:43] CHATTERLEY: On this day in 1999, Vladimir Putin was handed power in Russia amid a financial crash. And now 20 years later, he has
never released his grip.
The Russian President's rise was fueled by a boom in oil prices. It was a sudden influx of cash into a country traumatized by the collapse of the
Soviet Union and a painful transition to a market economy.
Two decades later, the winds have changed and the economy is sputtering once again. Mr. Putin's hold is beginning to show cracks. Fred Pleitgen
has our report from Moscow.
(BEGIN VIDEOTAPE)
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): A final goodbye from the embattled and fatigued Boris Yeltsin. His
successor, Vladimir Putin, designated by Yeltsin on August 9, 1999 immediately laid out his ambitious plans.
(BEGIN VIDEO CLIP)
VLADIMIR PUTIN, PRESIDENT OF RUSSIA (through translator): I've always said and will continue to say that the Russian state must be strong.
(END VIDEO CLIP)
PLEITGEN (voice over): But Putin's presidency got off to a rocky start. He was heavily criticized for his handling of the sinking of the Kursk
nuclear submarine in 2000, which killed all those on board. Putin didn't immediately return from his holiday to manage the crisis.
He escalated the brutal war in Chechnya, eventually, crushing the breakaway Republic's rebellion at an immense human and material cost. And Putin
cracked down on terrorism.
(BEGIN VIDEO CLIP)
PUTIN (through translator): We'll whack them in the outcomes.
(END VIDEO CLIP)
PLEITGEN (voice over): More than 330 hostages were killed when Moscow Special Forces raided a school taken hostage by extremists in Beslan,
southern Russia in 2004.
Meanwhile, Russia's economy and overall stability started improving. Thanks in part to high international oil prices boosting the President's
popularity.
After finishing two terms, Putin had reached the limit under Russia's Constitution. His solution, he swapped jobs with his Prime Minister Dmitry
Medvedev for four years.
Medvedev then changed the Constitution, extending the terms from four years to six before Putin's return to the presidency. Vladimir Putin was re-
elected to his third term as President in 2012.
But not all Russians were happy. Massive protests engulfed the streets of Moscow. Russian authorities crushing the opposition movement despite
international condemnation.
[15:20:11] PLEITGEN (voice over): Vladimir Putin's second stint as President has been defined by confrontation with the West. In 2014, after
an uprising unseated the pro-Russian leader of Ukraine, the Kremlin invaded Crimea, later annexing the peninsula.
Russia is also accused of fueling and aiding the uprising in eastern Ukraine which has led to thousands of deaths. And the downing of a
commercial airliner killing everyone onboard.
International investigators blame a missile fired from Russian military equipment for the tragedy, the Kremlin has remained defiant.
(BEGIN VIDEO CLIP)
PUTIN (through translator): We think there is no proof. Everything that was presented shows nothing. We have our own version. But unfortunately,
nobody wants to listen to us.
(BEGIN VIDEO CLIP)
PLEITGEN (voice over): Russian forces are supporting Syrian President Bashar al-Assad, against the rebellion in the Middle Eastern nation.
Western countries saying Russia's heavy bombardment and frequent targeting of civilian areas amount to war crimes.
And Putin's Russia is accused of directly meddling in Western nations affairs. Including a broad effort aimed at swaying the U.S. presidential
election in 2016 in favor of now-President Donald Trump.
Putin denying he meddled, but acknowledging he wanted Donald Trump to win.
(BEGIN VIDEO CLIP)
PUTIN (through translator): Because he was talking about normalizing U.S.- Russia relations.
(END VIDEO CLIP)
PLEITGEN (voice over): But normalizing relations seems out of the question after Britain accused Russia of using chemical weapons to poison former
double agent Sergei Skripal and his daughter in 2018. Russia once again dismissing the evidence.
Twenty years after taking power, Vladimir Putin maintains a strong grip on the presidency having a largely marginalized Russia's opposition. But
international sanctions and isolation along with a weak economy has sent his popularity into a nosedive, as some Russians have grown weary of their
long-standing leader.
Fred Pleitgen, CNN, Moscow.
(END VIDEOTAPE)
SOARES: Now, Vladimir Putin kicked my next guest out of Russia for exposing corruption. Bill Browder was once dubbed the Kremlin's enemy
number one, the CEO of Hermitage Capital Management. He helped push for the Magnitsky Act to sanction Russian officials over human rights abuses.
And Bill joins me now.
Bill, thanks very much for being on the show. Always great to have you here on QUEST MEANS BUSINESS. As viewers would have seen that report there
from our Fred Pleitgen highlighting 20 years of Putin as President, it's pretty significant. But before we talk about how he has been able to do
it, which is probably a bit more obvious. I want to know from you really what kind of President he was when he came into power. Give us a bit of
perspective there.
BILL BROWDER, CEO, HERMITAGE CAPITAL MANAGEMENT: Well, he has evolved in a major way from his first day to where he is now. He was a very insecure
President, I would say, when he first was elected, because he didn't have all the trappings of power. He didn't know there were oligarchs who had
stolen a lot of the power from him.
And so I would say in the first couple of years, he behaved, as one might expect a technocratic president to behave. He was cutting taxes. He was
normalizing different laws. He was firing corrupt officials. And for a brief period of time, it looked like maybe Russia was going to become a
normal country.
But there's an expression that absolute power corrupts absolutely. And as Putin started to gain power, he started to enjoy his power. And he started
to enjoy the money that went with his power. And from that, we ended up in a situation which is looking far more terrible today than ever.
SOARES: Bill, did you ever expect Putin to remain in power for 20 years? Is this something that doesn't surprise you at all? That probably even
more in the next few years, do we expect him to be in power for longer?
BROWDER: Well, so the issue is this -- that Putin is a kleptocrats. So he is a person who has amassed a large amount of money. I would estimate he
is worth $200 billion, and that money that he has is -- the only way that he can keep that money is by staying in power, and the only way he can stay
out of jail is to stay in power.
And I would I would even argue the only way you can stay alive is to stay in power, and so there is no -- there is never going to be a Putin
Presidential Library that he can retire to in a dignified way. He is going to be there no matter what the Russian Constitution says, as long as he's
physically alive and able to be there.
SOARES: Bill, I want to play a soundbite because in May 5th in fact of this year, Richard Quest spoke to Mikhail Khodorkovsky who was Russia's
richest man until Putin stripped him of oil fortune, of course, and threw him into prison. He now lives in exile. And he says that anyone who
succeeds Putin will also become an autocrat. Take a listen to this.
(BEGIN VIDEO CLIP)
MIKHAIL KHODORKOVSKY, FOUNDER, OPEN RUSSIA (through translator): I believe most of all, that Russia is a European country for which democracy is just
as suitable as for any other European country. My greatest fear is that our historical faith in a good czar, will force us to put somebody in
Putin's place, to put a new Putin in his place.
And we'll get into yet another spiral of the same old same old. I really hope that Russian society has gotten mature enough to abandon autocracy.
(END VIDEO CLIP)
SOARES: Has the Russian society, Bill, gotten old enough to ignore tenets back on autocrats?
BROWDER: Well, I think it really depends on a lot of different things. So what you have to understand is, whoever is in charge of Russia is in charge
of an enormously important amount of money. And there's a lot of people who financially benefit from who is in charge of Russia.
And so there's going to be a very, very strong desire by the people who are benefiting financially to have a dictator in place who cooperates with
them. That doesn't mean that it's going to happen though, because if you watch what's going on in Russia today, and there's demonstrations now,
every weekend, Putin's popularity has plummeted. People are very angry. And really anything that happened.
It's like in in Tunisia, when the fruit seller set himself on fire, and that led to the Arab Spring. It all depends on how power changes in
Russia, it could be the corrupt way whereas Mikhail Khodorkovsky fears, you end up with another autocrat or it is possible that you could end up with a
revolution and you end up with optimistic and aspirational people that want to have a democracy. It's uncertain, although I think most of us fear the
worst, not the best.
SOARES: And interesting, you're talking about really looking at his polling data, looking at his approval rating, we're talking about -- it is
quite low at the moment, but in fact, it has never dipped below 60 percent, believe it or not since 1999. So very quickly, how has he been able to
achieve this, Bill?
BROWDER: Well, I would caution anybody looking at this polling data, in fact, the polling data did or I should say his approval ratings did dip
well below that. And then he replaced the people who were doing the polling, and all of a sudden they jumped back up again.
Imagine that you're living in Russia, and the FSB, which is the successor organization of the KGB is listening in on everything, and some stranger
calls you up and said, "Do you support Vladimir Putin?" You're not going to say no. And so you end up in a situation where all these numbers really
mean nothing.
And the way that Russia would work is that -- I can guarantee you that at the moment he was out of power, should he ever be overthrown, his approval
ratings will be one percent the next day. Everybody is just sort of saying "yes, yes, yes" to the leader, because they're all afraid right now.
SOARES: Such important context. Bill Browder there. Thank you very much for taking the time to speak to us here on QUEST MEANS BUSINESS.
BROWDER: Thank you.
SOARES: Now we want to change gears and look at Uber because an Uber XL loss is now arriving. Investors did not like what they heard in Thursday's
Uber earnings call. We will have much more after a very short break.
(COMMERCIAL BREAK)
[15:30:00]
SOARES: Hello, I'm Isa Soares, and there's more QUEST MEANS BUSINESS in a moment. When your Uber XL loss is arriving now, but CEO says it's a one-
time event and pulling the plug on extremist content. The CEO who cut off 8chan after last weekend's gun massacre joins me live. But before that,
the headlines for you this hour.
The man who authorities say killed 22 people in the shooting at an El Paso Wal-Mart last weekend told police that his targets were, quote, "Mexicans".
That is according to an arrest affidavit obtained by CNN. The 21-year-old suspect told the detective, "I am the shooter."
U.S. President Donald Trump says there is tremendous support in Congress for gun background checks. But the president left for fundraisers in New
York and Summer vacation at his New Jersey Golf Resort after speaking to reporters outside the White House.
And Senate Majority leader Mitch McConnell doesn't appear willing to pull lawmakers back from their Summer recess. Restrictions imposed on India-
controlled Kashmir were eased to allow people to attend Friday prayers in the Muslim-majority area. But phone and internet service have not been
restored and tensions remain high. Pakistani protesters gathered after Friday prayers to protest India's move to assert more control in Kashmir.
Now, U.S. investment giant Goldman Sachs says it will vigorously defend itself against criminal charges after 17 of its current as well as former
employees were accused in the 1MDB scandal. Now, among those charged were Goldman's top international banker Richard Gnodde. Authorities claim the
bankers are connected to a plot to steal $4.5 billion from a development fund.
The U.S. Justice Department claims the monies were used to fund condos, yacht and even a Hollywood movie. The scandal has engulfed Malaysia's
former Prime Minister Najib Razak, his trial is ongoing and he denies the charges. Matt Egan is in New York with more. And Matt, this is a rather
complex story, which I probably would guess is going to drag on. What is the latest you're hearing though?
MATT EGAN, CNN BUSINESS SENIOR WRITER: So, Isa, it's clear that this scandal continues to cast a shadow over one of the most powerful banks in
the world. So today, we learned that 17 current and former Goldman Sachs employees have been charged by authorities in Malaysia. As you mentioned,
one of them includes Richard Gnodde; the CEO of Goldman Sachs International.
Now, all of these individuals were directors at Goldman Sachs subsidiaries during the time that the investment bank arranged three large bond
offerings for Malaysia's sovereign wealth fund which is known as 1MDB. Now, as you mentioned, the Justice Department has previously alleged that
$4.5 billion was stolen by Malaysian officials out of this sovereign wealth fund and the money was then funneled into everything from the "Wolf of Wall
Street" movie to yachts and condos and hotels.
[15:35:00] Now, Malaysian authorities have pointed the finger at Goldman Sachs, they have alleged that the investment bank misled investors on the
bond offering and also fraudulently diverted $2.7 billion of the proceeds - - now, they're pointing a finger at these 17 directors, and they're saying that they exercise or should have exercised decision-making authority over
these transactions.
Now, we do need to caution that these are just charges at this point. Goldman Sachs has put out a statement and they say that they think that
these charges, they believe the charges are misdirected and they will vigorously defend themselves against it.
But clearly, Isa, all this suggests that the scandal is not going away any time soon.
SOARES: Very much, especially when they say they're going to vigorously defend itself. Matt Egan, thank you very much, appreciate it. Uber shares
are falling after it announced its biggest quarterly loss on Thursday. The largest cost was related to its IPO, a once in a life-time hit according to
CEO Dara Khosrowshahi.
Uber's stock was down as much as 8 percent today as you can see there, now, it's down just over 6 percent. Clare Sebastian joins me now. So, Clare,
talk us through this. Why are investors so disappointed? I mean, was it all really bleak?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Isa, the context of this is that when we got Lyft's earning value yesterday, everyone got very
excited about Uber and the stock price went up 8 percent because Lyft said price pressure in the industry is easing, suggesting that the two aren't
going to have to keep discounting so heavily to win customers.
Now, then we got the Uber earnings report, and it was on the surface, a pretty gloomy one. They did lose more than $5 billion in the space of just
3 months, but as you say, most of that was related to costs -- one-time costs associated with the IPO, but even if you strip that out, they still
lost $1.3 billion.
That is about 50 percent more than they lost in the same period last year. And if you're going to make a loss that big, you want your revenue growth
to be as high as you can, and it really wasn't, it was about 14 percent, which wasn't Wall Street, it was a bit less than Wall Street was expecting,
but if you ask analysts who cover the stock, they are willing to strip out these one-time costs and to look even closer at the results and they see
that there is some path to growth going forward.
Revenue, if you strip out the one-time costs, was up 26 percent, Uber Eats, which of course is a separate branch of the business --
SOARES: Yes --
SEBASTIAN: Is growing much faster at 72 percent. Interestingly, about 40 percent of new customers for Uber Eats aren't already using the ride-
hailing platform, so it is helping to bring new customers in. So, look, it is a very bit of a bleak picture, Uber has still has to prove that it has a
path to profitability, but analysts are pretty much holding fast in terms of their price-tag as in it, it's some faith that it can keep growing.
SOARES: But with that $1.3 billion loss, you're talking about, Clare, this path to profitability, is that -- does that raise significant questions
from analysts you've been speaking to when it comes to Uber here?
SEBASTIAN: I think there are significant questions going forward, Isa. Uber is having to spend a lot of money, not just to maintain its market
position in terms of ride-hailing or in the U.S., it has about 70 percent of the market, but Uber Eats, the competition is really intense in that
actually, because like DoorDash, Grubhub, all of this well -- very well- funded competitors.
So, it is going to have to keep spending. The keyword was efficiency as well. Uber needs to start to try to rein in costs as it goes forward. It
just cut about 400 jobs and its marketing divisions or analysts are really watching that going forward. But you know, unlike Lyft, business is a
multi-dimensional company, it's international, they've got a lot of growth areas.
So, I think a lot of -- a lot of investors and a lot of analysts are thinking, well, we really do need to stay in this market leader and watch
where it goes. But don't be fooled, their earnings reports is going forward, this was only their second one since going public, will be heavily
scrutinized for those efficiencies.
SOARES: Yes, no doubt, Clare Sebastian there for us in New York, really good to see you, Clare. Now tech companies are gathered at the White House
today for a summit on extremism. Some of them might not like the new executive order being drafted there. We'll tell you all about it after a
short break.
[15:40:00] (COMMERCIAL BREAK)
SOARES: Welcome back to QUEST MEANS BUSINESS. Now, recon from the shootings in El Paso and Dayton, some tech leaders trying to take action to
prevent hate speech on their platforms. Tucows said early this week it will no longer register a domain for online forum 8chan. That's where
suspects and at least three shootings this year posted hate-filled manifestos.
Tucows CEO Elliot Noss joins me now from Toronto. Elliot, thank you so much for being on the show, appreciate it. I am --
ELLIOT NOSS, CHIEF EXECUTIVE OFFICER, TUCOWS: Thank you for welcoming me - -
SOARES: Was just reading up, going back and reading up a bit about your company. And correct me if I'm wrong, but your company initially resisted,
disavowing 8chan following the brutal mass shooting in El Paso, Texas, on Saturday. Over the weekend though, the manager at -- of public policy, I
should say of your company told the "New York Times" that "we have no immediate plans other than to keep discussing internally."
By Monday though, your company did an about-face. Talk to us about what caused that about-face.
NOSS: Sure, I think I should start by clearing the record on both what happened before and after. This shooting took place early in the weekend.
The first we heard about the connection of this specific shooting to 8chan was when the "New York Times" contacted our head of public policy.
We did not have time to process this and make a determination. The quote was not quite accurate or slightly out of context. By Sunday evening, the
domain name had transferred off our platform to another registrar, one who is well known for being a strong advocate of free speech.
I suspect -- we suspect that that's because they were worried that we might be more likely to take action than the other.
SOARES: So, I suspect with what you're saying, Elliot, that given that this was the third act of public violence linked to 8chan this year that if
you had known, you would have reacted much quicker.
NOSS: You know, it's -- I think that the answer to that is, it's possible. But I want to be clear that for us, the issue is not an issue about speech,
free speech, protection of speech. I think we all can agree that so much of 8chan's content is objectionable. It's very important though that we be
thoughtful about our role as domain name registrar and what -- and why we are entitled to and in what situations we will take down content.
That is a very big step for a company in our place in the internet eco- system.
SOARES: You've taken me wonderfully to really the point I wanted to go to, which you talked --
NOSS: Right --
SOARES: On your website, you say, the company actively participates in internet governance and in shaping internet policy to ensure that the focus
remains on making the internet better and more effective for all users. So, on your point there earlier, how far is too far? Where would you say
you draw the line?
[15:45:00] NOSS: Well, it's less about where we draw the line and more about where we're the proper party to act. Let me give you a simple
example, and then let me take you into deeper waters and darker waters. You know, we are actively engaged, for instance, at a security level with
the security offices of banks all over the world.
When a phishing site goes up, we are working with them usually within minutes and those phishing sites come down. Now, they stay up often, as
little as 20 minutes and that's long enough for them to still to do damage. That's a place where the domain name itself as opposed to the content on
the website is what's relevant, and that's where we have a clearly appropriate role. When I say about going into --
SOARES: Do you think -- go ahead, go ahead, Elliot, pardon me.
NOSS: Well, you know, what I want to be clear about is when it comes to content, it's much more complicated. So, the problem at its -- at it root
is that this is a global resource, the internet, and there is no global content body that somebody in our situation can rely on. Nation states are
simply, not only unable to, but unwilling to really tackle these problems.
That leaves companies like us alone, and then you end up as a platform in a damned if you do, damned if you don't place.
SOARES: Elliot Noss, fascinating, thank you so much for taking the time to speak to us here, I could have spoken to you for much longer, but we are
running out of time, I appreciate it, have a good night.
NOSS: Thank you very much.
SOARES: Now the Trump administration's preparing an executive order that would give the government more power to fight social media censorship. The
draft is still in early stages as news of it comes as the White House hosts a summit on online extremism. Brian Fung joins me now from Washington.
And Brian, talk me through -- talk us through this draft executive order and really what changes it could bring to many of the social media
companies. What content are we talking about here?
BRIAN FUNG, CNN TECHNOLOGY REPORTER: Well, according to a summary of the draft ordered that we received, the White House is considering asking the
Federal Communications Commission to draw up new rules that could give it some additional power over how companies like Facebook and Twitter and
Instagram moderate or curate the content that appears on their platforms.
Now, at the same time, the draft order would, according to this summary ask the Federal Trade Commission to take those new policies into account when
it goes after companies for allegedly violating, you know, anti-consumer or anti-trust laws. Now, when I talk to legal experts who've looked at this
issue, they say, you know, there are a lot of questions that are raised here when it comes to these agency's missions and whether or not, in
practice, this proposal could actually ever work.
And at the same time, there're also potentially many First Amendment questions that are raised here, but if this proposal does get approved by
President Trump, it would represent a significant escalation in terms of his campaign against social media websites and the tech industry in
general.
SOARES: You know, we don't know if it will get approved like you said or whether it will even happen. But what have tech companies been saying? How
-- I'm guessing they would argue they should have brought freedom, let's say to handle content as they see fit. So, how have they been reacting to
this?
FUNG: Well, exactly. The current law that governs how social media companies can moderate their content generally gives tech companies broad
leeway to make decisions as they see fit. And, you know, potentially, this executive order could narrow the government's interpretation of what it
means to give these companies that sort of leeway.
And so, you know, it's no surprise that if you have a lot of tech industry officials saying, you know, this is -- this is kind of outrageous that, you
know, you would have the government intervening in what private businesses can and can't do on their own platforms. And in fact, as this comes, you
know, as the White House is holding a meeting with tech companies to talk about online extremism.
One tech industry official told me that, you know, it's frankly kind of inconsistent to see the White House trying to have it both ways, saying
that they will -- you know, they're complaining about tech companies not being aggressive in moderating issues such as online violent extremism, but
saying that tech companies are going too far in allegedly censoring conservative views.
SOARES: Brian Fung there, thank you very much, appreciate it.
FUNG: Thank you for having me --
SOARES: Wal-Mart's CEO promised a thoughtful as well as deliberate response after a mass shooting in one of its stores. The company is
banning displays of violent video games. My next guest says the U.S. has a gun problem, but not a video game problem. We'll bring that story next.
[15:50:00] (COMMERCIAL BREAK)
SOARES: After a gunman killed 22 people in one of its stores, Wal-Mart is responding not by banning guns but violent video game displays. It's not
the violent video games themselves, just displays temporarily. The company's CEO vowed to, quote, "a thoughtful and deliberate response
earlier this week."
Wal-Mart is no stranger to shootings. Eight injured at Wal-Mart in Pennsylvania after shooting checkout lines. Man accused of randomly
killing three people at Wal-Mart captured, seven-year-old killed in Texas Wal-Mart shooting, right? You sort of get the idea from a lot of these
headlines here behind me.
Christian Heyne is in Washington; he's the Vice President of Policy with the Brady campaign to prevent gun violence. He joins me now, Christian, I
appreciate you taking the time to speak to us here on QUEST MEANS BUSINESS. Let's -- I want to stick to --
CHRISTIAN HEYNE, VICE PRESIDENT OF POLICY WITH BRADY CAMPAIGN TO PREVENT GUN VIOLENCE: Thank you very much --
SOARES: Wal-Mart to start with. I find it difficult and I think a lot of people internationally find it very difficult to understand Wal-Mart's
decision. It's basically stopping displays of violent video games, but still selling the games, and critically the bigger problem, not the games,
the guns that's killing and the ammunition they're selling. Explain to our international audience why a company like Wal-Mart can't just -- can't --
why can't they just pull the plug on the ammunition and the guns they sell?
HEYNE: You know, you raised a really important point and an important question. The one thing that's extremely clear about the U.S. in general
is we share a lot of similarities with the international community. We have similar rates of mental illness, we have similar rates of violent
video games, we have similar rates of violent movies.
All of these things that we hear people talk about all the time --
SOARES: Yes --
HEYNE: But we have a unique gun violence problem in this country, and I think you've hit the nail on the head. The common denominator her is our
easy access to weapons.
SOARES: Yes, absolutely. So, when you listen to Wal-Mart saying they made a decision and I'm quoting here, "out of respect for the incidents over the
past week." Surely, you need more than just respect, you need change. So, what can consumers do?
HEYNE: Once again, it's a great question. And also, you know, Wal-Mart, there's a ton of things that Wal-Mart can do. I think to a certain degree,
Wal-Mart has good practices for how they sell weapons, but we do know that they sell an incredible amount of weapons in this country as well.
What we really need is decisive and clear action from Congress. We need our gun laws to match the practices of responsible gun dealers. Wal-Mart
may be going above and beyond the sort of threshold that is before them, but that threshold is so low, we know that we should be doing better. Wal-
Mart could have a great voice in that conversation by calling on Congress to do more and frankly, we think they should be.
[15:55:00] SOARES: A question on Wal-Mart. I will talk about Congress in just a bit and the politics, but --
HEYNE: Yes --
SOARES: If Wal-Mart stopped selling guns, do you think it will make any difference? Because surely, one stops, another one continues.
HEYNE: Look, we need gun dealers in general to be utilizing similar practices to what Wal-Mart is doing. We have a gun issue in this country
and the sheer volume at which, you know, box stores like Wal-Mart can sell guns. But we also should be lifting up the fact that they're going above
and beyond.
We know that a small portion of irresponsible gun dealers account for so many of the guns that are used in violent crimes in this country. Some of
the practices that Wal-Mart does are above and beyond, but frankly, we have more guns than we have people in this country, and we need to do a better
job to make sure that those guns are in the hands of people who have been properly screened, people who are not prohibitive persons and a host of
other things.
So, it's an important conversation and an important dialogue, but I also want to lift up that those practices that they are doing are something that
we really hope that a lot more dealers would do.
SOARES: On the politics, on Congress, what do you think Congress can do realistically, can and is willing to do?
HEYNE: Listen, we at Brady feel incredibly strongly that it's long past time that Congress come together to do what millions of Americans, what a
majority of Americans are desperate to see. It is incomprehensible to me that these leaders and these legislators are back home and not here in D.C.
dealing with this problem while we're having this national dialogue.
So often people say, it's too soon to be talking about gun violence in the wake of this shooting, it's too soon to have this conversation. I mean,
gosh, with the levels of violence that we just witnessed this weekend, and frankly, the levels of violence that we see every day in America, it is way
too late to have this conversation.
Mitch McConnell should immediately call the entire Senate to come back and they should vote on the bills that are sitting on their desks right now.
They have the solutions in front of them and we are really calling on them to come and do it and to do so in a way that these bills can pass.
SOARES: Christian Heyne, I appreciate your time in speaking to us on QUEST MEANS BUSINESS, our show will continue after a very short break. Do stay
right here.
(COMMERCIAL BREAK)
(BELL RINGING)
SOARES: Closing bell is ringing on Wall Street, "THE LEAD" with Jake Tapper starts now.
[16:00:00]
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