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Quest Means Business
House Gears Up for First Public Hearings This Week; Man Set on Fire Hours After Police Shoot Protester in Hong Kong; Hong Kong Stocks Suffer Worst Fall in Months of Protests. Aired 3-4p ET
Aired November 11, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:25]
PAULA NEWTON, CNN INTERNATIONAL HOST: Yes, I know, it's shocking to me, too. Here we are in the final hour of trading on Wall Street. And get
this, the Dow is trading at record highs, you know, just about. We can call it flat. But remember, it's a record. Those are the markets and
these are the reasons why.
Boeing soars to the top of the Dow on predictions that the 737 MAX will be back in use in January.
Hong Kong Stock markets suffer its worst drop in month after a pro- democracy protester is shot by police.
And Apple is accused of gender bias by its own founder. You're going to want to hear this as the new Apple Card appears to give men -- really -- a
higher credit limit than women.
Live from the world's financial capital New York City. It's Monday, November 11. I'm Paula Newton, in for Richard Quest and this is QUEST
MEANS BUSINESS.
And good evening. Tonight, Boeing makes a major comeback -- look at this - - the stock is jumping. The plane maker says it expects deliveries of its troubled 737 MAX jets to resume next month, however, remember this, the
F.A.A. must give its approval first. Boeing also says commercial service could restart in January.
Rene Marsh joins me now from Washington and has the latest on this really surprising news, at least for me, Rene. What confirmation do we have, if
any, that the F.A.A., never mind Boeing, but that the F.A.A. is any closer to approving any of this?
RENE MARSH, AVIATION AND GOVERNMENT REGULATION CORRESPONDENT: You know, the F.A.A. has been saying all along that they are not working on any
specific timeline. And what you saw Boeing lay out today was essentially a rough timeline, which many of us, we know if you've been following this
story, the timelines have shifted, from time to time sliding backwards.
But the big news from Boeing in this progress reports that they put out is that they still believe with all the twists and turns and delays that we've
seen throughout this process, they still believe that by the end of the year, they will get permission for this 737 MAX to fly again, and as you
said, airlines could be in Boeing's words, flying this plane by mid to late January.
I can tell you that the airlines are not as bullish as Boeing. Many airlines including Southwest Airlines, which is the U.S. carrier that has
the most of this aircraft in their fleet is saying that they're not even planning on flying this plane yet and putting it back on its schedule until
March.
So compare that to Boeing who is today saying, look, we believe that airlines can be flying this plane in January, clearly, their progress
report looking extremely aggressive.
All of that being said, to your question, how likely is it that the F.A.A. will be moving on this timeline? I can tell you this. Boeing's has to
complete five tasks before this plane can fly again.
So far, we know from this progress report, they have only completed one. So they still have four more to go. They've got to do this certification
flight. They still need to get airline pilots in the simulator to test out this new software. So they're not quite where they need to be just yet.
NEWTON: Yes. And just trying to remind everyone, of course, what the problems were, the significant and very serious problems were with the 737.
They had a slew of bad news and you've covered this so closely.
There was also this information that perhaps the F.A.A. wasn't watching the design and the approval of this plane as closely as it should be.
I mean, there's a lot on the line as well for the F.A.A. and that's why I'm kind of surprised by the bullish timeline that Boeing has given everyone.
MARSH: No, you're absolutely right. Look, the F.A.A. has no appetite to move quickly on this. Boeing may have the appetite to because obviously,
it's costing them by the day as this drags on. It's costing the airlines who are growing increasingly frustrated with Boeing.
The American Airlines CEO has publicly said he wants Boeing to reimburse them for some of their loss here. So they certainly want to see this move
quickly. But for the F.A.A., you're right, they have a lot on the line, because they have their reputation as a gold standard for certifying these
aircraft as safe, worldwide really, because when the F.A.A. speaks, regulators around the world trust the F.A.A.'s word. So that is what is at
stake.
So in talking to officials within the F.A.A., I can tell you they are not looking to move quickly and that is why their public stance has
continuously been that we are not working on a timeline, but Boeing would like them to.
[15:05:08]
NEWTON: Yes, it seemed -- I'm kind of interested to see and we will find out soon -- what motivated this from Boeing and why they seem so bullish.
Rene, I really appreciate you following the story. Thanks so much.
MARSH: Sure.
NEWTON: Now, U.S. stocks are mixed. The Dow as we were saying earlier, coming off session lows as major headlines lifted Boeing and Walgreens.
China trade talks uncertainty was weighing down the markets this morning, but as you can see, we are up there about 20 points.
Healthcare and banking sectors leading the decline at first. Investors are turning to defensive stocks, remember, such as real estate.
Now, regulators meantime in the United States are now looking into allegations of gender discrimination with the Apple credit card. It comes
after users of the card flocked to Twitter over the weekend, many claimed that Apple and its underwriter, remember, Goldman Sachs, are offering much
higher credit limits to men than to women with similar financial profiles.
Clare Sebastian is here to explain all of that to us. You know, Clare, I found this shocking, but then again not because the point is the algorithm
that decides this -- still the inputs are made by human beings, right?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Right.
NEWTON: What exactly went on here?
SEBASTIAN: Right. So of course, yes, a human being has to write an algorithm. But this all began, Paula, with a Twitter storm and it started
with this tweet from a man called David Heinemeier Hansson. He is a tech entrepreneur.
And he tweets, "The Apple card is a [expletive] sexist program. My wife and I filed joint tax returns, live in a community property state and have
been married for a long time," and yet still, he said, he was given 20 times -- 20 times -- I think that deserves highlighting -- the credit limit
she does.
So even you know, you don't know, this is anecdotal, you don't know if they have identical profiles. You don't know if their earnings are the same,
but still 20 times seems a lot and then piling in to this now viral tweet, we find Steve Wozniak who is the co-founder of Apple. He says, "The same
thing happened to us." He got in this case 10 times the credit limit than his wife did. It's not quite working, but you get the picture.
"We have no separate bank or credit card accounts," he says " ... or any separate assets. Big tech in 2019." He is saying, but of course, this
isn't just big tech because Apple partnered with Goldman Sachs.
NEWTON: I liked what he said that right, it's hard to get a human connection. A human connection.
SEBASTIAN: Right.
NEWTON: For big tech.
SEBASTIAN: This is the issue because you know, we had a couple of our producers try and do this themselves and they say it takes two minutes. So
obviously, it's not a human behind it. It is an algorithm. Goldman Sachs say that they're implying that the problem is that they don't offer shared
accounts. So you can't have a situation where one person is responsible for the debt.
Let's say, you put your children on it, they can also have a credit card and they say that they -- and as with any individual credit card, your
application is evaluated independently. In their statement, "We look at an individual's income and an individual's credit worthiness which includes
factors like personal credit scores, how much debt you have and how the debt has been managed."
They say, "In all cases, we have not and will not make decisions based on factors like gender." So we did our own test. We have a male producer
here and a female producer, very similar ages, very similar credit scores.
The female earns slightly more than the male. They both did it. It took two minutes to be approved. They both got a credit limit of 9,000. So
obviously it's not a big sample. This is just one on each side.
But you could argue, you know, she might have got more because she earns more and her credit --
NEWTON: Her income is higher.
SEBASTIAN: Right.
NEWTON: Her credit score is higher.
SEBASTIAN: And her credit score is higher.
NEWTON: The credit limits are exactly the same.
SEBASTIAN: Again, you don't know, I mean, the different credit reports get run. You don't know the full background here, so it is difficult to tell.
There are a lot of people coming out on Twitter and saying that they've had similar problems to these high profile tweets.
NEWTON: Before I let you go, Clare, in terms of these kinds of complaints, historically, this is a complaint that a human being would normally do this
even when the algorithm at this point was involved.
SEBASTIAN: And this is something that we're seeing increasingly as more and more tasks are getting automated. There are more and more algorithms
involved and more and more companies are facing questions.
We had Amazon, who reportedly automating the hiring process and finding that their AI tool discriminated against women. They're also under
pressure because of a facial recognition tool that discriminates against women and other minority groups.
So this is something that's out there and I think transparency is what's really being called for.
NEWTON: That's right. We need to tap into that black box, open it up and see what's going on. Clare Sebastian, thank you.
Lucky for us, the New York Department of Financial Services is already officially investigating whether those algorithms, those nasty little
things violate state discrimination laws.
Now the superintendent of D.F.S. Linda Lacewell tweeted, "Financial services companies are responsible for ensuring the algorithms they use do
not unintentionally discriminate against protected groups." And Linda joins me now.
Linda, so great to have you here. Look -- look at this. The heart of the issue here that you say is whether or not it's an algorithm, right. But
someone is responsible for that. So does it or does it not discriminate on the basis of sex?
In terms of your investigation? How can you hope to figure that out?
LINDA LACEWELL, SUPERINTENDENT, NEW YORK DEPARTMENT OF FINANCIAL SERVICES: Well, we're starting with a dialogue with Goldman to have them explain to
us how does this work, because as you indicated, it's a black box.
It's a black box for consumers. It cannot be a black box for the financial services companies who are using it, so they need to walk us through how
this is working?
[15:10:00]
LACEWELL: And on top of that, we believe it is incumbent upon financial services companies to test the products that they're using before they
apply them to consumers so that they can see how they're working in application.
NEWTON: And they will probably be able to show that they did do that. And yet, you know, tell me, you were looking at Twitter, right?
LACEWELL: Yes.
NEWTON: You were looking at the anecdotal stuff, and I know, I say that you're inviting people who have any kind of complaints, any kind of
evidence to obviously let you know about it, and you guys will continue to investigate.
But what did you think when you saw the anecdotal evidence coming in?
LACEWELL: Well, it was a little surprising. I mean, I think Apple and Goldman are at the heads of their industries, and it is incumbent upon them
to show some leadership.
I realize this is an emerging area, but it's incumbent now upon those companies to set some best practices, and show how others in the industries
can follow because it's obviously a problem across industries.
NEWTON: What's your concern in terms of when we talk about the way banking used to be done and the way banking is done now?
Look, this is FinTech. Right? This is supposed to be cutting edge, and yet does it surprise you that it seems to be turning up the very same
problems?
LACEWELL: That's a great question. Technology is moving at the speed of light across our industries. And it's important to take a breath and look
at how these two new technologies are affecting customers.
It can be very positive for consumers by generating new opportunities, especially from those who have been outside the realm of financial
inclusion. But a financial product is a financial product. It is always going to affect real people. We cannot leave them out of the equation and
that's what companies need to keep in mind.
NEWTON: How difficult will it be depending on what your investigation shows to hold companies to account when they seem to -- the knee jerk
reaction is, this is not us, right? This is an algorithm.
LACEWELL: It's no different than saying it was my computer department. It was the clerk down the hall. The company is responsible for those whom it
employs and also for whatever products they use.
NEWTON: When we talk about what the -- in terms of remedy, right, whenever you do an investigation, there would be remedy. Do you hope -- and you
don't know what you're going to find here.
LACEWELL: Right.
NEWTON: We have to say this is an open investigation still. In terms of remedy, what has worked in the past in terms of really trying to isolate
these issues and make sure they don't discriminate again?
LACEWELL: Well, of course, these are new. But I think what's important is for there to be transparency to the consumer about how the decision is
being made. That's point one.
If an adverse decision is made, the consumer needs to understand why. The consumer needs to have a meaningful right of appeal, which means they have
to have the information so that they can make an appeal.
And I think also, it is incumbent again, upon the company, it shouldn't require a regulator to say, hold on a minute, let's take a look at this.
The company ought to be taking that look first and then they won't end up in this problem to begin with.
NEWTON: Which is important in terms of the sample size. I know what we did here at the company are two employees who were given the exact same
credit limit, and yet even again, anecdotally, did it surprise you? Does it surprise you when you see those kinds of results?
LACEWELL: Unfortunately, it's not a great surprise. I think that unfortunately, there's a lot of historic biases that are at work and when
factors are kind of thrown into the mix, this can happen.
So the important thing is that we get ahead of it and make sure that it doesn't happen through these technologies as well.
NEWTON: We hope to have you back here at the end of our investigation, so we actually get some results and again, take apart that black box, right
and figure out how it happened.
LACEWELL: Yes.
NEWTON: Thanks so much for coming in.
LACEWELL: My pleasure.
NEWTON: We appreciate it.
LACEWELL: Thank you.
NEWTON: Still to come, Uber's CEO drives himself straight into trouble. His apology may not stop the calls for a boycott.
And later, a dramatic escalation in violence in Hong Kong. It is also spelling trouble for the city's economy.
(COMMERCIAL BREAK)
[09:16:11]
NEWTON: The #BoycottUber is now trending after Uber CEO compared Saudi Arabia's murder of Jamal Khashoggi to a fatal accident involving Uber's
self-driving cars. Yes, that was just comparison.
Dara Khosrowshahi has now apologized for those comments made in this interview with Axios. Take a listen.
(BEGIN VIDEO CLIP)
DARA KHOSROWSHAHI, CEO, UBER: I think that the government said that they made a mistake.
UNIDENTIFIED MALE: Well, they made a mistake. I mean, somebody is dead.
KHOSROWSHAHI: Well, it's a serious mistake. We've made mistakes too, right, with self-driving, and we stopped driving and we're recovering from
that mistake.
So I think that people make mistakes. It doesn't mean that they can never be forgiven. I think they've taken it seriously.
UNIDENTIFIED MALE: The C.I.A. didn't suggest that they made a mistake and that was an oversight. Like with self-driving, that was basically a bad
sensor, correct?
KHOSROWSHAHI: Yes.
UNIDENTIFIED MALE: This was -- the C.I.A. suggested that the Crown Prince had a role in ordering an assassination. It's a different thing. You guys
didn't intentionally run somebody over.
KHOSROWSHAHI: I didn't read that part of the C.I.A. report. You're obviously deeper in it. But I think from a Saudi perspective, they're just
like any other shareholder, right? It's we -- now we're a public company, anyone can invest in our company if they choose to do so. And they're a
big investor, just like you could be a big investor as well.
(END VIDEO CLIP)
NEWTON: You can imagine, those comments are raising eyebrows in part because of Uber's ties to Saudi Arabia. Now, the Kingdom is of course the
key investor both through its public investment fund and through Masa Son's Vision Fund, and the Managing Director of the Saudi investment fund sits of
course on Uber's Board of Directors.
Joining me now David Bach, Professor and Deputy Dean at Yale's School of Management and the thing that's been so jaw dropping for me here, and you
know, remember this is the age of the celebrity CEO and Dara is none other than a celebrity CEO.
This is a man whose personal pedigree comes from his own personal story from a repressive regime in Iran. Personally, I think you'd have a hard
time explaining that comment to his family, never mind to shareholders. But what do you think went wrong here in his thinking?
DAVID BACH, PROFESSOR AND DEPUTY DEAN, YALE'S SCHOOL OF MANAGEMENT: I have no idea. I'm just as puzzled as you are. You are absolutely right. He
has actually made a name for himself as being sort of Uber's chief diplomat going around the world rebuilding relationship and you know, clearly the
mistake here is the mistake he made. You know, what Saudi Arabia did was horrendous, and to call it a mistake is just that inexcusable unforced
error on his part.
NEWTON: We say it's an unforced error. He seemed to realize it quite quickly. I want to just go to his apologies, "I said something in the
moment that I do not believe when it came to Jamal Khashoggi. His murder was reprehensible and should not be excused or forgotten."
Here's the fine point of it though. There's a financial noose around his neck, isn't there? It was put there by Saudi investors.
In terms of Uber trying to figure out how to mitigate the effects of this, how do you do it? Because, you know, for the shot that you and I may have
registered, you and I both know that there are executives sitting there saying, well, of course, that's what he said, the Saudis bankroll, a large
part of Uber.
BACH: Yes. Well, look, I mean, I think he does this, he should deserve some credit for trying to clear it up within an hour and for apologizing
for the comment and setting it straight.
And at the end of the day, I think a lot of stakeholders will look at not just the mistake, but how you deal with it. And so, you know, he's doing
much better on that front.
But you're absolutely right. You know, Saudi is an important shareholder, he has to be very careful, and I think it highlights more generally, the
challenge that a lot of CEOs find themselves in; on the one hand side reckoning with Saudi Arabia's human rights records and, you know, many of
the terrible things that are happening in the region.
But at the same time, clearly, you know, being influenced by the country's political and economic cloud and in the Uber case, you know, having them as
a major shareholder.
[15:20:00]
NEWTON: You made such a good point in the notes. I was reading about this and it's difficult for CEOs to be taking such a firm moral stance if they
can't even count on world leaders to take such a firm stance on countries like Saudi Arabia.
And you know, this isn't just the U.S. President, there are, you know, a long list of other countries that are not putting their foot down about
this. How does it make it more difficult for CEOs?
BACH: I think, you know, you are absolutely right, we're sort of in this age of CEOs, estates, people who are, you know, political figures. And,
you know, there's a lot of upside to that. But at the same time, you have to realize that there's certain things that, you know, states -- real
states people, you know, world leaders ought to be doing, and if they're not giving them cover, it's very difficult sometimes for CEOs to assume
that role.
And you know, certainly when it comes to Saudi Arabia, some of the most prominent voices in the world are sort of signaling, you know, the U.S.
President, but also, as you mentioned, many others, let's get back to business as usual, and so it's very difficult, I think for CEOs to divert
from that.
Now, the blowback he is experiencing, what's happening in social media, I'm sure the questions that his employees are now asking him suggest that, you
know, this clearly wasn't proper, but I think more generally, we can't be expecting, I think CEOs to do what some of our elected global officials are
not doing themselves.
NEWTON: Yes. And it's such a good point especially to be fair to them because they are running companies and not nation states. David, thanks so
much for coming. I really appreciate it.
BACH: Thank you.
NEWTON: Now, reports of a formal takeover offer for Walgreens have caused the company shares to spike -- finally, something got them to spike.
They're off the highs of the day now, but the private equity firm KKR is reportedly the buyer.
If the deal goes through. It's likely to be the largest private takeover in history. Paul La Monica is here. You've been following it all
reminding us of the backstory and this, I encourage everyone to go on cnn.com because you've done an excellent -- actually two writes on this.
PAUL LA MONICA, CNN BUSINESS REPORTER: Thank you.
NEWTON: I want to ask you why this private equity buyout and why now?
LA MONICA: Yes, I think Walgreens has been struggling for some time. It's faced with the threat of more competition coming from that joint venture of
Amazon and Berkshire Hathaway and JPMorgan Chase. CVS is a tough rival, and obviously there are concerns about in the front part of the store, you
know, the crackdown on vaping, will that hurt the company?
So there are a lot of cross currents right now that are not in the favor of Walgreens. Its stock has been one of the worst performers in the Dow. So
going private would give them more flexibility. They don't have to worry about public shareholders as much anymore and there is a history here
because KKR helped take Boots Alliance, the U.K. drugstore chain that then merged ultimately with Walgreens, private a few years ago.
And Stefano Pessina was the CEO and head of that company, the biggest investor. He is still the biggest investor in Walgreens, so he has worked
with KKR before.
NEWTON: Right, and so you make the argument. This is someone who knows what they're dealing with. They know the company and what presumably what
they want to do with it without having the glaring view of a quarterly report and shareholders breathing down their neck.
Still, the private largest equity takeover, colossal in terms of the money we're talking about. I have to ask you though, Walgreens is by far the
best performer in the Dow 30 today, although it is down for the year, as we said.
If Walgreens goes private, okay, its spot on the board is up for grabs. This is significant because it would be a real tough battle to figure out
who you put in its place.
LA MONICA: Yes, there's only 30 companies obviously in the Dow. It is a very exclusive club. Most people still view it as like the be-all-end-all
market indicator, even though you have the S&P 500. So if you take Walgreens away, who could replace it?
You could argue that maybe a company like Amazon or Google would make sense because they're so large, but because of their stock price being above
$1,000.00 and this is a price weighted average, they couldn't go in unless their share is split, which is what Apple did a few years ago before it
entered. So I don't think either of them are real likely contenders.
Then you look at something like maybe a Facebook, Berkshire Hathaway, they could be intriguing. My money -- you know, gut says that CVS makes the
most sense. It's the cleanest competitor right there. And they own Aetna, which competes with Kewaunee and UnitedHealth, but I don't think you rule
out our parent company, which ironically enough, Apple replaced AT&T a couple of years ago. Comcast, Pepsi, Oracle -- these are all giants of the
S&P 500 that could add some diversification to the Dow.
NEWTON: All right, we will continue to wait it out. Not a done deal yet. So we'll wait to see more headlines on that. Paul, thanks so much.
LA MONICA: Thank you.
NEWTON: Appreciate it. Now, it is a critical week for President Trump. The public impeachment hearings could turn some voters against him in 2020.
But economic election models say the odds are still in his favor.
(COMMERCIAL BREAK)
[15:28:05]
NEWTON: Hello, I'm Paula Newton and there's more QUEST MEANS BUSINESS in a moment when we will visit a Trump stronghold in Florida to see how a
housing boom is boosting the President's popularity in that crucial battleground state ahead of the 2020 election.
And we'll hear from BP Chief, Bob Dudley as he prepares to leave the C- suite after an incredibly tumultuous 10 years.
Before that, though, these are the headlines this hour. Outgoing Bolivian President, Evo Morales is calling on opposition leaders to quote "pacify
the country" a day after he suddenly resigned and took much of the government leadership with him. Bolivia is in crisis and who is going to
take the helm is still unclear. Morales remains defiant calling his fall from power a coup.
An anti-government protester was shot and wounded by a police officer in Hong Kong earlier Monday. Now in a separate incident, a man who confronted
protesters was doused in a flammable liquid and set on fire.
Both men are being treated in hospital. The violence comes amid five months of pro-democracy protests.
British Prime Minister Boris Johnson is getting a big helping hand in next month's election from the Brexit Party. Nigel Farage says his party is
changing tactics and will not challenge conservative-led seats. Farage is now touting a Leave Alliance, focusing on other parties to avoid a second
referendum.
The former U.S. Ambassador to the U.N. says in her new book that two key members of President Trump's inner circle tried to recruit her to undermine
him.
Nikki Haley accuses former Secretary of State Rex Tillerson and former White House Chief of Staff John Kelly of seeking her help to subvert the
President in an effort to quote "save the country."
A seven-day state of emergency is in effect in Southeastern Australia. Raging bush fires have killed at least three people and destroyed more than
a hundred homes. They are fueled by the worst drought in decades and hot, windy conditions.
[15:30:00]
PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hot windy conditions. Of course, it is a big week in the impeachment inquiry as the first public
hearings are set to kick off on Wednesday. U.S. lawmakers will hear from key witnesses who had concerns about a quid pro quo by President Trump over
Ukraine and security aid.
Now, meantime, the president says he will probably release another transcript of a phone call with Ukrainian President Zelensky, that would be
on Tuesday, tomorrow. Now, despite being mired in impeachment scandal, those in Florida are feeling quite confident about President Trump and of
course, the booming economy. It comes as the state is now seeing home prices surge after facing the housing crisis a decade ago. Vanessa
Yurkevich has more.
(BEGIN VIDEOTAPE)
VANESSA YURKEVICH, CNN CORRESPONDENT (voice-over): This is Tampa, Florida, and there's construction everywhere. More than 900 people a day are moving
to Florida. Real estate agent Nicholas Palazzolo sees it firsthand in Tampa.
NICHOLAS PALAZZOLO, REALTOR, KELLER WILLIAMS REALTY: It's growing like crazy, it's booming every day.
YURKEVICH: Ten years ago, Florida was the poster child for the housing crash in 2008. But today, median home prices here in Tampa are beating
expectations, up over 200 percent since the crash.
PALAZZOLO: When the economy is good, you know, people have money to spend. So we're buying more houses, selling more houses.
YURKEVICH: President Trump won Florida in 2016 with 49 percent of the vote, and Palazzolo who supports him says Trump's been good for business.
PALAZZOLO: With him in office doing what he's doing, it's helping our economy grow down here. So, that's good for all of us, especially in our
industry because the better the economy, the more house are being sold.
YURKEVICH: It's not just downtown, the suburbs are heating up too, which is why Tara Sinatra decided to move here five years ago.
(on camera): You saw this place as having high growth potential.
TARA SINATRA, CREATIVE DIRECTOR, VISIT WESLEY CHAPEL: Major.
YURKEVICH: And has it lived up to that promise?
SINATRA: Exactly, it's actually exceeded.
YURKEVICH: Sinatra lives in Pascoe County, a Republican stronghold that overwhelmingly supported the president in 2016.
SINATRA: I'm proud of the way he wants our country to go. I'm proud that I'm able to flourish in my business and not be taken advantage of.
YURKEVICH: If you were in a different financial situation, would you still feel the same way about him?
SINATRA: Yes.
YURKEVICH: You would?
SINATRA: One hundred percent.
YURKEVICH: But not all residents are thriving here in Tampa.
LILLIAN STRINGER, DIRECTOR OF PUBLIC RELATIONS, TAMPA HOUSING AUTHORITY: It's booming for those who can afford luxury condos, but for those people
who are looking for affordable housing, housing assistance is virtually zero.
YURKEVICH: Lillian Stringer, a Democrat, works for the Tampa Housing Authority in Hillsborough County which swung for Hillary Clinton in 2016.
She believes Trump needs to do more.
STRINGER: How can you say that, that you're happy with the present administration, when it's their charge? They can make a difference and
they're not.
YURKEVICH: Jennifer and Jason Catalanotto, realtors and Republicans bought their home in 2015 and are profiting from the current real estate market.
JENNIFER CATALANOTTO, REAL ESTATE AGENT: It's just shocking to see that only a few years later, it's worth a couple hundred thousand more than what
it was when we purchased it.
JASON CATALANOTTO, REAL ESTATE AGENT: And that's even spurring more money into the local economy.
YURKEVICH: The couple is happy with Trump, but say he doesn't make or break their bottom line.
CATALANOTTO: We've succeeded in both administrations, right? When Obama was in, we were successful. When Trump's in, we're successful.
YURKEVICH: Fellow Republican Mark McBride owns the home right next to the Catalanottos.
MARK MCBRIDE, REGISTERED REPUBLICAN: We got an excellent deal on it. It was being at the right place at the right time.
YURKEVICH: McBride, a reluctant Trump supporter agrees the economy is doing well, but he'd prefer another option in 2020.
MCBRIDE: I am certainly not that impressed with him. When you look at the economy and you look at cycles, they do go in cycles, and so, is this
rebound attributed to Donald Trump and his policies, or is it just he's at the right place at the right time like I was when I bought this house?
YURKEVICH: Vanessa Yurkevich, CNN, Tampa, Florida.
(END VIDEOTAPE)
NEWTON: OK, Kevin Hassett is the former chairman of the White House Council of Economic Advisors, he joins me now. And I really want to hear
from you on this. In terms of looking forward to that 2020 election, how much do you believe the economy will still motivate voters? And I preface
this by saying that, you know, I agree with other people who say, look, outside of the Democratic base and the Republican base, few are really
talking to our reporters on the ground about impeachment.
KEVIN HASSETT, FORMER CHAIRMAN, WHITE HOUSE COUNCIL OF ECONOMIC ADVISORS: Yes, that's right. And I thought that story just now was fantastic because
it captured what's going on all around the country, which is that, you know, folks are -- the economy is booming, folks are getting jobs, housing
prices are going up, and so on.
[15:35:00]
And that tends to favor incumbents. So, I think that is going to be the main economic part of the political story next year. And so, I think that
the story really hit the nail on the head. The people I talk to that are running voting models for next year say that Florida is now kind of a safe
red state because Florida is doing so well and it's flourishing so much.
The flip side to that, though, is that in a lot of the blue states, they're seeing their real estate prices drop, like New York State and Connecticut,
because people are leaving those states because the state and local income tax deduction was limited in the tax bill. So, there's a lot of pain in
blue states, and a lot of growth in red states right now.
NEWTON: Well, and that, of course, was a premeditated move by Donald Trump in that tax bill. And while we're on that topic, I know you've been
looking at this, and you had been looking at this, what does Trump 2.0 look like in an election campaign and in a second term? And what I'm getting at
is a second tax cut.
HASSETT: Sure --
NEWTON: Is one really needed? And what would it look like?
HASSETT: Yes, that's right. I think that it's very likely that the president after the Democrats have sort of worked it out between themselves
is going to come forward with a positive agenda for the next four years. And you're right, tax cuts 2.0 is going to be part of it. If you look at,
you know, one of the people in the piece we just listened to, said, well, I wonder if President Trump's policies are the reason why we're doing so
well.
Well, I think that there's a lot of evidence that they are. And don't forget in 2016 when the president took office, everybody was saying we've
got a new normal where we're going to grow at about 1.5 percent like we did in 2016. And so I think that President Trump is going to make the case
that his policies took us from that 1.5 percent growth up to 3 and now it's down a little bit, but still at least a percent higher than what he
inherited.
And if we magnify those policies or double-down on those policies, we can get even more growth. I'm sure that's going to be what he does next year.
And so, I think you can expect the corporate rate to go down again. I think you could expect marginal income tax rates to go down again and so
on.
NEWTON: You know, there has been though such a dual purpose to this, right? Because you know, as you just pointed out yourself, there were some
states and some people in certain income brackets that they didn't feel anything from the tax cut at all. How strategic do you think he's going to
be with it this time?
HASSETT: Well, again, I don't think that as you mentioned, you know, before with this impeachment thing going on, we're probably not going to
see a whole lot of new policy between now and the election. So, in terms of election strategy, I think whatever is baked in the cake right now is
what you're going to see.
But I think that going forward, you know -- this year, if you look at -- over the last year, it's the bottom, that's how -- it's the people at the
bottom who have had the fastest income growth. All of, you know, the unemployment rate is the lowest it's ever been for African-Americans, for
women without a high school degree with children, for handicap folks, for Hispanic -- it's pretty much across the board.
If you look at every subgroup, even groups that traditionally have been discriminated against and disadvantaged, they're doing as well as they've
ever done. And I think it's because President Trump's policies have brought all these factories home. And so, I guess the question there is
that with all of this drama in Washington, you know, how does that interact with the facts that there's probably never -- oh, I'm sure that looking at
Wayfair(ph) from Yale, the economists who's studied this, there's never been a president with a strong economy like this that didn't win re-
election.
NEWTON: Yes, and we'll see if that holds. There's one number though that I want to point out that's not so fantastic. And that is the national debt
and the deficit.
HASSETT: Sure --
NEWTON: I mean, look, Kevin, I've been pretty nice so far. I've got to go to this --
HASSETT: Oh, why not?
NEWTON: I am the one --
HASSETT: Yes --
NEWTON: Who harps on this every single solitary time. No matter who the president is after 2020, will this alarming level of both the deficit and
the debt not hobble any president? It doesn't matter who it is. Don't have anything, you know, in the till for an emergency, do not have --
HASSETT: Yes --
NEWTON: Any leeway in terms of trying to save something like Social Security.
HASSETT: Yes, and if you look at it, the tax revenue is about what the Congressional Budget Office thought it would be this year when President
Trump took office. So the growth has given us some more revenue, but the spending is just through the roof. And so the deficit is a lot worse than
it was when he took office.
NEWTON: But that's not what Republicans --
HASSETT: And that's going to be --
NEWTON: Told us when they were trying to sell that tax cut 1.0.
HASSETT: But it's the spending, not the taxes, it's the spending not the taxes that has driven the deficit --
NEWTON: They said we'd grow our way out of this.
HASSETT: Well, we're growing our way -- the tax side, especially the corporate side, it seems like the corporate side has definitely paid for
itself. But I think you're right, that we need to do something about that. And that Washington has basically avoided it forever and ever. The last
time there was really something serious was Bill Clinton remember with Newt Gingrich in 1994.
They passed a bill that was a serious deficit reduction --
NEWTON: Right --
HASSETT: Bill. And I guess in order for that to happen, then it has to be kind of a kumbaya moment where Democrats and Republicans agree to put their
differences aside and do something that's good for the country. The question is, do you think that -- suppose he is re-elected after a year
like what we're seeing right now, do you think the kumbaya is going to be heard in Washington at all? And if not, then I would guess the deficit
reduction is not going to be top of the agenda.
NEWTON: All right, I think we better start praying for something or somebody, Kevin, if we want any of that --
HASSETT: Yes --
NEWTON: To happen. But --
HASSETT: Sure --
NEWTON: Let's see, especially as we continue to get more of those alarming numbers out of Washington on that deficit. Kevin, thanks so much, really
appreciate it --
HASSETT: Thanks for having me, yes.
NEWTON: Now, it was a dramatic start to the week in Hong Kong after a protester was shot by police. The city is of course on the edge, all the
while, its economy continues to suffer.
[15:40:00]
(COMMERCIAL BREAK)
NEWTON: Monday marked one of the most dramatic days in over five months of anti-government protests in Hong Kong. Two disturbing scenes both caught
on video have the city on edge. Ivan Watson has more.
(BEGIN VIDEOTAPE)
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT (on camera): This is the situation now on a Monday night here in Hong Kong, where riot police
have moved out, firing tear gas on a day when there was a call for a general strike, ugly scenes of violence breaking out. The authorities
have said that basically they will not give in to violence on behalf of the opposition.
And the police have responded to criticism about allegations of excessive use of force, saying they're acting in self-defense. But the scenes just
get uglier and uglier, and no signs of any kind of de-escalation on the side of the city's leader Carrie Lam, fresh from an endorsement, face-to-
face with China's leader Xi Jinping.
CARRIE LAM, CHIEF EXECUTIVE OFFICER, HONG KONG: Our society has been put under strain because of the extensive violence by the rioters. And this is
exactly why I came out this evening, to send those very clear messages. There's no question that escalating violence could get what the rioters
want, not from the government, not from the society at large, because violence will only lead to more violence.
And once we satisfy the rioters, because they have resorted to violence, I can assure you that more violence will follow.
WATSON: The crisis in Hong Kong has been going on for more than five months, and both sides look like they're getting more and more entrenched,
more and more willing to use violence, and the city is suffering. It has gone into recession, the Hong Kong Stock Market took a big hit on Monday.
The Hang Seng index falling some 2.5 percent, the worst fall it has seen in more than three months.
This is a low-level urban conflict that shows no sign of ending any time soon. Ivan Watson, CNN, Hong Kong.
(END VIDEOTAPE)
[15:45:00]
NEWTON: Five months on as we've just been saying, the escalating violence in Hong Kong is of course spelling deep trouble for its economy. How deep?
You know, as Ivan said, the Hang Seng suffered one of its worst one-day drops since these protests began. And you see it there as Ivan was saying,
down 2.6 percent.
Earlier this month, it was confirmed that Hong Kong slipped into recession. The recession of the economy shrank 3.2 percent in the third quarter.
Meanwhile, foreign companies say that the unrest is hurting business and its earnings last week. Disney warned that income in its Hong Kong-theme
park could fall 275 million in this fiscal year, and of course, money is still flying out of the city.
Goldman Sachs estimates Hong Kong lost as much as $4 billion worth of capital to Singapore over the Summer. Patrick Chovanec is here and is the
chief strategist at Silvercrest Management. Thank you so much for being here. It's interesting to see the perspective on this because business
investment has slipped so sharply now. We have to go back actually to just after the handover in 1997 to really see this kind of, you know, this kind
of problem in terms of investment in Hong Kong.
PATRICK CHOVANEC, CHIEF STRATEGIST, SILVERCREST ASSET MANAGEMENT: And even then, I don't think there was as much nervousness when the handover
actually took place. For somebody who's lived in Hong Kong as I did for many years, it's really shocking, the pictures that you see. Because this
is supposed to be a safe place. This is supposed to be a peaceful place.
And that's why people put their money, that's why people put billions and billions of dollars there, and why it's a financial center is because --
well, it's exactly the opposite of the kind of pictures that we're seeing.
NEWTON: I know, look at that, Patrick, and I'm so glad you brought that down to the personal. Because this does in fact, inform the financial
investments, right? I mean, people say that the city isn't the same, and they can't see it being the same ever again.
CHOVANEC: And this is a conflict which has taken on a life of its own because, you know, the -- Beijing doesn't want to -- it wants to exert
control over Hong Kong, but doesn't want to kill the goose that lays the golden eggs. The problem is that, you know, after these protests, after
several months of protests, Beijing actually backed off and withdrew the Extradition Bill which was the trigger for all of this.
Thinking that maybe this would defuse a lot of the energy behind the protests. It hasn't because what we're seeing now is a total breakdown of
confidence of trust between the police on the one hand, who have orders to get these -- get these people off the streets. And the -- and a big chunk
of the Hong Kong population, which feels that the police have just run amok.
And they want accountability -- now it's not about the Extradition Bill, it's about wanting accountability for how the police have handled
themselves over the last several months. And I don't think it's very likely that that's going to happen.
NEWTON: So, what do you do if you're the Chinese leadership? And this is still the open question here. I mean, you know a lot about this. You've
spent a lot of time not just in Hong Kong but in China as well. In terms of where the Chinese leadership would go from here -- and here's the issue.
It seems that they've lost confidence in the Hong Kong executive as well, obviously, to keep a handle on this.
CHOVANEC: Well, they're backing her and they're backing her hard line. So, they haven't -- you know, they haven't replaced her. If they've truly
lost confidence, they could boot her out and put somebody else in. But you know, it's a very difficult situation because, like I said, they -- I don't
think they want a crackdown in a way that would be even more overt.
The international reaction is one thing, but also just the financial reaction. You know, if money starts -- we talked about the money is
flowing out to Singapore. That's a tiny amount compared to what could flow out if there was a real crackdown that took place.
NEWTON: Right --
CHOVANEC: And then the Chinese would really have no choice but to put capital controls on there, and then that would make Hong Kong no longer a
functional financial center as it was. So, you do kill the goose that lays the golden eggs if you pursue that path.
NEWTON: And I have to leave it there, although end of this conversation, not the end of the whole conversation. Again, continue to watch this ever
-- you know, this ever-developing situation on the streets of Hong Kong. Patrick, thanks so much for coming in, I appreciate it.
When we return, the CEO of BP speaks to CNN as he gets ready to retire. Why he's championing natural gas on the road to cleaner energy. And his
thoughts on Deepwater Horizon a decade later.
(COMMERCIAL BREAK)
[15:50:00]
NEWTON: BP's CEO says natural gas can actually help, not hurt, the transition to a cleaner energy economy. Bob Dudley is preparing to step
down next year. He took over the company in 2010 in the midst of the Deepwater Horizon crisis, considered one of the worst oil spills in
history. Dudley spoke to our own John Defterios.
(BEGIN VIDEO CLIP)
BOB DUDLEY, CHIEF EXECUTIVE OFFICER, BP: I don't like the term fossil fuel. I think that's wrong because it's a whole spectrum from natural gas
to oil and coal, big difference. To me, we cannot get to the goals in Paris, not just as BP, but our industry cannot reach the goals of Paris.
No scenario without natural gas displacing coal.
As the world turns its back on nuclear, we need lots and lots of renewables, but natural gas has got to play a huge role in this. And
that's why I've seen some very intelligent people talking about how we have to stop natural gas. I think it's irresponsible, really.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Michael Bloomberg did so in a speech, Elizabeth Warren is campaigning on shutting down shale in the
United States. Is it getting too political and we're losing sight of the end goal?
DUDLEY: Well, I think that does sound very political to me because we just simply cannot get there. Now, we do need to take methane, detect it, keep
it, keep it from flaring, keep it from leaking, and we'll do that. But technologies are rolling through really fast with satellites and drones.
We'll be able to do that.
Put that technology solution aside, and it's there. Natural gas has half the CO2 emissions as coal. And there's a coal fire power plant being built
once a week in eight countries in the world. I don't know how we're going to get there unless we start using natural gas. John, I'm really worried
when I hear things like the World Bank and the IMF won't loan to fossil fuel projects.
DEFTERIOS: Even on Wall Street, the market cap of oil and gas companies was cut in half in the last five years, it's below 5 percent. How do you
manage that as a CEO as you retire in the early part of 2020? What has changed so radically? Nobody wants to touch it.
DUDLEY: Well, you're right. The percentage of energy companies and the S&P is about 6 percent, it's down from 1.15 percent of the percentage of
the S&P companies there. I think that feels -- these energy companies are generating huge amounts of cash flow. They play lots of dividends. I
think it's an unloved sector. I think it's still recovering from the earlier part of this decade when big projects were spent, capital was
spent, projects were late, they were not on time.
And I think there's still a hangover from that, getting the confidence back. And then you combine that concept with what's happening with the
shales, not generating the free cash flow, it's an unloved industry. But I actually believe this industry is going to deliver and generate free cash
flow of the large companies that will -- has got to be attractive.
Take the U.K., for example, you take BP and Shell, maybe one or two of the other smaller energy companies. These companies provide 25 percent of the
in-dividends of the entire United Kingdom --
[15:55:00]
DEFTERIOS: Twenty five --
DUDLEY: Most of which goes into pension funds. So the world needs those as well.
DEFTERIOS: You came into the position of CEO during Deepwater Horizon. What's the biggest thing you learned yourself as a leader, and then how has
BP changed after the biggest test you could ever imagine?
DUDLEY: Well, that was an event that was a tragic accident that shook the company to its core. And at one point, almost -- we almost didn't make it.
You know, financially, it was very close, touch and go. So, how do you deal with something like that? I think you try to stay calm, have a group
of people around you to stay calm, absolutely dedicated, meeting the commitments.
We didn't run away from it. The total cost of bill of that is up over $68 billion today. And just keep a team, keep the engineering going. Just
step by step, one foot forward in front of the other to move through it. And you have to have a lot of patience and perseverance. And a really
committed team working on it. Lots of lessons from it.
DEFTERIOS: Well, in fact, at one point, did you think that BP was going to survive as an independent company, which has a huge legacy?
DUDLEY: Well, I always had the faith it would, but not everybody did.
DEFTERIOS: Saudi Aramco, everybody is expecting a 5 percent listing originally, big aspirations for New York and Asia listing. It's smaller,
but what does it tell us about what's changing in Saudi Arabia?
DUDLEY: Well, I think this IPO and all the work that goes into it and due diligence, the disclosure of risk, the processes, meeting with people,
answering all the questions is an amazing leap forward for transparency in Saudi Arabia. And so whether or not people had expectations on this
listing or that listing, the fact that they're going to bring it out in Riyadh, learn from it, see how to do it, learn about the processes of
quarterly earnings and paying dividends is a massive leap forward for the country.
(END VIDEO CLIP)
NEWTON: Our thanks to JD there. There are just a few moments left in this trading day. We'll be back with the final numbers in a moment.
(COMMERCIAL BREAK)
NEWTON: I swear, the market is listening to me. It just went positive as I was speaking. OK, it's basically flat, OK, we were down, though, as much
as 163 points early in the day. A surge in Boeing's shares brought the Dow back to even and maybe better than any of the major indices though are
close for the day, they will set new records.
Let's look at the Dow components over here, Walgreens and Boeing are at the top as you can see. I leave you now in the capable hands of "THE LEAD",
filling in for Jake Tapper, Dana Bash.
(BELL RINGING)
END
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