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Quest Means Business
Trump Pardons Former Junk Bond King; Apple Warns Coronavirus Creating Supply Shortage; Jaguar Land Rover CEO On Coronavirus Challenges. Aired 3-4p ET
Aired February 18, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ZAIN ASHER, CNN INTERNATIONAL HOST: All right, Apple and a few other American companies are issuing dire warnings about the impact of the
coronavirus on their supply chains. That is having an impact on the Dow. You see the Dow there down about 150 points, about an hour or so to go
until markets close.
Those are the markets and these are the reasons why.
Donald Trump issues a presidential pardon to one of Wall Street's most notorious figures.
Apple warns, as I mentioned, iPhones could soon be in short supply as the coronavirus hit its supply chain.
And the stage is set for Mike Bloomberg, one of the world's richest men to take part in this first Democratic presidential debate.
Coming to you live from the world's financial capital. I'm Zain Asher, in for my colleague, Richard Quest and this is QUEST MEANS BUSINESS.
All right, welcome everybody. I'm Zain Asher. Tonight, we begin with breaking news. Donald Trump is issuing a presidential pardon to an infamous
financier once known as the junk bond king. I'm talking about Michael Milken.
He served two years in prison for his role in an insider trading ring while at Drexel Burnham Lambert in the 1980s. The White House cited his
charitable work fighting cancer as reason for his pardon.
Jeremy Diamond is joining us live now from Beverly Hills, California, where Donald Trump is actually now headed. So, Jeremy, what more do we know
because it wasn't just Michael Milken. There were a handful of others. Walk us through that.
JEREMY DIAMOND, CNN WHITE HOUSE CORRESPONDENT: That's right, Zain. The President has commuted or pardons at least 11 individuals just today, and
they include Michael Milken, the junk bond king of the 1980s and 1990s.
He of course, became the face of insider trading during the 1980s. And in the early 1990s, he pleaded guilty to racketeering and securities fraud and
he served a two-year prison sentence.
Since then Michael Milken has become of course, a very well-known philanthropist. He's funded a lot of cancer research. And he has really
tried to restore his image. But one thing that he has not been able to do until now is to secure that coveted presidential pardon.
He sought that pardon from the last three Presidents to have served, none of them would grant it to him. But today, he gets that in President Donald
Trump, who, of course, we know has really relished using his presidential clemency powers, using it both for some individuals who were sentenced
unfairly in the President's view on drug charges and other kind of lower level offenses.
But also the President has really used this to benefit some of his political allies, and we're seeing that again today. A number of the
individuals who were either pardoned or had their sentences commuted, got that pardon and got that commutation as a result of many of the President's
allies lobbying the President personally.
This was not through kind of the normal pardon process that typically occurs in most White Houses.
We also saw the former Illinois Governor Rod Blagojevich, his sentence was commuted. He will get out of prison after serving eight years of a 14-year
sentence.
Blagojevich famously tried to sell essentially the Senate seat of former President Barack Obama in 2008, and he was convicted on corruption charges.
That was something that the President had been waiting for some time now. But he ultimately had held off for some time at the urging of Illinois
Republicans who urged the President that this was essentially going against his draining the swamp message.
But today, the President decided to put aside those concerns for many Republicans, and instead issue this commutation for Blagojevich.
Also on the list is Bernie Kerik, the former New York City Police Commissioner. He will be getting a pardon as well.
So again, a number of these actions benefiting the President's political allies, most of them occurring outside of those normal pardon channels
where you go to the Justice Department and you have a pardon and attorneys kind of look at these cases and see if these cases have any merit.
In this case, the President once again, going around those normal channels -- Zain.
ASHER: Jeremy Diamond live for us there. Thank you so much.
I want to bring in Paul La Monica to talk more about this. So Paul, Michael Milken jailed for two years for racketeering and also violating U.S.
security laws as well.
For our viewers who might not be as familiar with him, just walk us through what kind of role he had on Wall Street in the 1980s.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, he was known as the junk bond king. He was the head of high yield debt at a firm that no longer exists,
Drexel Burnham Lambert. He was kind of one of the role models if you will for the Gordon Gekko character, I think in the movie "Wall Street."
[15:05:07]
LA MONICA: I mean, clearly he was of that era of, you know, the 80s greed is good type of mentality.
But since he went to jail admitting to guilt for some of those financial crimes, since he got out, he has turned into a major philanthropist and
that's one of the reasons that President Trump cited in his, you know, argument for why he was granting clemency to Michael Milken.
He has really donated a lot, raised a lot of money for cancer charities. He himself is a prostate cancer survivor. So this is something that I think
you're talking about a bit of redemption after his financial crimes in the 1980s when, you know, things were a lot more loose, I think back then,
before so many of the rules or regulations that we now have on Wall Street to try and prevent these types of things.
ASHER: All right, Donald Trump also commuted the sentence as we heard from Jeremy Diamond, commuted the sentence of Rod Blagojevich as well. And
Michael Milken, obviously pardoning Michael Milken.
And when you think about these two characters, to some, they represent corruption. Let's be honest.
LA MONICA: I think that's fair. Yes.
ASHER: Right. So what sort of message does that send, do you think, especially to Wall Street with Michael Milken that he is pardoning?
LA MONICA: Yes, I think that in the case of Milken, obviously, there will probably be some who find fault in this decision. What I think is worth
noting though, Zain, is that one of the main prosecutors of white collar crime in the late 80s and early 90s, a guy named Rudy Giuliani.
ASHER: Rudy Giuliani.
LA MONICA: Former mayor of New York City, a high profile Trump adviser who has gotten into a little bit of hot water himself as of late.
So I do think that because of Michael Milken's second act, the fact that he has gone on to be so charitable and doing all these things for cancer
research, and he's also even though he's not in the securities industry anymore. He has the Milken Institute, which attracts a lot of leaders every
spring for a conference where they talk about corporate governance and issues in high finance.
I think that Milken has had this redemptive moment, and if we do believe that people when they serve their time are allowed their, you know, sort of
second act, then I think that's what Trump is signaling here, at least with Milken.
I really can't comment too much on Blagojevich, but with Milken, we're definitely talking about a person who served his time and has now done a
lot from a philanthropic standpoint, to probably merit praise.
ASHER: And that is one of the things that Trump mentioned. The reason why he is pardoning Michael Milken at this time is because of his charitable
giving, as you mentioned, how much he's done from a philanthropic perspective.
But there will be still others who do find fault with that rationale.
LA MONICA: Yes, I mean, there will be some that one will argue what's the point of doing this when he already has done his jail time? But I think
even though he has obviously served, it is not -- you know, it's still symbolic to say that we are exonerating him, pardoning him from these
crimes.
But there are others who probably want more, you know, a sort of vindictive type of environment and want people to be punished and want people to have
it as a permanent stain on their record.
And it might be the case where Milken has done enough that he served the time and probably deserves to have some praise for what he has done after
his financial crimes in the 80s and early 90s.
ASHER: It is certainly subjective. Paul La Monica live for us there. Thank you so much. All right, still to come here. Apple's warning about the
impact of the coronavirus on its supply chain. It is pushing markets lower.
And coronavirus causing an economic emergency in South Korea. The country's president now is calling for stimulus to offset that impact. That's next.
(COMMERCIAL BREAK)
[15:11:36]
ASHER: The coronavirus outbreak is hitting Apple's supply lines, sales and the broader market as well. Company shares as you can see here are down 1.7
percent. Apple says it does not expect to reach its revenue targets for the quarter.
The news from Apple is dragging down the Dow. The Dow fell as much as 280 points. It is now off the lows of the day, down about 140 points right now.
The coronavirus outbreak is hitting Apple in three key ways. Let's take a look here.
First, final assembly at the massive Foxconn factory in Zhengzhou, sometimes called iPhone City. That's one key way. Even though it's outside
Hubei Province, which is the epicenter of the outbreak, many workers have not been able to get back.
Many of those that have returned have been placed in quarantine, one per door room. That means this complex can only house a fraction of those it
would normally have.
And the second, the suppliers. Shares of all of these companies -- let's take a look here -- actually fell on Tuesday. Some of them are inside China
and facing their own worker shortages.
Others are simply selling less than usual with iPhone assembly lines running slowly.
And third, Chinese consumers. Apple has 42 stores in Mainland China and most of those actually do remain closed.
Clare Sebastian is joining us live. Hey, Clare, we were talking about this earlier in the day.
And so for Apple, when you think about what they're going through, factories closing, stores closing and now just the fact that they are
dealing with so many issues when it comes to their supply chain, what does that mean for global supply of the iPhone?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, it's unclear as yet, but it was quite a definitive statement from Apple. They said worldwide
iPhone supply will be temporarily constrained. Might not be, not could be - - now, we expect it will be temporarily constrained.
So whether that eventually trickles down to the consumer and we see delays in shipments, well, that I think depends how long this goes on.
But as you laid out, this is a double whammy for Apple. Its demand side, its supply side. I think, given that it's actually surprising just how
little the stock has fallen today.
When we saw them warn about demand from China about a year ago, the stock fell seven percent. That day today is proving remarkably resilient and it's
still, Zain, within a couple of percent record high.
ASHER: When we think about the tech sector more broadly, if there's any company that can handle this sort of crisis. It is Apple. You use the word
resilient.
SEBASTIAN: Yes.
ASHER: I would certainly use that adjective to describe this company.
SEBASTIAN: I mean, it's interesting because Apple is exposed in the sense that unlike a lot of other tech companies, it's a hardware company. It is
selling things and making them in China.
But it's resilient because of its performance really over the last year. The stock has basically almost doubled. It's been producing new models of
iPhone, which have been really well received.
It's spent most of the last year diversifying away from the iPhone worrying about sales flagging, only to find in the last quarter that the iPhone
sales had also come back. And meanwhile, they've ramped up their services business, to become basically a standalone Fortune 100 company with
revenues of about $12 billion.
I mean, this company, Zain, made $22 billion in profit in the last quarter. That's more than any American company ever in a quarterly profit. So it is
--
ASHER: So they are doing something right.
SEBASTIAN: It's pretty strong right now. It's pretty strong.
ASHER: And what does the Chinese market actually mean to Apple going forward?
SEBASTIAN: Yes. So in the last quarter, I mean, it's the third largest market. It's the U.S., the European Union and then Greater China. They made
about 14 percent of their sales in China in the last quarter.
So I think in terms of demand, that's important. There were already concerns that iPhone sales were flagging in China. So that's something
definitely to watch. But I think supply is, you know, if not an equal then perhaps even a bigger issue because the vast majority of Apple's products
are manufactured in China.
And it's really going to matter how quickly these factories return to normal and it's taking longer than they expected.
[15:15:17]
ASHER: All right, Clare Sebastian, live for us there. Thank you. President Trump's top trade adviser says he wants more information from the Chinese
government to assess the spread of the coronavirus.
Speaking with CNN's Poppy Harlow, Peter Navarro said the U.S. economy isn't getting hurt -- yet.
(BEGIN VIDEO CLIP)
PETER NAVARRO, DIRECTOR, WHITE HOUSE OFFICE OF TRADE: The good news about Apple is that it's kind of sui generis. It's one of the most heavily
dependent companies on China both for its production and some of its growth.
So we don't see Apple as the norm. We have a really solid economy here. Numbers are coming out well, which you would begin to expect from China as
portions of the supply chain across different sectors might experience bottlenecks that could lead to some slowdowns or perhaps inflationary
pressures, but we're seeing absolutely none of that yet.
(END VIDEO CLIP)
ASHER: All right, joining us now in the C-suite Craig Hayman. He is the CEO of EVA, one of U.K.'s largest tech companies. How vulnerable is the
tech sector given the impact of the coronavirus?
I was talking with my colleague Sebastian earlier about Apple seeing massive sort of supply chain disruptions because of the coronavirus. How
vulnerable is the tech sector, do you think?
CRAIG HAYMAN, CEO, AVEVA: You know, CORVID-19 is really first off you have to --
ASHER: The technical name.
HAYMAN: You have to think of the people aspect, you know, for most of the technical companies, technology companies like ourselves, we have employees
in China and that's probably our first -- in fact, our first concern is ensuring they are safe, allowing them to work from home as travel is
restricted in Beijing and Shanghai and other places. So it's sort of the first element.
But now you think about these supply chains that those who are manufacturing physical goods, you were talking about Apple. Over the last
20 years, these supply chains have been built out across countries across geography. It's very highly complicated.
And so what you're now seeing as a cycle, perhaps for the next two decades is where supply chains have to become more detached, more closer to
consumption trends.
Now, AVEVA, we are a software company. We don't manufacture goods, but our customers do. And so we're helping them optimize how they manufacture the
sort of the staples of our lives, not discretionary products, like like iPhones or white goods, but things like energy or food or beer or medicine
-- these types of things.
ASHER: Obviously, you mentioned that the first priority for any company that's dealing with this is of course, the safety of their own employees.
Now -- but with a lot of people working from home, just from the economic perspective, a lot of them working from home, what does that do to
productivity?
HAYMAN: Yes, I mean, our employees in China are there -- what we call customer facing -- so they're engaging with customers as they go through a
digital transformation, helping them optimize their businesses. So that's really hard to do from home. You know, you try your best, but it's really
difficult.
Now, this has all unfolded since the January, the middle of January, which is in China, a time where traditionally, there's a lot of offline time. You
have the Chinese New Year, people travel and spend time with their families.
So far, you know, really, it's really quite early. But as we roll out of the end of March, I think it really will be sort of seen, how does that
factor into companies like ours and our plans for the rest of 2020 and 2021?
ASHER: And just given the uncertainty, so I mean, no one really knows how long this is going to go on for. Do you think that you're getting adequate
support from government? From public health officials? Just in terms of getting up to date information about this?
HAYMAN: Yes, I think so. You know, country by country, it varies. Now, the challenge is, of course, getting access to data or ensuring that the data
that everyone is looking at is consistent because different countries have different views over the same statistics.
And so this is the same with, you know, any situation. You want accurate data. So we look to our local employees to make the right decisions based
on their -- based on what they do and keep their own health and safety sort of front of mind.
ASHER: What are the top -- just looking at the tech sector more broadly? What are the types of companies -- types of tech companies that are going
to be more easily and readily able to weather this storm, do you think?
HAYMAN: Yes, I mean, of course, I would say software companies, you know, when you're a software company, either delivering software through the
Cloud or on-premise, you are not shipping physical goods around the world.
So therefore, you're just fundamentally, you're not worrying about spare parts coming in and worrying about unplanned downtime.
So I would say that that would be one aspect versus tech where you're manufacturing consumer goods of some sort.
Now, as you get further into those sectors, look for sectors that are underpenetrated where they have very little digital technology, but have
the opportunity to optimize even further than they are today. And for us, that's the industrial sector.
[15:20:08]
HAYMAN: The industrial sector is perhaps the first to use digital technology. But the very last to use it at scale, Cloud, Big Data, AI,
machine learnings, very under penetrated versus let's take retail, for example. You use a lot of technology in retail, but you still have the
physical distribution of goods.
ASHER: Overall, how optimistic are you? I mean, yes, we talk about uncertainty. But how optimistic are you that this is going to be resolved
relatively quickly? This is only going to be a short term issue.
HAYMAN: Yes, I'm neither a doctor nor an economist, so I can only talk about it as from the seat I have is running AVEVA.
Look, I think the world's economies turn. They typically work through situations like that. Straightforward data helps people like myself make
the right decision.
And let's look at it from a worldwide demand perspective. The world has a certain need for the staples of our lives: Energy, chemicals, things like
ammonia, methane, ethane, things like for heat, for clothing, for food, for medicine.
And so any industry that's attached to those fundamental core staples of our lives, I think is going to be the very first to sort of power through
this.
Industries that are more attached to what I'll call discretionary spend, you know that's really the question is, how does confidence change in
consumers, because discretionary spend is one that's typically that can be impacted first.
There's an index called the PMI index, which is Manufacturing Index: Above 50, things are great; below 50, things are not so great.
A year ago that was above 50 in most countries around the world. Today, it's below 50 in most countries around the world, but if you look on to
that PMI number, it's really the consumer confidence number that is actually lower.
Anything that is back to the staples of our lives, sort of food and energy is still actually very, very positive. It's just being suppressed in the
overall number by this consumer confidence factor.
ASHER: Craig Hayman, live for us. Thank you so much.
Jaguar Land Rover is opening a new autonomous Innovation Center in the U.K. Chief Executive Ralph Speth spoke earlier on the challenges in the face of
the coronavirus.
(BEGIN VIDEO CLIP)
RALPH SPETH, CEO, JAGUAR LAND ROVER: We are seeing an absolutely different picture. First of all, you mentioned demand. There or no sales at the very
moment in China, dealers or the bank and there's no demand.
So that will be a huge impact, but we don't know how long it will take. So we cannot give you any, let's say, prognosis or the forecast. We have so
much good in swing. Our team delivered until the day 28 last month, over and above the target and all of a sudden there's nothing anymore. So that's
strange.
From a supply point of view, we have to feed both the factory in China, but as well as the factories in Europe.
At the moment, we are safe with two weeks in Europe. We are going to start the production in China next week on Monday and we are safe for one week.
The rest nobody knows at the very moment because nobody knows how long a government will also close the regions, how long it will take and also the
tier two, tier three and tier four suppliers will come back on stream so we don't know what kinds of parts will be in short supply.
(END VIDEO CLIP)
ASHER: South Korea is now sounding the alarm. President Moon Jae-in says the country is facing an economic emergency. He is calling for an all-out
effort to cushion the impact with a stimulus plan to lift domestic demand.
This as Singapore unveils a $4 billion relief package that dwarfs the $165 million the city committed back to battling SARS in 2003.
The world famous Beijing Auto Show has now been postponed as automakers were already trying to reverse slowing China sales.
In Germany, a new Zew survey reveals a sharp 18-point drop in investor sentiment this month as the outbreak weighs on world trade.
Ben Phillips is the Chief Investment Officer at EventShares. He joins us live now. So Ben, we're seeing a handful of countries just sort of pump
money into various stimulus measures. Is that going to be enough to turn around domestic demand in those countries and the various disruptions we've
seen because of the coronavirus?
BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: Yes, it's a good question. I mean, I think for now the market is saying, yes. I'm not so
sure myself. I mean, China's throwing hundreds of billions of dollars at it as well. So let's not leave them out of the equation.
But yes, it's very tough to see what's going to play out here. I mean, I think we're going to know as far as the impact on the U.S. if we get
coronavirus in the U.S. over the next four to six weeks. We're really going to have much more clarity on that just because of the incubation period.
But it's a big question mark right now and I don't know if the market is fully pricing it in.
ASHER: Do you think the market should be pricing it in more and why do you not think the market is taking it as seriously as it should be?
[15:25:08]
PHILLIPS: I think the biggest issue is the reporting of the numbers. So we've seen 70,000 confirmed cases, but that's from China's reporting. We
have some sources, our friends at Raymond James just put out this morning that they estimate there's 400,000 cases in China. So it's an order of
magnitude of 6X potentially larger than what's being reported.
Now, that means that the death rate is actually probably lower than stated on a percentage basis, but the infected rate is much, much higher,
potentially. And that has implications.
I mean, the C.D.C. wasn't even aware. The Director of the C.D.C. wasn't aware of the cruise ship outbreak and that that's just shocking to me. So
there's just a lot of misinformation out there. And I think a lot of under preparedness in the U.S. as well.
ASHER: Just in terms of the impact on China's growth. Are you anticipating what some economists are referring to as a V-shaped recovery and that is to
say, things will get far worse before there's a sharp turn around now and everything gets better, i.e. in the second quarter?
Do you anticipate that in the second quarter or in the third quarter there will be this sharp turn around?
PHILLIPS: I think it's too early to tell and we're going to have to watch. I mean, it could be an L-shaped, right? We could just stick at the bottom
and have a period of prolonged just weakness in the Chinese economy.
But that also means in the global economy, we could have a slower global economic growth scenario, if consumer confidence does weaken as your last
guest was talking about.
So I think it's all going to depend, does this start to bleed into consumer sentiment? Does this start to bleed into spending? Do we start seeing U.S.
cases and more cases outside of China? That's the big question mark right now.
ASHER: And if people look at what happened in 2003 with SARS as some kind of indicator as to what's going to happen with the coronavirus, but it's
also important to point out to viewers that the world is a vastly different -- the world is vastly different now compared to what it was in 2003
particularly when it comes to China's economic role in global growth.
PHILLIPS: Yes, there's an expression out there in the markets that you know, in China sneezes, the world catches a cold, right? So if you look at
oil consumption in 2002, it was around six and a half percent -- China consumed around six and a half percent. That's now over 13 percent.
You look at base metals, you know, copper, steel, iron ore, those were all in the teens, right? Now they're 50 percent or so of global consumption
that is coming from China.
So China is very important. One third of semiconductor sales -- that used to be, you know, just over 10 percent back in 2002. So yes, if China is
seeing a dramatic slowdown, which they are, it's in the numbers. No factories are operating right now. The only growth is government spending.
And that's only going to offset things for so long.
So yes, things are really bad in China right now and the market is kind of shaking it off right now and I'm more concerned.
ASHER: What's interesting because there are some days in which the market sort of completely shrugs it off, and we see the market climb to record
highs despite fears about the coronavirus, and there are other days like today for example, when you're really seeing the market being weighed
heavily by what's happening to certain companies, particularly Apple, and the coronavirus?
PHILLIPS: Yes. And that's just, you know, the market having a lot of different drivers in it, right? So I think sentiment, and those things are
coming into play.
But what the biggest thing we've seen here to date is access liquidity out there from global central banks is really pushing a lot of just risk taking
and a lot of movement into equity markets that's pushing markets higher.
We've seen hedge funds, they missed last year. They missed the mark big time.
So hedge funds all of a sudden are hitting the gas trying to put more risk on and catch up from their whiff last year. And so they're adding more to
equities.
So there's a lot of dynamics going on that are pushing stocks higher right now. But if confidence swings, and we see sentiment weaken, that's when
markets can reverse quickly. And so just -- I think it's reasonable to be cautious right now.
ASHER: Ben Phillips live for us there. Thank you so much.
PHILLIPS: Thanks.
ASHER: Wednesday's Democratic presidential debate will have a new face. It is the world's twelfth richest man. I'm talking about Michael Bloomberg. He
spent hundreds of millions of dollars to get there, and says, he will spend hundreds of Millions more to defeat Donald Trump.
[15:30:00]
(COMMERCIAL BREAK)
ZAIN ASHER, CNN INTERNATIONAL HOST: Hi, I'm Zain Asher, there's more QUEST MEANS BUSINESS in a moment when we'll be looking at how Michael Bloomberg
used his vast fortune to gain a foothold in the Democratic primary race. And the Boy Scouts of America files for bankruptcy. We'll look at the
scandals that rocked the century-old institution. Before that, though, these are the headlines at this hour.
President Trump says he's commuting the prisoner sentence of former Illinois Governor Rod Blagojevich. He appeared on Mr. Trump's boardroom
reality show "Celebrity Apprentice" in 2010. Blagojevich has had eight years of a 14-year sentence for corruption after trying to sell Barack
Obama's Senate seat after Obama was elected to the White House. And China's government says it's going to designate health care workers who died
fighting the coronavirus outbreak as martyrs. That's after the director of a hospital in Wuhan died on Friday. So far, the virus has infected over
72,000 people inside China alone, and more than 1800 people have died.
Jury deliberations are underway in the Harvey Weinstein trial. The jury sent out a note four hours ago, asking about legal definitions, among other
things. The former Hollywood mogul is charged with rape and predatory sexual assault. Banking giant, HSBC, is cutting at 35,000 jobs around the
world after reporting a plunge in profits. They fell by a third last year. The bank says it will focus more firmly on Middle East and Asia, and plans
to shut about $100 billion in assets by the end of 2022.
It's just nine months until the next U.S. election, and the Democratic debate stage is getting bigger when it's meant to be getting smaller.
Michael Bloomberg, the billionaire, former mayor of New York has qualified to appear in Wednesday's democratic debate. It comes after an unprecedented
advertising blitz. According to CNN, Bloomberg's communication director says there is no limit to what his boss is willing to spend.
(BEGIN VIDEO CLIP)
JASON SCHECHTER, COMMUNICATIONS DIRECTOR, BLOOMBERG CAMPAIGN: Mike believes that Donald Trump is an existential threat to this country. His reelection
poses a huge, enormous challenge to America. So, he will spend whatever it takes to get Donald Trump out of office. I would also say Mike is somebody
who is self-made. His father never made more than $6,000 a year. He built his own business from scratch. Came from a working class, middle-class
background, and he's using his own money. And I think what voters value is the independence that provides.
(END VIDEO CLIP)
ASHER: The other Democratic candidates say Bloomberg is trying to buy the presidency. So far, he's spent $418 million on advertising. That's about a
quarterly T.V. ad budget for the likes of Target or Macy's. It's more than twice the other billionaire in the race, Tom Steyer. The front runner,
Bernie Sanders has only spent -- take a look here -- 42 million only.
[15:35:08]
Bloomberg has hired at 2400 staffers cornering the market. The campaign now has more employees than six fortune 500 companies. His entry-level
organizers are being paid about 6,000 a month. It is undeniable that the spending spree is working. Bloomberg entered the race late and has yet to
appear on a ballot or in a debate. Yet, a new poll puts him as the pick of 19 percent of democratic voters.
Joining me now is Cristina Alesci and also Matt Egan, as well. Thank you both for being with us. So, Christina, what does that mean -- what does
this mean? You could basically buy your way onto a debate stage?
CHRISTINA ALESCI, CNN BUSINESS AND POLITICS CORRESPONDENT: Right. And I don't think that Michael Bloomberg has an issue with you saying that,
right? He's going -- he has spent $400 million to get on that debate stage. Now, it's show time. He has to prove that he's going to be able to face
criticism in a live setting, you know, having to do that and respond immediately. I've been to his campaign rallies, they're scripted, he's on
prompter. He's not taking questions from the audience. So, this is the first time that he is going to have to really defend his record and take
incoming fire from his opponents in real time and react to them in real time. And, you know, the big question is, will he be able to convince the
American public that he is the best candidate to go up against Donald Trump? And his campaign has been telling me all day, yes, he'll get it
done.
But they're also, interestingly enough, trying to set the bar low in the sense that they're telling me Look, he hasn't debated in a while; he
doesn't have the benefit that the other Democrats have had of having done, you know, eight other debates before this. So -- or seven other debates
before this. So, they're priming, you know, for low expectations --
ASHER: Yes, what you got to do?
ALESCI: -- in the hope that he -- you know, but he's going to face questions about stop and frisk.
ASHER: Yes, of course.
ALESCI: He's going to face questions about his previous comments about women. So, he's going to have to have really great answers and then spin
forward about what his policies are.
ASHER: Yes. When you think -- I mean, he does have some skeletons, at least a few bones in his closet. Right? So, when you -- when you think about
that, you know, as you mentioned, stop and frisk, but also the fact that he used to be Republican, then he was an Independent, now he's a Democrat.
He's a billionaire in the -- in a sea of candidates that are becoming more and more Progressive. But is he going to be a friend of Wall Street? What
are your thoughts Matt?
MATT EGAN, CNN BUSINESS JOURNALIST: Well, he was clearly, and probably still is, Wall Street's preferred candidate among the Democrats. I mean,
think about it, he's got deep, deep experience in the industry. He started in the brokerage industry. He founded a company that makes money by selling
financial technology to big banks. He was the Mayor of New York City where Wall Street is located. But what's interesting is that Bloomberg came out
with this Wall Street reform plan this morning that's a little bit more aggressive than people had probably anticipated, given his background. It's
not like Bernie Sanders who wants to break up the banks.
But listen to some of the things that Bloomberg wants to do. He wants to have a financial transaction tax, he wants to impose a speed limit on
trading. He wants to bolster the CFPB, which is the consumer watchdog that was inspired by Elizabeth Warren. He also wants to toughen bank stress
test. Now, we should probably have the big breaks a little bit. I mean, he's not the nominee. He hasn't even had a debate yet, as we were saying,
and he could moderate some of these positions if he ended up being the nominee. But clearly, he is trying to make himself more appealing to the
left-wing of the party, which is very skeptical of billionaires, wants to crack down on Wall Street, but also wants to beat President Trump.
ALESCI: What's also interesting about this economic plan and this attempt to regulate Wall Street, these are his customers.
ASHER: Right.
ALESCI: He sells terminals to banks.
ASHER: He has made money through them.
(CROSSTALK)
ALESCI: And so, we'll see how much conviction he has to actually get these policies into place. And also, we'll see how many of them require Congress
to move in that direction. But it is a very interesting dynamic to see a candidate who intimately understands Wall Street. And also, kind of lives
and dies by them, as well, if you want to talk about his terminal business, his information technology business.
ASHER: And when you think about just how much money, not only has he spent on his own campaign, $400 million, but he's also emerged as a formidable
democratic donor. In the midterms, he spent, what, about $100 million to try to help female candidates in the midterms, female Democratic candidates
get elected. So, what does that mean in terms of party loyalty? Surely, there's going to be moderates in the Democratic Party who are not going to
speak out against Bloomberg because in the future, maybe he doesn't win, he could be my donor.
ALESCI: Yes, money has gone a long way to help him with these relationships. What -- and also opening him up to accusations that he's
essentially buying these endorsements which is what you're getting at. And I understand that, and there's a fair -- you know, there's a fair debate to
be had about that.
[15:40:07]
His campaign would say he's passionate about these causes. He's been donating to Planned Parenthood for a very long time. He's been really
leading the way on a lot of liberal causes for years, even before he made this announcement, even before he floated the idea of running this time
around. And if you look at the NRA, I mean, this is something that he's going to do in the debate. He's going to pivot, and he's going to say, it's
my spending. You have a problem with my spending. Well, I helped crush the NRA. Like, tell me, do you want -- do you want me to be -- do you want my
money in politics, or do you not want my money in politics? Because if you're a true Progressive, I actually have results to show. That's not --
I'm not -- that's not me saying that.
ASHER: No, no, of course. Of course.
ALESCI: That's how the campaign will spin it.
ASHER: Right. But no doubt, he's going to trade punches with Bernie. I mean, he already has been trading punches with Bernie Sanders.
ALESCI: We've got the preview. We've got the preview.
ASHER: And to tell you that the Progressive wing are not going to welcome him with open arms. Guys, we have to leave it there. Christina Alesci, Matt
Egan, thank you so much.
Michael Bloomberg is looking to beat out Donald Trump in the race for the White House and they're not the only billionaires with public battles.
We'll discuss what's going on billionaires from Bezos to Bill Gates, that's next.
(COMMERCIAL BREAK)
ASHER: Welcome back, everybody. We've already discussed Michael Bloomberg's campaign for president. Some of America's other wealthiest men are trying
to make their mark. Amazon CEO Jeff Bezos is storing his wealth behind combating climate change. He says the $10 billion Bezos Earth Fund will
back those working to mitigate the impact of a global warming. Billionaires like Bezos have been stealing the spotlight lately. Mike Bloomberg is
hoping to defeat his fellow billionaire, Donald Trump, while other billionaires arguing for more petty reasons. Elon Musk called fellow
billionaire and Microsoft co-founder Bill Gates, underwhelming after Gates bought an electric Porsche instead of a Tesla. Of course, Musk made that
statement on billionaire Jack Dorsey's social media site, Twitter.
Darrell West is the director of governance studies at Brookings. He's also the order -- author of "Billionaires Reflections on the Upper Crust." He
joins us live. now. Darrell, thank you so much for being with us. So, just walk us through the landscape right now in terms of the role that
billionaires play in terms of influencing our society, currently.
[15:45:02]
DARRELL WEST, DIRECTOR OF GOVERNANCE STUDIES, BROOKINGS: Well, billionaires are setting the agenda on many aspects of politics and public policy. I
mean, you just talked in the last segment about the 2020 campaign, Donald Trump, a billionaire is president, Michael Bloomberg, a billionaire is
challenging him, already spent over $400 million on advertising. In a lot of respects, that election is going to become a referendum on great wealth
in America. Bernie Sanders is casting his whole campaign against billionaires and excessive wealth, proposing a wealth tax in order to fund
various types of public services. And so, in a lot of respects, billionaires are really the people who are setting the agenda across a wide
variety of topics.
ASHER: So then, do you think that it's Donald Trump being president that has now sort of changed the landscape in terms how -- in terms of how we
look at billionaires and what we expect of them in terms of shaping our society?
WEST: I mean, Trump is merely the symptom. The longer-term force that is dictating what's happening now is high income inequality. You have to go
back nearly 100 years, at least in the United States, in order to have income inequality as high as what we see now. So, our political debate is
quite polarized around issues of great wealth. We have some candidates who are actively campaigning against that wealth, saying this is the reason
ordinary Americans are doing poorly, the system is rigged against them. All of these issues would be addressed if we just raise taxes on the wealthy
and funded more services for the middle class. So, the issue of big money is really at the core of many of the major policy debates that we're facing
right now.
ASHER: Bernie Sanders says there should be no billionaires in the United States. Do you agree with that statement?
WEST: I wouldn't say there shouldn't be -- zero billionaires, but there certainly is a reasonable debate over tax policy. The last 40 years have
basically seen the corporatization of American politics with taxes being cut on corporations, taxes being cut for the ultra-wealthy. And I think
it's certainly a reasonable question in terms of whether tax rates are too low. We know that the public sector is starved, that many people need help
in terms of access to education, access to health care. It's one of the reasons why there's so many proposals for free education and Medicare for
All. The people are seeing those types of programs as a way to address these issues of great wealth.
ASHER: Michael Bloomberg has just qualified for the Democratic debate tomorrow night. In this current environment, on the one hand, you have
Donald Trump who's a billionaire as President, on the other hand, you have Democratic Party, more progressive than ever has been, does being a
billionaire help him or hurt him?
WEST: Well, Michael Bloomberg certainly is going to be the punching bag in this upcoming debate because it's going to be his first time on the debate
stage. Bernie Sanders certainly is going to want to make a great issue of Bloomberg's wealth because that's the whole essence of the Sanders
campaign, that there's too much inequality. And we need to tax those individuals in order to provide needed services.
But I think Bloomberg is going to make the argument and you've heard a spokesperson make a variation on this, that in an age of great public
cynicism, when people don't trust ordinary politicians, he's going to argue, basically, he is too rich to be bought. He's going to try and turn
his wealth into a political asset. He's going to say, I have $52 billion. You don't have to worry about petty corruption under my regime. And so, I
think that will provide a lot of the basis of debate during the discussion this week.
ASHER: And the fact that he is a billionaire. Does that mean that voters will look to him and say, Wow, this is a man who has the most chance in
this field of being able to stand up to President Trump?
WEST: I mean, there's actually a lot of evidence that even though people have great concerns about high income inequality, they actually like
wealthy individuals. We've elected many wealthy individuals. The U.S. Senate is filled with multi-millionaires. And so, people basically like
wealthy individuals who are self-made. You know, unlike Donald Trump, who inherited a lot of money at the beginning of his career, Michael Bloomberg
is self-made, built his own business, created jobs in the process. So, he's basically going to spend that side of wealth that he made his own money,
that he worked hard, that he had innovative ideas. And then, he can bring that same sense of innovation to the public sector. And there's a lot of
evidence that Americans like that type of wealth.
ASHER: Right, Darrell West (INAUDIBLE) thank you so much. All right, still to come here, one of America's most prominent youth organizations files for
bankruptcy. We'll look at the rise and fall of the Boy Scouts of America, that's next.
(COMMERCIAL BREAK)
[15:50:00]
(COMMERCIAL BREAK)
ASHER: Welcome back. The Boy Scouts of America has filed for Chapter 11 bankruptcy. It comes as the organization faces hundreds of sexual abuse
lawsuits across the U.S. Those lawsuits have now been suspended because of the filing. The BSA says it will use the bankruptcy process to create a
compensation fund for victims.
For more than a century, the Boy Scouts of America has positioned itself as a beloved childhood institution. It boasts several U.S. presidents as its
alumni, and has a 6-1/2 million member at its peak in the 1970s. That number has slipped as scandals have come to light. The BSA lost several
sponsors over its longtime ban on gay members, and since changed its policy to admit gay scouts, and gay troop leaders. CNN's Martin Savidge has more
on the latest controversy to hit the group.
MARTIN SAVIDGE, CNN ANCHOR: This bankruptcy filing is going to mean a number of changes, both to the organization of the Boy Scouts but also to
the litigation. And it has been the large number of lawsuits that have been filed now against the Boy Scouts of America, implying that there was sexual
abuse that was conducted on a major scale. Hundreds of lawsuits so far have been filed. And they actually represent thousands of victims here, but the
number of lawsuits continues to accelerate.
In fact, there were some attorneys that say that eventually the Boy Scouts of America could end up paying billions of dollars in compensation to the
victims here. That's part of the reason that the Boy Scouts decided that they needed to seek the protection of bankruptcy court. They say, in part,
so that they could continue to pay reparations to those that have been harmed, but also, too, that they could continue the organization which is
serving Boy Scouts today, but it's also bringing in funds.
But the attorneys that represent many of these victims say that it causes a real problem for their victims. It doesn't allow them their day in court,
their chance to speak out against the horrors that they say, were conducted against them by members of the Boy Scouts of America over the decades.
Instead, what happens now is all the civil litigation is going to be suspended. And there will simply be filings to the court that will ask
people to seek a claim. It's like they have to get in line almost and take a number to get some sort of compensation here. It was pointed out also
that this could mean there will be a deadline for future, meaning that if someone has not come forward and made a claim, if they don't do so soon,
they may never get that opportunity again.
And in fact, that was something that Boy Scouts addressed in an open letter the leader of the organization saying, "I encourage you and all your
victims to come forward and file claims so you can receive compensation from this trust."
[15:55:11]
He went on to say, "I want you to know that we believe you, we believe in compensating you. And we have programs in place to pay for counseling for
you and for your family." It is hard to really explain if you're not from the United States, just how iconic the Boy Scouts of America had been in
this country's history; how much they were revered, and how the qualities that they seemed to embrace were part of the American qualities of
truthfulness, of loyalty, of honesty. But all of that now in light of what has happened seems very much in the past. Zain?
ASHER: Martin Savidge, thank you so much. There are just moments left the trade on Wall Street. We'll have the final numbers and the closing bell
right after this.
(COMMERCIAL BREAK)
ASHER: Welcome back. There are just moments left to trade on Wall Street, about two minutes, in fact. The Dow is off the lows of the day. It had been
down as much as 280 points at one point after Apple warned the coronavirus outbreak is holding back iPhone production and demand in China. Let's look
more specifically at the Dow components for you. Apple and Intel are both near the bottom. Wal-Mart shares are up despite the fact that its earnings
actually fell short of expectations. The company did report that e-commerce sales jumped 35 percent.
As I mentioned, a lot of the reason why the Dow is actually down at this point is because of Apple, because specifically, Apple had mentioned that
there would be an impact on its supply chains because of the coronavirus. Stocks finished with losses in Europe, as well. The German stocks were hit
the hardest. A new survey shows German economic sentiment plunging this month on coronavirus fears. So, that's been the main theme of today,
coronavirus, and how it's been impacting specific companies and market sentiment, as well.
And that is QUEST MEANS BUSINESS. I am Zain Asher in New York. I will be back same time tomorrow with more news for you. The news continues right
here on CNN with Jake Tapper. You're watching CNN.
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