Europe May Take Legal Action Against Goldman Sachs
QUEST: It is eerily quiet here at Kennedy Airport, admittedly it is only just after 2:00 o'clock in the afternoon. But this will be the time when the European flights would be landing, preparing, of course, to head back to Europe in the early hours of the evening, those red-eye flights. Much loathed by business men and tourists alike. Let's look at the Big Board in New York at the moment. The Dow Jones industrials are now over 11,000. The market had taken a tumble, not only on Friday, on the back of the Goldman Sachs announcement. But also, of course, because it was felt that it was time to take something of a breather. When the weekend reaction from Goldman arrived, it was feared that it would be another serious fall on Monday. Maggie Lake joins me now from CNN New York. Maggie, the Goldman factor in the market, it may not have had a massive effect today but certainly it is the talking point.</s>MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: It certainly is, and it is going to be all week, Richard. Just want to bring you up to date with the latest news we have on that report that for that Fabrice Tourre, the Goldman executive named in that SEC suit is perhaps not surprisingly going to take some personal time off. Goldman stressing that he is still an employee. He has not been suspended, but he's going to take some time off. No doubt to prepare for the legal battle. But it is really the battle in the court of public opinion that is intensifying and moving swiftly now this week. Today the White House announced that President Obama is going to come to New York on Thursday to rally support for financial reform that is making its way through Congress. He's not doing it in D.C. He's coming right to Wall Street's doorstep, so to speak, in order to make that. You bet that he's going to use strong language. The U.K.'s Gordon Brown, of course, has slammed what he calls moral bankruptcy announcing that regulators in the U.K. are going to probe Goldman. It is likely that Germany will do the same. Over the weekend Dick Bove, a widely followed bank analyst here, from Rochdale, predicting that top management, perhaps including Lloyd Blankfein, will ultimately in his words, `have to fall on their swords". You know, resign, because of what happened to Goldman's persona. But not everyone, it should be said, is jumping on this bandwagon, this anti- Goldman bandwagon. "The Wall Street Journal"-I had a very interesting op-ed that caught my eye today. They say after 18 months of investigation all the government can come up with is an allegation that Goldman misled some of the world's most sophisticated investors? This is more like a water pistol than a smoking gun. And what we are really waiting for is Goldman's chance to defend itself. Lloyd Blankfein sending out a voice mail to all of his employees, we have the text of that today. Saying that they are getting ready to defend the firm and its reputation, that they don't stand by any wrong doing. They are having a conference call that was already scheduled, about their earnings, tomorrow morning. The general counsel will now be on that call and they are inviting the public to call in, if they want to, to listen. And you can believe they are going to be rolling out the heavy artillery to make their defense and defend the firm's reputation, Richard.</s>QUEST: All right. Maggie Lake, in New York, with that part of the story. Maggie, so you'll be on that conference call? Or at least you will be accessing that conference call and you and I will talk abut it tomorrow. If only Goldman Sachs' problems were on this side of the Atlantic. They might be OK, but they're not. They seem to be global, certainly trans-Atlantic. The European governments have been weighing, putting the boot into Goldman Sachs, if you will. John Defterios is in London.</s>DEFTERIOS: John, you know, people-is it a case of kicking Goldman when they're down?</s>JOHN DEFTERIOS, CNN ANCHOR, MARKETPLACE MIDDLE EAST: A little bit Richard. The charges against Goldman in the U.S. may not be the only action the bank has to deal with, as Maggie was noting. The U.K. and the German governments are now signaling they may take legal action of their own. Prime Minister Gordon Brown, during the election cycle here, has U.K. regulators to open their own inquiry. He said he was shocked at the, quote/unquote, "The moral bankruptcy of the conduct Goldman is accused of. Going back to Richard's point right now. Germany has asked for more details from the SEC, according to Chancellor Merkel's office. Stock markets in Europe reacting with shock on Friday, and that view prevailed throughout the morning session, then stocks stabilized, not surprisingly all around the airline recovery, if I can put it that way, in the afternoon. Let's take a look at the numbers, of course, the overall numbers, and then we'll drill down a little bit. The FTSE 100 down .28 percent, and we had losses in the major three markets. The DAX down about 0.30 percent, as you can see here. Paris down about 0.41 percent The biggest loser, of course, because driven by banks was the Zurich SMI, down 1.31 percent. UBS was down 2 percent, Deutsche Bank off 2.5 percent. But one reverse bank play was RBS, up more than 4 percent on speculation it will claim damages from Goldman Sachs over huge losses on the subprime mortgages. All that trading that took place there. It's not the only story of course that traders were focusing on. Airlines, not surprisingly capping the headlines today. British Airways down one 1.4 percent. Lufthansa down 2.7 percent and Air France, KLM down 2.8 percent. I suspect, I don't want to speak out of turn here-that we'll see a recovery, probably as the skies start to open up, with trading tomorrow. The Asian markets, Asian investors started the selling reacting to the Goldman Sachs news. The deepest losses were in China, but again, let's take a look at the overall markets and we'll come back and drill down, afterwards. Nikkei 225 down 1.75 percent. In Hong Kong, the Heng Seng down just over 2 percent. As I noted the bigger seller was in Shanghai, down 4.79 percent, there. Partially because of what we saw with Goldman Sachs and partially the sentiment with the airlines, but more importantly the Bank of China now reining in some of that lending. Not just on second homes, but on third homes as well. The broader index, the S&P; ASX 200, that was down more than 3 percent on the day. Japan's Mitsubishi Financial, HSBC, down more than 3 percent for the banks in Asia. And commodities fell today, including the stocks, BHB Billiton down 1.5 percent, in Sydney. And oil prices fell in reflection to some concerns whether this recovery will continue. Again, the Goldman effect, we saw prices down earlier better than $2. Let's take a look at where they finished off in European trading. Down $1.66 a barrel, at $81.54. It is worth noting, though, that we hit an 18 month high 10 days ago, of $87. So, again the Goldman affect playing out through the commodity markets. And also, flight cancellations. Of course, they fly on jet fuel. And perhaps demand goes down if this comes back and causes delays in the airports. So a very interesting day in the markets. You had the airline stocks dominating the markets in the second half of the day, in the front have of the day, we had not surprising the banking stocks being driven lower because of the Goldman affect, Richard.</s>QUEST: John Defterios, with the markets there. When we return in just a moment to New York, actually we are looking at our "Future Cities". There are many ways you can get around cities, but I'm going to show you the new way for the future. "Future Cities" returns in just a moment.