Assignment this week. Who is taking her place today . Contestant is bill cohen. Theing me out at all hours, bloomberg contributing editor, welcome. Great to have you here. I am no replacement for stephanie, but i will try. I know you will. The top stories out of business and finance, let us begin with oil prices. The lowest level in 12 years, brent crude is at its lowest level. Also already facing the highest capital surcharge under International Rules and the bank may have to than 20 billion in Additional Capital because of new regulations proposed by the Federal Reserve. The capital boost would not be due until 2019. Wellgan says they are capitalized and intends to meet the requirements, whatever they are. Shares of yum are trading lower. Forecastp their profit for the year. Yum was hurt via food scare in china, a huge source of its profits. Kfc is very popular there. In july they were investigated for altering expiration dates on their meet, not what you want. Beat posted earnings that estimates, plus sales growth that beat rivals from walmart. 7 , walmart is of less than 1 . Greece is back on the front burner, in case you missed it. Dropeting in the biggest since 1987, the snap election and ofthe greek default course, bill this year. I was delighted not to have to any longer,regxit will i have to use it again . So. Dont think what you are seeing is the combination of the political and the surge of populism in europe and a backdrop to the markets. You get these incredible price moves. Does that make any sense . That they should drop 12 in the space of a day . Is continuing. And it is interesting. Here we are, this is what is happening today. They areertain extent trying to benefit from the volatility and spook the voters into supporting his candidate. So, the more turmoil, the more likely you will get those marginal candidates in the parliament to back the vote. This is the best play that he has got. Is this a buying opportunity . Overblown, this fear . Or something that we should stay away from . On the debt side there is no question that we will pay. In terms of the percentage of interest costs, that is incidental. When people talk about the scare of restructuring it applies to the official factor of the debt. What greece is looking to do, they are looking to do a considerable haircut on the bilateral debt within europe. Ironically, if you get this dialog advanced, it is probably better for the private sector, but you still might have tremendous turmoil on the ground in the equity markets. The underlying economy . We read stories over the summer and into the early fall the ends were picking up, that the economy was doing better. Absent this political turmoil, how is the actual economy doing . Is picking up but it will have a setback. Ironically if you look at the euro area rates in general, a lot of the companies and countries caught up in the enthusiasm, looking at the baseline numbers and greece, greece looks very attractive, but technically the greek bondholders tend to be risk on risk off traders, where countries like italy and spain in some ways look worse than greece and are trading very well. So, this is a good buying opportunity on the debt, but political turmoil is going to continue for a little while. Can we go back to appoint a point that you made at the outset . That they are hoping for a 12 plunge in the stock market to wake people up to the risks of electing or putting too much power in parliament . Are greek voters to what goes on in Financial Markets . We have spoken before about argentina and how unusual it is that the people there have been forced to become kind of closet experts on the economy. This seems like a very difficult to manage business. It is even difficult to manage ones personal affairs when you have no idea the value of the currency tomorrow. This president ial election goes to parliament, not the voter on the street. Do is swingrying to the additional fringe party voters. The parliamentarians. I think they are. You have seen two rounds of elections where people were faced with a real abrupt change and they backed off. If you look at the general sense of it, look at the scottish wrote. When people are faced with what might be a scott catastrophic vote, they back off. In some ways it is helping him and what he is trying to do in these elections. You could make a much broader argument that he has mismanaged the dialogue, but i think that what he is doing now is probably the best that he can. Do you think that there might be a knocking affect on the rest of europe . We all got nervous, even over here about it. This is juste political turmoil and economics might not be as bad as they apply. Agree. I think there is a risk of this percolating into the peripheral countries. Objective analysts is going to look at those instabilities in europe. Fueling the populist outrage against renzi . I think that what will have to happen is at some point they may have to blink a little bit in the discussions. Helping out again . Will the German Government have to help out with financing some of these . They gave the twomonth review extension, so there will have to be some progress. Some of the rhetoric that came out of the dutch and the germans over the last few weeks, they will have to back off if they dont want to strain your to mark too much. What does this say about europe right now . They get volatile sometimes. [laughter] is going on inat greece is a good example of how these markets trade and it is interesting. In this situation they are trading much more like venezuela than spain. Markets, you have a group of people driven a little bit more by headlines. The money can come off the table a bit more quickly. He continues to be a tricky asset class. Based on yesterday it feels like a shoot first ask questions type of situation. Is that the case . Possibly on both sides. To the market in general is not to overthink it. If you spend too much time looking at every angle of a you are going to but the reason that i ask is what is the likelihood that current levels for the market has stabilized will be the lows . Or will we see the market test on the debt side or the equity side with greek markets testing new lows as we move towards the early election . I think that we may, given where we are in the year, see some further selling pressure with people unloading risk. I might be wrong. This could be the capitulation trade. Because we are getting towards the end of the year cleanup for investors. Nevertheless, investors are desperate for higher yields, i call it the yield hunger games. Is this an opportunity or more of an illusion . Could this be worse than it looks . Side, i really think you are not going to go wrong. There is some mark to market, but there is no way that if you buy a greek bond you have to go through restructuring. Every headline that you see about debt restructuring talks about the efficiency structure. They are not going to have to restructure the private sector debt. Stomachou have a strong as an investor and you have excess cash into play the credit markets, this is a good buying opportunity. We are not too far off the lows. Very good. Nice seeing you, my friend. Of greylock capital. When we come back we will be talking about jpmorgan getting hit by yet another requirement from the Federal Reserve that may force jamie dimon to find another 20 billion of capital. Plus cashing in on the housing recovery, the ceo of wall would make her. Jamie dimon likes to boast that the fortress Balance Sheet is not fortified enough for the Federal Reserve. Jpmorgan, which already fell into the riskiest category may raise may now need to 20 billion in Additional Capital by 2019. At the same time they are bringing unprecedented scrutiny to the bank. Asked Richard Farley to join us. A partner in the leverage finance group. Richard, we have lots to talk about, so lets be in with the new capital surcharge. But really, as you have probably gathered by now, it is all about jpmorgan. Unequivocally singled out jpmorgan is the bank that needs to raise capital. I think that the policy is completely backward on this point. I think that it is just the latest iteration of uniquely american insanity in terms of the prejudice against large banks. Because back of the founding fathers, where we fought against the central bank and were the last nation in the industrialized world to have a central bank. This is the latest way of saying the large banks are where the risk is. It is incorrect now and has been incorrect historically. The idea that we would require large banks, the best run, historically, which present the least risk, requiring them to have more capital than Smaller Banks is a misguided policy. Save,reat is too small to not too big to fail. Did i miss something . Im getting older, i know, but in 2008 was there not a financial crisis that originated in many of the large banks in the city . That is one. Two in history. About 1931. The savings and loan crisis. 8093, as far back as you want to go. But historically it is too small to fail that is the problem. His point is that there is basically one point that has not enough capital. By the way, jpmorgan could raise that capital by retaining their earnings. May i at one point . From what i gather it is not the size of their Balance Sheet, it is how it is financed. More so than the other banks they rely on wholesale funding. Think that that is what they argue with respect to smaller institutions when they want to spend more capital. Essentially this is peer discrimination against large, which is misguided. Well, there are other large banks. Bank of america. Citigroup. I dont think the fed is going to penalize me in particular. My Balance Sheet is entirely deposit funded. As i understand that this particular issue is related to the size and not necessarily the mix. If i am wrong on that, i would be happy to stand corrected. Look, its 2008 there has been a lot of talk about having more capital at banks. Correct, a separate issue. A separate issue. Argueable people can about what the right level of capital is and how the risk inting ought to take place other matters, but i am talking about the discrimination of large versus small. I dont know that there is discrimination. Thats what this is. Not really. Yes, really. It is one bank that the fed thinks needs more capital. It is applied implied discrimination. Im sorry. Richard is unquestionably right in the sense that large attracts more scrutiny. Look at what is happening with leveraged loans, for example. Loans tot make large finance buyouts are getting a lot of scrutiny because the fed apparently has some issues on the terms in which the loans were being made and the sheer amount of money being committed. They do. Right. It has been characterized the sierraot as leone erroneously, as the fed using its power to regulate the prudential aspects of banking to enact monetary policy. And went through the rules regulations i was attracted to what they were after and i came upon something that said that these rules, the more leverage loans that we want to limit, we want to look at them closely and squeeze them down. It applies to whether or not they have Balance Sheet risk at all. Deal,f the best efforts these rules apply, so how can it possibly be designed to protect the banks . Its not. Policyly is monetary using Regulatory Authority to essentially treat the banks differently from other institutions that will fill the gap created by the regulatory arbitrage, which is completely unfair. Even if they syndicate these loans, the fed does not want them to do them . Even if there is no obligation at all. Here is a question for you, bill. Takes agents. To judge whether the borrower will repay a loan . Jamie lee or dan tarullo . No question, jimmy lee. No question. [laughter] iss face it, jimmy lee smart enough not to hold onto these loans anymore. Vice chairmanhe of j. P. Morgan. Vice president of jpmorgan, in it for the fees that a leveraged loan generates. No mistake about that. Someone is going to wind up holding this loan and is going to have a Principal Risk related to it. My concern is that we are once again in the part of the market where these loans dont have covenants. Where basically people are mispricing of risk. Im not sure the jpmorgan necessarily cares so much about that. What they wanted for their clients take the fee and syndicate it out. Wife you dont want to be in the position to blow up your client a keyhen you touched on point, where do the loans and that . Hedge funds. Cbo. They dont wind up in the Banking System where you put your deposits. Which is essentially what happened with Mortgage Backed securities. There was an Interest Rate arbitrage where the banks kept it on the Balance Sheet as aaa. Did not haved they to add regulatory capital against it and they could borrow from the fed cheaper than the return they thought they would get on those securities. That was the disconnect. Again we have real investors with real Principal Risk at stake who are probably mispricing risk because of the frothy nisan the market. Some of the most sophisticated investors in the world. Like we did in 2007 and 2008 . Sometimes investors do miss priced things. Of course they do. If they mispriced risk, who is responsible . Underwrote the loan . That is an ongoing debate. Here is what we know for sure. Buyers icated eager lenders want to loan the money. Eager borrowers say that i can get a return on my investment using these proceeds. Those between shall meet, even if the regulators the banking the fees will go to others, unregulated entities, increasing the risk when all of these loans move off of the regulated grid and into the unregulated grid. I think it will stop because it is wrongheaded. I am not so sure that it will increase risk when you move it off into the unregulated sector. We will have to continue this debate another day. Rich, thank you. Richard burley, bill cohen, my guest host for the hour, author and bloomberg contributor. And all sorts of other great things, wouldnt you say . Whatever you say. All right. What is it like having Warren Buffett is your biggest shareholder . We will ask someone who knows. Time for bloombergs on the markets. Market, in the Oil Brent Crude is down another 2 in trading with a 65 handle. Brent has not been this low since 2009. Opec cut its forecast for the amount of crude oil it would have to supply to meet world demand after the lowest in 12 years. Opec figures now it will have to supply 28. 9 billion barrels per day, below the target that they affirm that their last meeting in vienna. This is a serious existential problem for many of their members. 10 out of the 12 need Oil Prices Higher to meet their budgetary forecasts. And qatar can survive long term with the oil price is 65. We will be back in a moment talking about home construction. Lets live, from bloomberg headquarters in new york, this is live, from bloomberg headquarters in new york, this is Market Makers. Stephanie is on assignment this week, bill has ably taken her place thus far. Helping me out, bill, he is a contributing editor and also the author of the price of silence, but you have also written books about their sterns and goldman sachs. Good to be here. Great to have you here. Talk about time to the housing recovery. They took a huge hit when the housing bubble burst, they were among the nations largest manufacturers of drywall and other building products. Companies making a comeback, here with an outlook for his business in 2015 is jim metcalf. Jim, lets begin by having you explain how closely correlated your companys sales are to housing prices and gdp growth. I like this i would like to say it is a pleasure to be here once again. We are very excited about the future. Housing is very important to us, but i think that where some people make a mistake is that it is only 25 of our business. The biggest part of our business is the repair and remodeling side of the business. Think about people in their homes now, home prices are going up, which is very positive. We have seen the employment figures that came out last month. Employment is getting more favorable. People just feel better about remodeling their homes. With half of the portfolio the United States tied to repair and remodel, we are really excited about that segment of the business. Housing is important, as well as our new commercial business, the third part of our segment. We are very optimistic about the future. Housing, obviously, is an important part of that. Obviously, you have a very famous large shareholder. Do you think that Warren Buffett is just playing the recovery in the Housing Market . He does it with the stock market and other sectors. After the 2008 financial crisis he just asked what is down so low and will rebound some nicely . Or is there more to it . Well, we really enjoy the investment from mr. Buffett. Like we do all of our shareholders. We feel the best opportunity for our shareholders is to continue to feel the growth in the company on the bottom line. If you look at the aging stock houses in the United States, they are about 40 years old. Looking at repair and remodel, a lot of homes need repair. Wahlberg is one component of that. You have paint, carpet, a lot of components that buy into the model. Our philosophy is to treat all shareholders equally and provide them appropriate returns on their investment and hopefully they are pleased at this point. Jim, do you have a dialogue with Warren Buffett . We do. He is very open the phone calls. We have meetings with him but by the same token we do that with all shareholders, firmly believing that to have an open dialogue with shareholder small and large, to talk about the future we are optimistic about the future. We have been through a very tough time with the recession. It really helped us to create a recovery. We were not sure what housing would come back. There was a lot of uncertainty, going back a few years ago. So, we focus on strengthening the core of the business, helping us to whether any type of storm. One thing that we did in the recession that i think was unique to a lot of companies was we doubled dow