on -- if iran is coming solely as an armed force on behalf of shia, if it is framed in that fashion, then that probably worsens the situation and the prospect for government formation that would actually be >> what is your sense of that right now? >> just as iraq half leaders have to make decisions, iran has heard from us. we have indicated it's important to avoid steps that might that kind of sectarian splits that might lead to civil war. the one thing that has to be emphasized as we have deep differences with a ran across the board on a whole host of issues. obviously, what has happened in ofia, is in part because

iran coming in hot and heavy on one side. considerld obviously the fact that if it's a view of throughon is solely sectarian frames, they could find themselves finding -- fighting a lot of locations. that's not good for the iranian economy or the iranian people for the long-term. i suspect there are folks in iran that recognize that. old habits die hard and we will they would have to take what would be a more >>mising path will stop president obama finishing up an

hour-long talk about the situation a rat -- situation in iraq will stop he talked about not only specific plans he is going to take now but also a philosophical view. the president has 300 military advisers that will be going to rack. some of them will be working on intelligence efforts to try to now.with the violence sending secretary john kerry to the region to build some sort of effort toward a political solution. the president ruled out any u.s. ground forces beyond these military advisers going in and said the possibility in the future, he called it targeted and for sites action like airstrikes, but that is not something he's announcing at this point. he did not address directly his support for prime minister maliki, but people will read in his words and statements, not a lot of confidence in maladie two and the political divisions he

thinks are the cause of the problems will stop >> given an opportunity to offer an endorsement tom i given in a very tepid kind of support, no endorsement, he said this is at his doorstep will stop he is not the man. could be asay he unifying force, he merely said it in the hands of the iraqi people and their leaders to try to come together. one of the big headlines coming out is surely going to be what's scenes andhind the what degree of leverage the u.s. has to try to get him out. it's clear that is what the u.s. would like to see happen and would like to see him go as a more unifying figure in that role. >> the last question he got was about iran and whether they could be a force for good there. think or whatu you see as a holding action and

how likely will he had to come back and deal with syria and the question of military strength? entire pressis conference is a holding action and given the lack -- even how minimal the intervention as he has described, and no ground troops, airstrikes eating held not think what he is proposing right now, i don't think most military experts would say the dynamic has changed. that dynamic in the downward spiral we have seen in the past couple of weeks, the president will have to come back because this is a very big and serious threat to u.s. security because if iraq turns into the old afghanistan, it is a profound effect on u.s. security. covering the other big washington story today, the house of representatives, the republicans taking some new leaders there. the president met with congressional leaders and talked about these issues. that'll seem to be pretty

collegial but moments before the president spoke, the speaker of the house put out a press release, headline of which the wheels are coming off his presidency. one of the elements they listed was the situation in iraq. how restive are republicans about the president has posture before the press conference and to the extent you can anticipated, what he said today? >> from the democratic side, very restive. not speaker john boehner, mincing any words at all. mitch mcconnell also did to the floor to give his owns beach on this issue, criticizing president obama on foreign policy. what you saw on the president's part this meeting was an effort to put on the table a glare and strategy. eatinghat he has been hit by in the last couple of days and it's what he's hearing behind-the-scenes from democrats. if you are going to do something, let's at least put a strategy out there.

it's going to be really interesting to see. house republicans are pretty distracted with their leadership elections but the criticism of the obama foreign policy has reached a peak level right now, just a few weeks after his big west point speech that was supposed to lay out his doctrine. i don't think he said anything is going to set that back in any way, shape, or form but it's going to be interesting. rex we will be hearing from phil throughout the hour and we have a house leadership elections will stop but to summarize, president obama, after some consultations over the weekend at a big national security meeting has come forward, 300 military advisers knowing to iraq to work with the current iraqi government. no airstrikes as of right now, secretary kerry going to the region and the main focus is to try to find an iraqi government that can deal with the sectarian divides fueling the problems faith higha lot of in the scenes right now in the current government. i'm here for my colleague, we

appreciate joining us for this special report. after the break, bloomberg bottom line and mark hampton picks up the coverage. ♪

>> from bloomberg world headquarters in new york, i'm mark crumpton. welcome to a special edition of bottom line. in washington, house republicans are meeting today to elect new leaders. job of majority leader following eric cantor's stunning defeat in the virginia primaries. house republicans will also be voting for a new whip. joining me for special coverage is mark help run, managing editor at bloomberg politics. a big story today in washington. just listen to president obama talking about iraq. couple of smart people to talk about that.

douglas. aegon, a former economic adviser to john mccain's 2011 campaign and our host from political capital, al hunt. thatow pretty clearly congressman kevin mccarthy from california will get the job being vacated by eric cantor, the whip position that is so important. rex it's great to be on with you. the race may be a bit closer than conventional wisdom. he had to give the edge to steve from louisiana because the red state guys say we need a spot in leadership. that's been an impressive argument for some fence setters, but there's a better vote counter then kevin mccarthy will be the new majority leader. aegon, doesoltz this race matter? these are conservative people,

one is from illinois, one is from louisiana, but that your party care about this in terms of the legislative agenda or in terms of the image for the party? >> i think it certainly does matter. theymage of the party and bring different attributes. he represent louisiana, red states, unifies the perception of the leadership to some extent, peter is out of illinois, a purple state, a lot of experience reaching across the aisle and experience in the whips job. there are some benefits to both is let's face it, this important because there will be more elections in not that many months. the issue of who will be the 2016 isan leadership in heating up already and this is the first skirmish will stop >> let's go to capitol hill. phil mattingly is there. this is going to play out over the course of the afternoon.

we don't really get a lot of insight into who is voting for him but let's talk about personality for a second. hasrepublicans personality been dominated by john boehner and eric cantor, often contentious and talk of cantor plotting to overthrow john boehner at some point or forcing him out. what do we know about the relationship between kevin mccarthy will be the new majority leader and john boehner? sweetnessing to be and light or will there be tensions between them? >> if there is friction, it is probably on strategy. on a colleague to colleague level, they get along a lot better than speaker boehner got along with eric cantor. team'se boehner perspective, they don't feel like there is a constant threat to be undercut and from a car the's perspective, he was often the middlemen between boehner and cantor throughout their time

on the hill. a good way to look at this is speaker boehner has a great deal of respect for kevin mccarthy possibility to know the conference and know it's extremely well. guysought a lot of these on and has a great deal of respect for the job speaker boehner has had to go through over the last couple years. is it going to solve the problems, no, but it's going to be better in the next couple of months. >> talk to me about kevin mccarthy's legislative agenda. what impact is that going to have on republican presidential candidates? >> a couple of things to look at the policy perspective, kevin mccarthy is not considered a policy heavyweight. but you will see an agenda that is very similar. the republicans only have a few legislative days to work and they're not going to make major changes. on ising to keep an eye they've got about six months until leadership elections happen again. you are not going to see a majority leader put out a

difficult or troublesome legislation on the floor if he wants to remain majority leader. the legislative agenda a little bit. >> what do we know about how speaker boehner wants us to come out? probably a little more closely to roskam -- is it in his benefit to take pressure off them to have somebody from a red state, a more conservative arson thethe leadership and in whips spot? >> i think he would personally prefer peter roskam. they are pretty close. but i asked someone out there who is really plug it in, is he an ideologue or operations guy john mark they said he's an ideological operations guy, not the right winger that jim jordan and some of the others in the conference are. to getguy who will want things done within limits and if boehner and mccarthy want to move, they will have to have steve with them.

the problem is i can't quite see what they are going to move on. closed-door meeting with the republican from labrador this week and he told his fellow republicans and they supported kevin mccarthy for majority leader, they would be supporting the status quo and in his words, you will prove we are still not listening to the public. what type of change does the public want at this point in the republican ranks? republican ranks are interested in seeing a party that can govern effectively and move legislation. one of the important things to her member about kevin mccarthy as he was the man who recruited many of the people elected in 2010 that move the republicans into the majority. his ability to have close connections to the entire caucus cannot be underestimated. to arrive it easier at a consensus from the bottom-up about what they should move and makes it easier to whip votes for whoever gets the third slot.

that's an important part of the dynamic we will see in the next couple of months. last have seen over the year or so the big things that have gotten done have involved speaker boehner turning the floor over to the democrats. is that something under the new leadership team we are expect in? existt a model that could on any big piece of legislation or are those days over? >> certainly not before the november election. the only issue you could see it happening on would be immigration. you could pass an immigration bill in the house right now with 270 votes but they would be mainly democratic votes. session,is a lame duck which is unlikely, then all bets are off of stop i think these changes will have very little effect. one wild card -- eric cantor was one of the few real champions of something called carried interest it matters a lot to private equity guys. if they even get some kind of small ball negotiations, a lot of republicans would settle for

carried interest in a minute. i think wall street lost its champion on that issue. accommodation and compromise -- are they still anathema to the tea party? is it still our way or nothing as evidenced by the partial government shutdown? does the victory over cantor embolden them? >> if thad cochran loses in mississippi tuesday, then the message a number of those people who are not really tea party types and are pretty conservative, the narrative of two months ago as we don't have to worry about the tea party. >> al hunt, joining us from washington. the rest of the gang is going to stay with us. this week on political capital, the faith and freedom coalition founder, ralph reed will talk 24 teen and 2016 politics. it's friday night.

up next, we'll check the latest on iraq and as we go to the break, let's show you gasoline as the violence in iraq pushes gas prices higher. the national prize of three dollars 68 per gallon is the highest price the time of year since 2008. stay with us. this special edition of "autumn just aontinues in moment. -- this special edition of "bottom line" continues in just a moment. ♪

>> welcome back. this is bottom line on bloomberg television streaming on your tablet and bloomberg.com. president obama announced the u.s. will send it to 300 is no advisers to iraq. washington correspondent joins us now with more on the story.

tophe president just at the of the hour wrapping up this announcement after emerging from a meeting with his security team. he said an all-out civil war in iraq could make it a safe haven for jihadist and it is in the united states strategic interest to get involved. but he reiterated he will not be sending ground troops. additionalove military advisers and said he's sending secretary kerry to the region. he wants targeted, precise action if necessary. what he says the leadership needs to come from the iraqis. leaders must iraqi rise above their differences and come together around a political plan for iraq's future. iraqisunni kurds, all must have confidence they can advance their interests and aspirations through the political process rather than through violence.

>> the president was trying to walk a line here. there's no question there have been frustrations with the iraqi government and its leader. the president was asked if he had confidence in malik em he said not our job to choose s.aq's leader yesterday, call from vice president biden urge the iraqi government to be more inclusive of minorities and as we heard the president reiterating today. >> what about congress? are we hearing anything from the hill? boehner speaker john spoke before the president's announcement today, criticizing the white house and can't help but get a sense the wheels are coming off as far as the plan to stop the growth of terrorism for not just in iraq. he did not talk about any specific actions and set down with house speaker john boehner to talk about the options he was looking at. senate majority leader harry

reid coming out of the meeting said none of the options the president would look at would require congressional approval but believed he would consult with congress after all. urged against the bidding engagement, so we are sure to hear more responses from capitol hill as the hours and days. >> megan, thanks. my colleague,ack mark halperin. this is like back to the future. you knew this was going to happen. it was predicted by democrats and republicans and we are seeing it come to pass. >> the scale and quickness has has beenock of stop -- a shock. i don't big it's going to revolutionize the system. andsecretary going overseas acting to send a message to the iraqi government, we will give you a little support, but you

need to change. it was clear from the president that he wants change and if it can't be maliki, i think the united states government expects to see other leaders in their big hurry. this has to be stopped politically. >> mark halperin will be with us through the next hour. thank you so much. it is 26 past, and bloomberg is on the market. that miller has the details. let's get caught up on where markets are trading after hitting new record highs yesterday. we have, for little but no change on the s&p 500. the dow jones also very little changed will stop the nasdaq off about .20 five percent. one stock we are watching is harley davidson. the company has come out with a new electric motorcycle it will deliver to various regions of the country for testing. is a project called livewire. it does not make noise like a typical harley davidson, which is very strange because that's the main thing they do.

looks pretty cool. we are back on the market in 30 minutes. i'm matt miller. stay with us for more "bottom line."

>> welcome back to the second half-hour of this special edition of "bottom line" on bloomberg television. i am mark crumpton. still with me, bloomberg politics managing editor mark halperin. good to have you on, thanks for sticking around. let's get to the top headlines we have been following for you this hour. prosecutors winding up their investigation of the exchange industry. the justice department is questioning fx salespeople at the world's biggest banks. investigators want to know if they traded ahead of their

clients or colluded to trade benchmarks. the board of the struggling retailer has suspended dov charney and plans to fire him, all after the investigation into alleged misconduct. american apparel is asking lenders to waive a default that would be triggered by charney's departure. pitched thehaw second no-hitter of the baseball season. josh beckettmate who tossed a no-hitter on may 25 against philadelphia. the 15 strikeouts are the most by any left-hander in baseball history in a no-hitter. that is a look at the top stories we are following this hour. >> we are going to continue with our political roundtable in washington. douglas holtz-eakin, white house onrespondent phil mattingly capitol hill where the house election is taking place, and on the phone from miami, chief

political strategist at atomic research, spent many years analyzing the impact that washington policy has on investors. phil, outline for us what the election sequencing is like and how long it is likely to take and what the twists and turns are as best we can predict them. >> we will start with what we already know is about to happen. kevin mccarthy is in the room right out voting for him versus raul labrador as majority leader. once that occurs, then the vote moves into who will face kevin mccarthy as whip -- will replace kevin maccarthy has whip. there is peter roskam, steve stutzman,nd marlon who is representing the tea party wing. keeping an i will be eye on for and something i am listening to, the people in the room right now, how that second

round goes. people might say go with somebody else in the first round and be with me on the second round. there is a lot of strategizing on how to get that second round. let me ask you companies are not well-known people to the american public, even maccarthy. savvy investors may not have a sense of him. whatever the leadership lineup stays a speaker, maccarthy as majority leader, any idea how markets and investors will react? >> investors really like eric cantor. wall street was particularly fond of him, and now with him gone there will be a testing period. personable, great personality, but the jury is out on how knowledgeable he is on policy. peopleill be a period on checking the gravitas of this

new team before the markets embrace him like they embraced eric cantor. a fightu think this is between pragmatic conservatives and rigid conservatives? >> i think the pragmatic conservatives are dominant. cantor was one of them. they don't want to be portray does absolutely rigid, like a ted cruz-type republican. i think the establishment republicans think they have crushed an insurrection but they are not certain on until they are certain, i don't think there's going to be a lot of optimizing the democrats. largely --ies have the party has largely defined itself over the obama term as being anti-obama. -- commerce man congressman mccarthy have an

ideological orientation towards an economic growth and any policy that might help the united states turnaround? >> kevin mccarthy's personal story is a great story for those who believe in small businesses and getting ahead in life, and ascended quite quickly to the post of majority leader. we will hear more about that in years to come. i want to pick up on something that greg he said. if you look at this election, one of the things that i see is scalise is not what i would call a rigid ideologue. he is a talented legislator, he has built a following in the republican study committee, and it has broadened his base. it is not a narrow base. regardless of who wins i see the internal battle as having broaden the party and can they put on a good face for the mac and public going into elections in november and 2 years from now? >> doug, talk to us about those ideological divisions.

what was exposed by eric cantor's defeat? >> i think very little except that a legislator us truck of his home district -- lost track of his home district. his is not that this was not an election where --this was not an election where national tea party groups came in and not about immigration. this was a vote against eric cantor. it wasn't against them aggression, it wasn't for david b -- it wasn't against immigration, it wasn't for david brat, quite frankly pray this was an election held in isolation the turnout poorly for the member involved. >> phil, one of the great things about the selections that people lie about who they are going to vote for and make multiple commitments. do we know where people like john boehner, paul ryan, other prominent members, where those votes are lining up or the other members of the leadership trying to keep their votes predator now -- votes private for now?

>> i'm sorry -- go ahead, greg. >> phil, you go ahead. behinduld just say all kevin maccarthy, but that is the easy one. i think you make a great point, these ballots are actually secret. we won't even know the tallies unless someone on the county committee leaks them out. it is up to the members whether they announce what they actually did. when you talk about these members trying to count their votes and see where the support is going into this, it puts them in a dangerous position. if you are not a good with you might not have the account you think you do. >> greg, let's give you the last word on this. >> this may sound like inside baseball to a lot of your viewers but it gets serious in a hurry. we have to deal with the highway trust fund, budget issues, tax issues, the debt ceiling extension. we go to some very key market

issues fairly quickly. you., thank we will have all 3 gentlemen, phil doug holtz-eakin, and on the hill standby by. we will get the results for the majority leader, the expected coronation of kevin maccarthy, and the whip results in the afternoon. purestng up, the marijuana in america -- how do you like that for a segue? you won't believe who is growing it. details in just a moment.

>> be sure to check out the latest edition of "bloomberg businessweek." it hits newsstands and your tablet today. you can read it on the go with our new app. attitudes are changing on marijuana and it no more so than

on the medical side, but how do researchers get their hands on a substance that remains classified as a schedule i drug by the drug enforcement administration? turns out there is one place and its location may surprise you. phil mattingly took a visit. >> university of mississippi, home to william faulkner, ole miss football, the only federally funded marijuana farm in the country. wait, what? >for all intents and purposes yu are the government's sole producer of marijuana. >> correct. >> this dr. oversees the university of mississippi's marijuana project, with kilo upon kilo of weed. its mission, to aid law-enforcement and produce pot for federal study, mostly related to addiction. -- theyfide research can get their material from our program. >> august the, putting a --

obviously, putting a pot farm in the middle of a college campus raises some, shall we say, security concerns. the university installed a little security -- some 20 high definition cameras, double barbed wire fencing, and armed guards. >> to put it in the contract to satisfy the requirements. security is all over the place. >> more than 30 years ago when the university launched its project, legalizing pot was little more than a joke, but now a majority of reckons favor legalization. -- a majority of americans favor legalization. is the only place to get sanctioned and funded pot for study. the shift in opinion on marijuana has coincided with an uptick in research requests for the plant. but it is not an easy process. it involves many acronyms. first, the contract to grossly

pot.rosslw the then nih has to sign off, and the fda has a say, and the dea has to approve the storage and transferring of the marijuana. this can take months or even years. >> there is no shortage of interest in doing this research but if you talk to researchers and scientists, they will tell you that the money, the energy, the effort required to jump through all of those hoops is just not worth it. >> is it your sense that the process is too onerous? >> well, it might be. it takes a longer time. >> is counter to his critics -- research takes years. a few more months won't hurt. phil mattingly, bloomberg, oxford, mississippi. >> it is time for today's latin american report. argentina's government is negotiating a payment plan for the $1.5 billion in debt and

interest it does to u.s. hedge funds. despite the supreme court's decision to turn away argentina's last appeal, president cristina fernandez kirchner has promoted the idea that the government can nor the rulings and keep promises to a much larger group of bondholders. her mistress say she can avoid defaulting on $24 million in debt by paying outside the u.s. -- her ministers say she can avoid evil thing on $25 billion in debt by paying outside the u.s. financial system. yesterday, an argentine government attorney promised the talks would take place. argentina schedule to make a $900 million debt payment on june 30, which will be made with a stay at -- won't be made with a stay on the ruling to negotiate the holdouts. we will have more of our political roundtable on the

house republican leadership vote when "bottom line" continues in just a moment.

>> welcome back. i am a bloomberg politics managing editor mark halperin, along with mark crumpton. you see some members leaving the voting. the voting has begun for the first ballot for majority leader eric cantor to be replaced almost certainly by kevin mccarthy of california. we will be following that election and the one that is more up in the air, the number three position, whip. we will go back to washington. douglas holtz-eakin is the head --the american -- uh, doug american action form, and former advisor to john mccain. for this election we have talked about what the ramifications are for policy and the markets. what do you think of the

ramifications are in terms of the brand of the republican party? is this an opportunity for some unknown people to get a fresh start in dealing with the public in a different way? >> i think the most important issue is the internal cohesiveness of house republicans. i was greatly strengthened in the aftermath of the government shutdown -- that was really strengthened in the aftermath of the government shutdown. people realized that was a mistake and tactic and rally together. even after today's election, regards of rat -- whether roskam or scalise is elected as whip, they get to pick the rest is an whip team and that opportunity to bring republicans together. ey toused that as the k present a better public face, being a cohesive group, not just saying no. >> since eric cantor's defeat

all the conversation about what his loss means for the gop. what doesn't it mean? >> i don't think it means anything on the lessee -- on policy. i agree with what phil mattingly said earlier. i don't think it changes policy much at all. i think the real question is going to be, working together leading up to elections in november, trying to strengthen their hold on the house. >> doug, we are told that the votes are being counted now in that relatively anti-climatic majority leader race. i don't know, we have not been told whether people are going to speak coming out. you talked about the importance of internal cohesion. ofuming we see some sort press conference with the new leadership team, what is the right message to start out on? is it an anti-obama message, and economic message? >> the top issue remains jobs, the economy, and after that, healthcare.

people know they disagree with the president. that is not news. what is news is where they are going from here. >> douglas holtz-eakin, joining us from washington, the pleasur -- it is a pleasure. mark halperin, as you said, this is anti-climactic. now what? it is temporary positions until they have to go through this again. >> kevin mccarthy is arguably the next most likely speaker of ner house, whether john boeh stays on for the rest of his term. he is not a well-known figure, so it will be interesting to see. he is from california and that is a state with big political influence. it is interesting to see if he steps up the way eric cantor did to be a national figure in the party. >> mark halperin, thank you so much. mark will be with us during "street smart" with trish regan. another check of the market

movers is on the other side of the break.

>> get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and bloomberg.com. that does it for this edition of bloombergne" on television. i am a mark crumpton in new york. "on the markets" is next. is 56 past the hour which

means bloomberg television is "on the markets." there's not been much movement at all in the indexes. we did see record highs yesterday. red arrows per week movement. dow jones industrial average at 16,893. sectorime for today's report and we are focusing on one of the best-performing sectors this year, utilities. been sort ofas boosted by suppressed interest rates, i should say. the question is does that continue. so many times janet yellen has said there is uncertainty like ofward, but we are certain one thing for sure is that interest rates are not going to rise very much. >> it can really be boiled down to the fact that 10 year treasury yields have come down since the beginning of the year, down about 13%, 12%, in that range.

the group is up 15, 16%. perfect correlation there. >> explain to my mother why utilities do well when interest rates go down. >> lots of investors look at utilities as an income-oriented sector. people buy them for the dividends, the yields. if there are alternatives such as interest, fixed income rate investments that are not giving you the same kinds of rates or yields, there is a natural tendency to look for higher yields and that brings you to utilities. another reason for owning them is safety. if there is concern about the economy and the overall global environment, you tend to benefit in those kinds -- >> is not so much, i'm guessing, the defense sector as it is just central banks are giving investors no other choice. >> absolutely. in this almost zero interest rate environment, the average yield is under 4%, pretty

attractive given the alternatives. >> at the same time we see a lot of the commodities that these need going up in price, especially with what is going on in iraq. is that a problem? >> the fact that there are certain companies that actually own unregulated power generation assets, rising gas and power prices are helping them. those kinds of stocks and companies have done extremely well known rising commodity price environment. >> the polar vortex must have helped him because we needed to use so much more energy and power. does that die off now if we have a mild summer? >> absolutely. i think summer tends to be the strongest 3 months of the year for most utilities. they made a lot of money in the cold winter we have, but summer is where they make or break the year, and if we end up with a

mild summer that could have negative repercussions. >> is my electricity bills are very high in the summer because of the air-conditioners plug in the wall, but they are very efficient and electricity use has fallen the last six to eight years. >> it is an amazing statistic that is not getting a lot of publicity. between 1985 and 2005, there was only one year, thousand one, when we had -- 2001, when we had negative demand growth. 2 other years it has been flat -- >> very interesting to bring up. thank you so much for joining us. more "on the markets" in 30 minutes.

>> stocks still in the red good fighting back as the s&p tries to close at a record high. ruled the final hour? this is "street smart." welcome to the most important hour of the session. today, congressional republicans vote on eric