Rand Paul courts the establishment

M.M. REPORTING: RAND PAUL COURTS THE ESTABLISHMENT — One of the big under-radar campaign efforts this summer entails Sen. Rand Paul (R-Ky.) meeting with small groups of executives and potential donors around Wall Street (and Silicon Valley) to convince them that his populist/libertarian approach to economic and foreign policy is not scary or dangerous.

The point is not for Paul to emerge as the “establishment” candidate. That’s not possible nor would Rand World want it to happen. The point is to become acceptable enough to establishment types that should Paul win a couple of early contests and gain momentum there won’t be a big “Stop Rand” movement uniting behind someone like Jeb Bush or Scott Walker or John Kasich or anyone else like them.


CAN HE DO IT? — Strategist and consultant Kevin Madden, who served as spokesman for the Mitt Romney campaign, thinks it’s possible but will be difficult, telling M.M.: “The donor community is mostly aligned with the public in being wary of past military interventions. Whether they or going to embrace [Paul’s] foreign policy, which some critics say tends too far toward isolationism, is another question. … And for many donors he is defined too much along the lines of what he is against and not what he is for and what he would do to grow the economy.”

THE OBAMA PROBLEM — Business Roundtable president and former Michigan governor John Engler tells M.M.: “The president’s record over the last six years probably hurts [Paul] in that in his first campaign the president was about hope and change and a new path forward. That was sold to the American people despite a record that was clearly way over to one side. … So whether you are left or right if you are out there on the edges in 2016 it’s going to be a tougher sell.”

Engler added: “On what issue has there been positive leadership exerted that would reveal [Paul’s] ability to build coalitions, bring votes together that might be seen as a real benefit to economic growth and job creation along with the shrinking of the government and balancing the budget?"

THE WALL STREET VIEW — Many GOP-leaning bankers say they like Paul’s unique brand and energy but are skeptical that he can maintain his outsider, populist (and often Wall Street-bashing) image while also ingratiating himself with the finance world. “When you’ve got one foot on either side of a giant chasm, you are likely to fall in,” one senior exec told M.M.

THE VIEW FROM RAND WORLD — A person close to Paul said that while senior level officials in Washington at big business groups like the BRT and the Chamber of Commerce and Wall Street trade groups might be uncomfortable at the moment, the larger membership of those groups mostly embrace the senator. “The rank and file agree with the core philosophy on free markets and getting the government out of the way of the economy. Rand Paul is in favor of keeping taxes low and reducing regulations and his budget does all of those things. You would think the Chamber and the Business Roundtable would fall in love with that.” And on immigration reform, a top issue for GOP elites, the person close to Paul said: “Rand has been clear we need a legal immigration system and guest worker program that actually works. … The Chamber and others just want to pass something even if it has major problems.”

PAUL’S EMMISARY — Leading the effort to connect Paul to bankers in New York and tech entrepreneurs in California is Nate Morris, a 33-year old fellow Kentuckyian and waste management entrepreneur recently profiled by Bloomberg. Morris and Paul bonded on a trip to Israel and have been tight ever since. Morris tells M.M. that Paul has many more events planned for the summer and fall that will make it even more clear to the executive class that the senator’s policies on immigration and economic growth are not to be feared.

“What I've found as I’ve taken the Senator to Wall Street and Silicon Valley and the so-called ‘establishment’ is that these folks are yearning for an opportunity to get real market-based principles back in the White House,” Morris said. “They are yearning for a candidate that represents free-market principles and upward mobility rather than going back to business as usual in Washington.”

WHAT ABOUT THE FED BASHING? — Another big knock on Paul around Wall Street is that he beats up on the one institution that many bankers think actually works: The Federal Reserve. Morris says it never comes up. “I have introduced the senator to dozens of investment bankers and investors and the subject of the Fed has not come up once in any of our discussions.”

THE TAKEAWAY — What Morris says people think after meeting with Paul: “The preconceived notion of the senator is not what they come away with. We all think people are a certain way when we see them on TV or hear about them but when the senator goes face to face with these folks they leave impressed thinking this is a highly competent, thoughtful individual and someone they can feel very comfortable supporting.”

“He’s reached a tipping point with the amount of people he’s talked to and there is going to be a groundswell in these communities that this is someone we can get excited about who is going to carry our ideas and principles into the White House.”

TODAY’S MUST-READ: The Pitchforks Are Coming… For Us Plutocrats — Entrepreneur and venture capitalist Nick Hanauer warns his “fellow zillionaires” that their “gated bubble worlds” won’t last if they don’t do something to fix the glaring inequities in this economy: http://politi.co/1jQoweo.

GOOD FRIDAY MORNING — Tough loss for Team USA against a talented German squad. Our side did well to keep it to 1-0 and make it to the Round of 16. Now it’s own to Belgium on Tuesday. Until then, enjoy your Freedom Waffles.

DRIVING THE DAY — President Obama delivers remarks on the economy at 10:50 a.m. in Minneapolis … University of Michigan consumer sentiment at 9:55 a.m. expected to rise to 82 from 81.2

EX-IM PROGNOSIS: NEGATIVE — Per Eurasia Group’s Corey Boles, David Gordon and Sean West: “The Export-Import Bank's mandate now seems likely to expire at the end of the current fiscal year … House conservatives have decided to make a major push against the bank's renewal, in an effort to show they can still exert influence. … The Senate is expected to advance legislation that would renew the bank's authority with few, if any conditions. Republicans in that chamber are far less exercised about the agency's existence than their counterparts in the House …. The Senate may try to apply pressure to the House in July, when it is expected to pass its version, but it seems more likely than not that the House will ignore this pressure.”

** Questions are mounting for FSOC. Four years after the passage of Dodd-Frank, the Financial Stability Oversight Council (FSOC) is not working as Congress intended. How is the FSOC is becoming more transparent? What options is it considering outside of designation? Is it basing decision-making on the best available data and expertise? Many critical questions are still unanswered. Visit http://goo.gl/OGRswN. **

ASPEN IDEAS UPDATE — You all know how much M.M. loves the Aspen Ideas Festival despite no one ever inviting us to it. We can now share with you that Larry Summers and Sallie Krawcheck will both participate and do "Facebook Conversations at the Aspen Ideas Festival.” Summers is July 1 at 4 p.m. facebook.com/aspenideas; Krawcheck’s is July 1 at 11:30 a.m. facebook.com/SallieKrawcheck

OBAMA SEEKS $500M FOR SYRIAN REBELS — FT’s Richard McGregor: “The Obama administration has proposed funding to provide US military training and equipment for the Syrian opposition for the first time … The announcement, which was foreshadowed in President Barack Obama’s foreign policy speech at West Point in late May, marks a reassessment in the White House of the impact of the Syrian civil war on US interests. … A statement from the National Security Council said Mr Obama would seek $500m from Congress in part of the 2015 defence budget ‘to train and equip appropriately vetted elements of the moderate Syrian armed opposition.’

“‘These funds would help defend the Syrian people, stabilise areas under opposition control, facilitate the provision of essential services, counter terrorist threats, and promote conditions for a negotiated settlement,’ said the NSC spokeswoman, Caitlin Hayden. The CIA already has a covert training programme, operating from Jordan, but this will be the first time the US military has got directly involved. The Syrian opposition has lobbied for such assistance for months, sending a delegation to Washington in February to convince the US government to give the rebels fighting the regime of Bashar al-Assad access to better weapons and training.” http://on.ft.com/1pFpKNr

WHITE HOUSE KICKS OFF SUMMER TOUR — POLITICO’s Jennifer Epstein: “Obama headed out of Washington on Thursday to offer assurance to Americans that he hasn’t lost touch with the issues that guide their daily lives — or their complaints about the political system. ‘Are there programs that the government does that are a waste of money, or aren’t working as well as they should be? Of course,’ Obama said at a town hall in Minneapolis, on the first of several day-in-the-life trips the White House has planned for this summer that are aimed at getting him out of town, and out of his latest slump.

“The president’s appeal fit into the broader theme of his trip Thursday, an effort to convey to Americans that he hasn’t forgotten about the struggles of their day-to-day lives, even after 5½ years in office. … He also offered a shoutout to the U.S. men’s soccer team, congratulating the players for advancing to the next round of the World Cup, despite losing Thursday afternoon’s game against Germany. In an interview with ABC’s George Stephanopoulos conducted during the game, Obama congratulated the team for moving from being a ‘nonfactor’ to being a ‘middle-of-the-pack team.’ … During the hour-plus town hall, Obama again and again returned to the challenges that his mother and grandmother faced in their careers and the struggles he and first lady Michelle Obama faced when trying to buy a home and pay off their student loans.” http://bit.ly/1nNuEp1

INVESTORS GET OUT OF BARCLAYS’ DARK POOL — WSJ’s Bradley Hope and Scott Patterson: “Investors and brokers cut ties with the stock-trading venue run by Barclays … disconnecting from one of Wall Street's biggest so-called dark pools as the firm battles allegations of fraud and misleading its customers. … Broker-dealers, including Credit Suisse, Deutsche, Royal Bank of Canada, Sanford C. Bernstein & Co. and Investment Technology Group … removed connections to the dark pool, called Barclays LX, from their routing systems on Thursday … Those moves followed a civil lawsuit filed … by New York Attorney General Eric Schneiderman that accused Barclays of allegedly telling customers it would protect them from high-frequency traders while actually catering to such firms.

“The allegations, including emails among Barclays executives that appeared to describe decisions to mislead clients, reverberated across Wall Street and among institutional investors across the country. … Barclays LX is the second-largest dark pool in the U.S., behind one run by Credit Suisse. The Barclays venue handles hundreds of millions of shares a week on behalf of big investment firms. The U.K. bank's executives referred to it internally as the Franchise … The lawsuit hit Barclays's share price Thursday, as it fell 6.5 percent to £2.15. Analysts also expected the case to have an impact on discussions about dark pools in the U.S. markets, with investors demanding more transparency.” http://on.wsj.com/TnHbr4

ALIBABA PICKS NYSE — NYT’s Michael J. de la Merced: “In the battle to be the market home for the Alibaba Group, the winner is the New York Stock Exchange. Alibaba, the Chinese Internet commerce giant, disclosed in an amended prospectus … that it planned to list on the Big Board, under the ticker symbol BABA. .. The choice is a big victory for the [NYSE] which had competed with the Nasdaq stock market for what is expected to be one of the biggest initial public offerings in years. Shares of Alibaba could begin trading as soon as early August … Alibaba will be the [NYSE’s] biggest Internet I.P.O. Facebook chose the Nasdaq exchange in its market debut two years ago. …

“The two exchanges constantly compete for highly anticipated initial stock offerings, hoping to win listing fees and — perhaps more important — the prestige of big names that could draw other market debutantes. Nasdaq has captured a bigger percentage of the 142 initial public offerings this year, with roughly 57 percent … Part of the reason for that lead has been the exchange’s continued dominance in the listings of biotechnology companies.” http://nyti.ms/1po1Ie6

OBAMA RECESS GAMBLE FAILS — POLITICO’s Josh Gerstein: “Obama’s big gamble on recess appointments was smacked down unanimously by the Supreme Court … an embarrassing setback for the administration just as Republicans are turning up the heat on alleged overreaches by the chief executive. The justices all agreed that Obama took executive power too far by naming three nominees to a key labor panel during a three-day Senate recess in 2012. GOP lawmakers are already seizing on the decision as more proof of claims they make in a lawsuit House Speaker John Boehner just announced plans to file: that this is a president gone rogue.

“So while the White House braces for a new legal showdown with Congress over policies ranging from health care to immigration, they’re heading in with one loss already under their belt and Republicans feeling emboldened. ‘It represents a clear — clear rebuke to the president’s brazen power grab,’ Minority Leader Mitch McConnell said on the Senate floor. ‘It was a unanimous — unanimous — rebuke of the president of the United States. … The administration’s tendency to abide only by the laws it likes represents a disturbing and dangerous threat to the rule of law.” http://politi.co/1vbIvcJ

DISTRESSED DEBT FUNDS FLOCK TO CHINA — Bloomberg’s David Yong: “Distressed debt funds are raising cash to seek greater opportunities in China, where Standard & Poor’s says corporate borrowing topped the U.S. last year. Planned commitments to funds investing in Chinese and other Asian troubled assets are set to surpass $2 billion this year, up from $303 million in 2013 … Morningside Group Holdings Ltd. in Hong Kong plans a $103 million vehicle … Guangzhou-based Shoreline Capital Management Ltd. is seeking $500 million for its third distressed-debt fund … China’s economic growth has slowed to the least in more than a decade even as companies increased debt to $14.2 trillion as of Dec. 31, surpassing the $13.1 trillion in the U.S., according to a June 15 S&P report.” http://bloom.bg/1o8puHh

** A message from the U.S. Chamber of Commerce Center for Capital Markets Competitiveness — Questions are mounting for FSOC. Today’s questions: How can potential systemically important financial institutions (SIFIs) “de-risk” to avoid designation? And what is the process to become undesignated? Four years after the passage of the Dodd-Frank Act, the Financial Stability Oversight is still not working as Congress intended, leaving many critical questions unanswered. Learn more at: http://goo.gl/OGRswN. **

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