Terror futures market canceled

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WASHINGTON - A Pentagon proposal to start a "futures" market that would have let thousands of investors wager on the likelihood of terrorist attacks or coups in the Middle East was canceled yesterday.

Deputy Defense Secretary Paul Wolfowitz told lawmakers - one of whom criticized the proposal as "morbid" - that the so-called Policy Analysis Market was terminated yesterday, three days before it was slated to begin registering investors.

"I learned about it first from the newspaper this morning," Wolfowitz said during a hearing before the Senate Foreign Relations Committee on Iraq's reconstruction. "And my understanding is that it's going to be terminated. In fact, I think there will be an announcement made today to terminate it."

Added Wolfowitz, "I share your shock at this kind of program."

Pentagon spokesman Lawrence DiRita later told reporters that the Defense Advanced Research Projects Agency, which oversees the program, had decided to cancel it.

The Pentagon had spent $600,000 on the proposal, which came under DARPA's Information Awareness Office, headed by retired Vice Adm. John Poindexter, a key figure in the Iran-contra scandal in the 1980s.

The proposed market-style trading system, hatched by an office within DARPA, was designed to use a betting method that had been successful in predicting elections, monetary policy and movie box office receipts. Defense officials said they hoped wagers would allow them to predict events instead of relying on a "consensus among experts."

DARPA, Wolfowitz said, can be "brilliantly imaginative" with its research. But, he added, "it sounds like maybe they got too imaginative in this area."

Poindexter's Pentagon office had come under criticism from lawmakers for proposing a computerized Terrorism Information Awareness program. That data-mining project was designed to glean information on a potential terrorist's financial, travel, credit card and health history, but lawmakers worried about privacy issues and axed the idea.

The Policy Analysis Market came to light Monday when Democratic Sens. Ron Wyden of Oregon and Byron L. Dorgan of North Dakota denounced it at a news conference and said they would move to end its funding request of $3 million for next year and $5 million the year after. Wyden termed the program "ridiculous and grotesque."

Registration of investors was scheduled to start Friday with trading beginning Oct. 1. The market would have been limited to 1,000 traders, rising to 10,000 by Jan. 1.

A graphic on the market's Web site shows hypothetical futures contracts, including the likelihood of the assassination of Palestinian leader Yasser Arafat and the overthrow of Jordan's King Abdullah II.

Sen. Bill Nelson, a Florida Democrat, commended Wolfowitz for saying the program would be shut down. "But I want to know who is behind this," said Nelson. "Who would have ever brought this up to the point of getting this thing established?"

Said Wolfowitz, "Senator, I'd like to know too, and I intend to find out."