CNBC News Transcripts SHOW Capital Report (900 PM ET) - CNBC August 1, 2003 Friday LENGTH 1656 words HEADLINE Terrorist futures market ANCHORS GLORIA BORGER BODY GLORIA BORGER, co-host And welcome back. Earlier this week, word leaked out about a controversial Pentagon project that was designed to allow people to bet on the likelihood of terrorist attacks. No, it wasn't a dream, but some people thought it was an absolute nightmare. That same day, the program was scrapped, and now the man who was behind it, former Iran-Contra figure John Poindexter, is going to resign from his job. And in a moment, we'll hear from Pat Buchanan, who thinks the program was a really good idea. But first, we want to debrief NBC's Pentagon correspondent, Jim Miklaszewski, on just what this program was designed to do. Thanks for being with us, Mik. Tell us a little bit about what the idea was behind it. JIM MIKLASZEWSKI (NBC News) Well, the idea was actually pretty ingenious. It was to establish a market to rely on market factors. After all, in terms of oil futures and other future commodities, they're a pretty good barometer of where trends are going. So some people in DARPA, which is the Defense Advanced Research Projects Agency here at the Pentagon--a big mouthful, but essentially it's a group of eggheads that develop super high technology that is used for national security, that is used for the US military. But DARPA, for example, is the agency in the US government that actually invented the Internet. So that gives you some kind of idea about the things they sit around and think up. But in this case, they decided to create a terrors future market. In other words, they would put commodities on a market--for example, one example that was given was the assassination of the king of Jordan--and see who would buy into that. So if suddenly, on any given day, that particular future spiked, then you 'd have to put additional security around the king of Jordan. That was the idea behind it. MURRAY Mik, good--whether it was an ingenious idea or not... MIKLASZEWSKI Well... MURRAY ...didn't anybody at the Pentagon ever say, 'Hey, you know, this could be a political problem for us. Maybe we should check it with the guys on the Hill'? 'Cause they got pilloried not just by Democrats, but by Republicans on Capitol Hill. MIKLASZEWSKI Well, it was ingenious in trying to use market factors to determine world events. Now how it came out, however, and what was roundly criticized is it made it appear that the Pentagon was getting in the business of betting on the possibility... BORGER Right. MIKLASZEWSKI ...of terrorist attacks and, in some cases, assassinations. Some people called it gruesome, other people called it worse. Many people on the Hill said, 'I can only hope this is a hoax.' What I found amazing, actually, was Secretary Rumsfeld said before Congress that he had no idea the program was being studied and pursued until he read about it in the newspaper, and he killed it an hour later. BORGER Well, you know, I think Secretary Rumsfeld clearly understood what kind of political fallout this would have. I mean, you have people, you know, whose spouses perished in 9/11, and the notion that people would be betting on the next terrorist attack is a real political problem. MIKLASZEWSKI Now people who were involved in the program say, 'Look, there '--and DARPA's mandate is to "think outside the box," unquote... BORGER Sure. MIKLASZEWSKI ...and this was clearly outside the box. But many people also thought it was outside the realm of good taste. BORGER Yeah. I think that's the controversy. Thanks a lot, Mik. MIKLASZEWSKI OK. BORGER Jim Miklaszewski at the Pentagon. And we're going to get into that now with Pat Buchanan, because while the futures program did provoke this firestorm of criticism, we didn't have to look very far--in fact, we looked right down the hall--to find a supporter of the plan, and maybe he's one of the only supporters of the plan, and that's Pat Buchanan, co-host of MSNBC's--I always get that wrong--Pat Buchanan, "Buchanan & Press." PAT BUCHANAN (MSNBC "Buchanan & Press") Hi, Gloria. BORGER Thanks so much for being with us. OK, what's really good about this? BUCHANAN Well, what I regret is the people piling on the idea when these are very brilliant people who are thinking outside the box, and they've got a fundamental good idea. Let me give you an example of the futures market. If out in the West on a cattle farm out there now suddenly some cow came down with mad cow disease or foot-and-mouth disease, who would pick it up more rapidly, the Department of Agriculture or the cattle futures market? The idea here is to involve all the experts in knowledgeable--in terror who have the intelligence, the knowledge and the imagination and to think outside the box. And if you put some kind of betting pool--I mean, this will come right up to the surface far more rapidly. You mentioned 9/11. We know there were ideas out there--out there in the FBI, Miss Rowley, out there in Arizona, out there in other places. Suppose you put out a pool, 'Al-Qaida, we think, is going to strike the country. Where do you think it will strike and how?' I think you would have gotten some people who said, 'Look, they tried to blow up the World Trade Center, there's this character up there who's trying to fly a plane. They could just take planes and fly them into buildings.' And if that moved up, people at the Pentagon could take a look and watch that. MURRAY OK, but, Pat, here's the problem. Look, I'm a big fan of markets. I wrote a whole book, "The Wealth of Choices," about the great things markets have done for this economy. BUCHANAN Right. MURRAY But, but, but the reason markets work is because people with good information get involved. BUCHANAN That's right. MURRAY Well, who are the people with good information about terrorist attacks? BORGER Terrorists. MURRAY They're the terrorists, they're their families, they're their associates, they're their friends. You can't set up a marketplace that's going to allow terrorists and their associates to profit from their activities. BUCHANAN Well, look, we give money to terrorists right now if they'll turn in Saddam Hussein, $25 million. Look... BORGER Well... BUCHANAN ...suppose you had this market and it's got--this futures market. It's got the brightest guys, retired and present working, FBI, CIA, Mossad, MI5, MI6, and some terrorist somehow gets a little bit of money into the market and he bets on what he's going to do. BORGER Well... BUCHANAN Suddenly the odds on what he's going to go do go down and you say, 'What is going on here?' BORGER Well... BUCHANAN He would give himself away. BORGER Well, but wait a minute. MURRAY Well, then why would he do it? BORGER Why--wait a minute. Wait a minute. Would it... MURRAY Then why would it work? BUCHANAN Well, I mean, it works because you have people in the intelligence... MURRAY OK, but let--that... BORGER OK, wait, wait. Let me just--couldn't the terrorists use this site, though, to create disinformation? BUCHANAN Sure. BORGER They could play it in the wrong way, you'd be off... BUCHANAN Sure. Sam Waksal could get into it. MURRAY It's--it... BORGER Well, but you'd be heading off in one direction... BUCHANAN Sam Waksal's a good idea. How did--Martha Stewart's a bright, bright lady, she's flying on a plane to Texas. She looks and she said, 'Something is wrong. The market was saying something's wrong at ImClone.' She calls Sam. He won't tell her, calls her broker. 'Well, what's going on?' He says, 'I think they're selling.' Something was going on, the FDA. No one else knew that. That information was drawn out by the market. MURRAY You know, Pat, if this... BUCHANAN All I'm saying is one thing--let me say this. I mean, I know John Poindexter. He's one of the brightest guys I know, graduated first at Annapolis, a brilliant guy. They're thinking out of the box over there. Their objective is to find a method that will get the information to the decision makers faster than the bureaucracy did it on 9/11. MURRAY All right. That's the last... BORGER Yeah, but I'm not so sure they wouldn't get the disinformation. That 's--they're not stupid. BUCHANAN Well, let me give you an example. Go to Iraq, ask the noncoms, junior officers and colonels, 'How many guys are we going to lose before December or before December 31st? How many do you think? 'Cause we'll need to replace them.' Now if they say, 'We're only going to need 10, 15 more,' they're saying, 'We've got this under control.' But if they say, 'We're going to lose 200, 300 guys. These guys up top don't know what they're talking about,' that pool will tell you that the thing is going to happen. MURRAY Oh, Pat, but that's where this thing fell apart, because the original idea was to limit it to the intelligence community. It would be a closed betting pool. But somewhere along the way... BORGER Gotta open it up. MURRAY ...they decided to open it up so the terrorists could play, and that 's where it went bad. And it's our show, so we get the last word. BUCHANAN Well... BORGER And we gotta go. BUCHANAN But isn't it a good idea? Why would you kill ideas when we need every idea in this war? BORGER All right. Well, MSNBC's... MURRAY All right. You get the last word. BORGER ...Pat Buchanan of "Buchanan & Press." BUCHANAN All right. BORGER Thanks very much. MURRAY Great to have you. BUCHANAN Thank you. MURRAY And when we come back, are you going to get arrested for swapping songs on the Internet? BORGER I hope not. MURRAY The recording industry wants you to. A crackdown going on. That's our Capital Debate. BORGER Plus, you'll never believe how the Senate is spending your tax dollars. We'll have the pork-barrel details when CAPITAL REPORT returns on CNBC. (Announcements)