Pentagon scraps terror futures market. By Deborah Zabarenko 29 July 2003 19:52 GMT Reuters News WASHINGTON, July 29 (Reuters) - The Pentagon on Tuesday scrapped a planned online futures market that aimed to get information on Middle East events by letting investors bet on the probability of wars, terrorist attacks and assassinations. One day after Democrats in Congress brought the Pentagon's Policy Analysis Market to light with withering criticism, a Defense Department spokesman said the program had been terminated. "The director has determined that this is a program that under further scrutiny probably doesn't deserve continued support," spokesman Lawrence Di Rita told reporters. Earlier, Deputy Defense Secretary Paul Wolfowitz told senators that while the Defense Department was supposed to be imaginative, "it sounds like maybe they got too imaginative." U.S. senators released a letter saying the program's funding would be eliminated and Sen. John Warner, a Virginia Republican who chairs the powerful Armed Services Committee, called the plan "a very significant mistake." The Policy Analysis Market, launched online at http://www.policyanalysismarket.org by the Pentagon's Defense Advanced Research Projects Agency, aimed to let anonymous traders wager money on when and whether such events as the overthrow of the Jordanian monarchy might take place. The market planned to focus at first on economic, civil and military futures of Egypt, Jordan, Iran, Iraq, Israel, Saudi Arabia, Syria and Turkey, and the impact of U.S. involvement with these countries, according to the Web site. Traders were to begin registering on Friday, with trading set to start Oct. 1. The program was expected to initially cost $8 million. HELPING THE BAD GUYS? The idea was seen as a means of aiding the Pentagon to predict terror events as part of its search for ways to prevent attacks, based on the predictive abilities of the markets. "The price discovery process, with the prospect of profit and at pain of loss, is at the core of a market's predictive power," the program's Concept Overview said. The plan would have allowed traders to buy futures contracts priced on the certainty of a particular event occurring in the Middle East. Investors could make money by spotting whether the contracts were over or under-priced. One market analyst took a dim view. "From one end, creating a futures market on terrorism makes sense because markets have major predictive powers," said Phil Flynn, vice president and senior market analyst with Alaron Trading Corp. in Chicago. "But not only could it help the good guys, it could also help the bad guys. The terrorists could use the same information that these markets provided to see where we would be the most vulnerable." The plan drew sharp criticism from congressional Democrats, including Senate Minority Leader Tom Daschle of South Dakota, who asked the Bush administration to reject the plan. "We are asking the administration this morning to renounce this plan to trade in death," Daschle said on the Senate floor. "The administration should issue a public apology, especially to the families of the victims of Sept. 11." Retired Adm. John Poindexter was involved in the program, Di Rita said. Poindexter, who was convicted for his role in the 1980s Iran-Contra scandal - the conviction was later set aside - also spearheaded the Pentagon's so-called Total Information Awareness Program. That program was meant to collect information about potential terror threats from private databases. It raised such consternation over possible privacy invasion that the Pentagon set up boards to monitor the program's compliance with U.S. law and "American values related to privacy."