Fair Game? Masters of the Great Bailout worry someone else could use their stolen software "to manipulate markets in unfair ways.”

Goldman Trading-Code Investment Put at Risk by Theft

7/6/09

By David Glovin and Christine Harper
Bloomberg
Copyright 2009

Goldman Sachs Group Inc. may lose its investment in a proprietary trading code and millions of dollars from increased competition if software allegedly stolen by a former employee gets into the wrong hands, a prosecutor said.

Sergey Aleynikov, an ex-Goldman Sachs computer programmer, was arrested July 3 after arriving at Liberty International Airport in Newark, New Jersey, U.S. officials said. Aleynikov, 39, who has dual American and Russian citizenship, is charged in a criminal complaint with stealing the trading software. Teza Technologies LLC, a Chicago-based firm co-founded by a former Citadel Investment Group LLC trader, said it suspended Aleynikov, who started there on July 2.

At a court appearance July 4 in Manhattan, Assistant U.S. Attorney Joseph Facciponti told a federal judge that Aleynikov’s alleged theft poses a risk to U.S. markets. Aleynikov transferred the code, which is worth millions of dollars, to a computer server in Germany, and others may have had access to it, Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public today. “The copy in Germany is still out there, and we at this time do not know who else has access to it.”

‘Preposterous’

The prosecutor added, “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.”

The proprietary code lets the firm do “sophisticated, high- speed and high-volume trades on various stock and commodities markets,” prosecutors said in court papers. The trades generate “many millions of dollars” each year.

Defense attorney Sabrina Shroff said in court that the government’s allegations are “preposterous.” The firm was aware that Aleynikov, who is the father of three young girls, was downloading programs to his personal computer to do work at home and that he hasn’t disseminated the code, the lawyer said.

“If Goldman Sachs cannot possibly protect this kind of proprietary information that the government wants you to think is worth the entire United States market, one has to question how they plan to accommodate every other breach,” she said.

Michael DuVally, a spokesman for Goldman Sachs in New York, declined to comment.

$750,000 Bail

U.S. Magistrate Judge Mark Fox ordered Aleynikov, who earned $400,000 a year, to be held by on $750,000 bail, after prosecutors claimed he posed a threat to the community. Aleynikov planned to earn three times his salary by joining a startup company and engaging in high-volume automated trading, prosecutors said. Aleynikov posted bail today and was released.

Aleynikov didn’t speak at the hearing, except to say that he understood the conditions of his bail.

Teza, co-founded by former Citadel trader Misha Malyshev, said in an e-mailed statement that it first learned of the allegations on July 5 and suspended Aleynikov without pay following an investigation.

The firm “was not aware of the alleged misconduct” and offered to cooperate with the government, according to the statement.

Reverse Engineering

“Someone stealing that code is basically stealing the way that Goldman Sachs makes money in the equity marketplace,” said Larry Tabb, founder of TABB Group, a financial-market research and advisory firm. “The more sophisticated market makers -- and Goldman is one of them -- spend significant amounts of money developing software that’s extremely fast and can analyze different execution strategies so they can be the first one to make a decision.”

Someone could use the code “to implement the same strategies and maybe on certain stocks they can be faster and, in effect, take away money that would normally be Goldman’s,” Tabb said today in a phone interview. “The second thing that they can do is actually analyze the code so that they know what Goldman’s going to do before Goldman does it and kind of reverse engineer Goldman’s strategies and make money basically at the expense of Goldman.”

‘Wake-Up Call’

Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission, said proprietary electronic data poses significant risks for all financial institutions.

“This is a wake-up call to all financial institutions to review their security systems, not just with respect to trading codes, but with respect to all proprietary information,” said Pitt, now chief executive officer of Kalorama Partners LLC in Washington.

Goldman appeared to have taken some steps to prevent the theft of its code, Pitt said. “The real question is whether, in light of this outrageous conduct on the part of one of its employees, it should have taken more steps,” Pitt said.

Aleynikov spent four hours with a Federal Bureau of Investigation agent after his July 3 arrest, Shroff said. He told the agent that he’d done nothing wrong, authorized prosecutors to seize his personal computers, and said he hadn’t known the server he was using was in Germany, she said.

32 Megabits

Only 32 of 1,024 megabits of the software code was transferred, Shroff said.

“It is not disseminated,” she said of the code.

Facciponti said at the hearing that Aleynikov could disseminate the code “in 10 minutes” using a cell phone. Once the government obtains access to the German server, prosecutors will see if Aleynikov transferred other confidential data as well, he said. It’s logical to conclude that Aleynikov planned to use the code at his new company, the prosecutor said.

“This is the most substantial theft that the bank can remember ever happening to it, in the sense the entire platform has been taken from it,” Facciponti said. “There has been no breaches anywhere on this magnitude at the bank.”

Aleynikov worked at Goldman from 2007 until June, the government said in the complaint. He was part of a team of workers responsible for improving the computer platform. His alleged transfer of computer codes ran from June 1 to June 5, according to prosecutors.

Moscow, Rutgers

Aleynikov studied applied mathematics at the Moscow Institute of Transportation Engineering before transferring to Rutgers University, where he received a bachelor’s degree in computer science in 1993 and a master’s of science degree, specializing in medical image processing and neural networks, in 1996, according to his profile on the social-networking site LinkedIn.

Before joining Goldman Sachs, he worked for about eight years at IDT Corp., the U.S. vendor of prepaid calling cards, where he led the team responsible for developing routing systems, according to the profile.

His profile on LinkedIn describes him as a vice president in equity strategy at Goldman Sachs and includes two recommendations from colleagues at the firm.

Goldman Profit

Goldman was the world’s biggest and most profitable securities firm until it converted to a bank in September following the bankruptcy of smaller rival Lehman Brothers Holdings Inc. Goldman earned $2.3 billion last year, down from a record $11.6 billion in 2007, as market turmoil caused it to report a fourth-quarter loss, its first in a decade as a public company.

Goldman’s equities business generated $2 billion of revenue in the first three months of 2009, down 20 percent from the first quarter of 2008, the company reported in April. Second-quarter results are due to be reported next week.

Goldman rose $2.97, or 2.1 percent, to $146.46 in New York Stock Exchange composite trading.

The case is U.S. v. Aleynikov, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.

© 2009 Bloomberg: www.bloomberg.com

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"It's intriguing how a spotlight can change a politician's perspective...."

In spotlight, toll roads too hot to handle

During special session, it's safety first for lawmakers.



7/6/09

Ben Wear
Austin American-Statesman
Copyright 2009

It's intriguing how a spotlight can change a politician's perspective. Or in the case of the special session just past, a whole bunch of politicians' perspectives.

Way back in the spring of 2009 (OK, about three months ago), the Texas Senate overwhelmingly passed Senate Bill 404 and Senate Bill 17. The House Transportation Committee later passed both bills. And the Senate even passed them again, this time while they were taking a ride on the Texas Department of Transportation sunset bill that later died.

In fact, all of these bills died in the House late in the session. But it had nothing to do with the content of SB 404 and SB 17, which occasioned little debate during the regular session.

Then, last week, members of the House and Senate turned their noses up at both bills and declined to even vote on them.

To refresh your memory, SB 404 would have extended by several years the authority of TxDOT and regional mobility authorities to sign long-term toll road leases with private companies. Its companion bill, SB 17, would have mandated that such contracts protect the state's and residents' interests by making it easier to build nearby free roads and setting prices now for the state to buy back a private toll road if it ever wanted to.

Those two bills were combined, for the special session, into a single bill. Neither could get a vote in the House Transportation Committee or the Senate Finance Committee. The House Transportation Committee chairman, Joseph Pickett of El Paso, said members did not consider it a "safe vote." Meaning, it was a vote that could turn a legislator into a former legislator.

Remember, this same committee voted for the same changes to the law about seven weeks ago.

Why was it a safe vote in May and a dangerous vote in July?

Back then there were thousands of bills up for consideration, and thus the attention of the public and the press was fragmented. Transportation insiders, anti-toll activists and the few transportation writers for major dailies were paying attention to this. But most people weren't.

Now, with only three subjects on the special session call, and no controversy on two of them, that left the entire focus on this one bill. On legislators voting to allow private toll roads, potentially operated by (and sending profits eventually to) foreign companies like Spanish toll road builder Cintra. On lawmakers in effect undoing a moratorium on most such contracts that they voted for in 2007.

So, why not just bring it up and vote against it? Well, that could then be used against lawmakers later by an opponent saying they'd voted against badly needed roads. And it would be a vote against Gov. Rick Perry, who wanted to extend the authority for private toll roads. A vote against Perry, who has enthusiastically wielded his veto pen through the years.

Of course, presumably somewhere amid all this there is the "right" position to take on this issue — even if what is deemed right might vary from lawmaker to lawmaker — rather than the "safe" position. But Jefferson Smith went to Washington, not Austin.



And he was a fictional character.

For questions, tips or story ideas, contact Getting There at 445-3698 or bwear@statesman.com.

© 2009 Austin American-Statesman: www.statesman.com

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"More than a year after TxDOT was labeled an out-of-control agency in need of reining in...No TxDOT reforms were put into state law."

TxDOT: After all the outcry, no changes in law

7/5/09

By Peggy Fikac
San Antonio Express-News
Copyright 2009

AUSTIN — More than a year after the Texas Department of Transportation was labeled an out-of-control agency in need of reining in, lawmakers made their decision: No TxDOT reforms were put into state law.

That means no alteration in the makeup of its governing commission, which is appointed by Gov. Rick Perry and in the past was accused of pushing his ideas without heeding lawmakers leery of such things as privately run toll roads. No special legislative oversight committee. No changes except for those TxDOT carries out on its own.

That's the upshot after a reform bill failed in the regular session and lawmakers meeting in a quickie special session simply continued the agency as is until they reconvene in 2011.

“Certainly I think this is a missed opportunity,” said Rep. Ruth Jones McClendon, D-San Antonio, a House Transportation member who pushed for such changes as an elected commissioner.

The good news: McClendon and some other lawmakers said TxDOT is working to change. Among actions they like is a new contract for a thorough review of agency operations.

TxDOT says it has acted on last year's Sunset Advisory Commission staff recommendations, including an update of its complaint receipt and tracking process. Senate Transportation and Homeland Security Chairman John Carona, R-Dallas, said most Sunset changes are under way.

Among items not addressed is the Transportation Commission makeup. But Carona, who opposes an elected panel as too political, said members are listening to lawmakers' concerns.

McClendon and House Transportation Chairman Joe Pickett, D-El Paso, say there's a need to change the agency “culture.” Pickett said that without a legislative overhaul, “I think they'll try to paint the trim on the ... building, but it's not going to make any real significant difference.”

Lawmakers said even without a new oversight committee, they'll keep close tabs on TxDOT between now and 2011.

“We recognize that TxDOT has been a troubled agency,” Carona said, “and it needs significant attention from the Legislature.”

As some lawmakers fruitlessly urged Perry to add a bill to expand the Children's Health Insurance Program to the special-session agenda, U.S. Sen. Kay Bailey Hutchison's camp still wouldn't say if she supported the measure. Her spokesman, Hans Klingler, said she will be detailing a plan for children's health care and make the issue “a centerpiece” of her expected tough campaign against Perry for the GOP nod for governor.

Perry spokesman Mark Miner said, “Once again, she doesn't have any details to discuss.” He noted Perry's stand that the focus should be on children who already qualify for CHIP but aren't enrolled, adding that Hutchison supported a CHIP expansion in D.C.

Lt. Gov. David Dewhurst, who married Houston lawyer Tricia Bivins just over a week ago, got to spend part of his honeymoon at the Capitol. Session over, he said they plan to go to Colorado or California. His take on his marriage: “Even a blind squirrel sometimes finds a beautiful acorn.”

© 2009 San Antonio Express-News: www.mysanantonio.com

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"Perry's Department of Transportation fought like a badger to put state highways 121 and 161 in the hands of private toll road firms."

Long a leader in toll-road pursuits, Texas taps the brakes on efforts



7/5/09

By MICHAEL A. LINDENBERGER
The Dallas Morning News
Copyright 2009

AUSTIN – Texas spent the past six years leading the nation in its pursuit of private toll roads. Now, it looks to be among the first to call a timeout.

Lawmakers quit the Capitol on Thursday after refusing Gov. Rick Perry's pleas to extend the state's authority to enter long-term contracts with private toll-road developers beyond this summer.

The decision won't kill all private toll roads in Texas – not yet. But it signals a significant halt to one of Perry's signature initiatives, and a pause for a policy that not only helped launch a powerful trend in statehouses across the U.S., but also sparked an explosion of toll roads in Texas, nowhere more extensively than in Dallas.

Perry's policies, first given life by the Legislature in 2003, have meant both billions of dollars in new highways constructed and ever-higher tolls for millions of Texans.

Now, the state may be headed down another road as its authority to strike new deals expires Aug. 31.

"I am as happy as a hog taking a bath in a pond of slop," said Hank Gilbert, an East Texas farmer who was the Democratic – and losing – candidate for agriculture commissioner in 2006. He also has been one of the loudest voices against toll roads in Texas. "It just couldn't be no better than this."

Gilbert and many other grass-roots activists had campaigned tirelessly against toll roads, public or private, since 2003.

The strongest opposition came from voices in rural Texas, where roads are already adequate and where many feared, unnecessarily it turned out, that Perry's proposed Trans Texas Corridor would result in a giant land-grab.

Urban impact

But it is places like Houston, Austin, and, especially, Dallas that have seen the biggest impact of Perry's push. Two of the richest toll contracts in the country involved highways running through North Texas, and Perry's Department of Transportation fought like a badger to put state highways 121 and 161 in the hands of private toll road firms.

Instead, those contracts went to the North Texas Tollway Authority, although the Highway 161 deal is not final.

But in large measure, Perry's approach won there anyway. To beat out private-sector competitors, NTTA had to embrace the same kind of staggering debt loads, quickly escalating toll rates and big upfront payments to the state that characterize the private deals.

The impacts are everywhere in North Texas. Drivers here pay higher toll rates on NTTA's growing network of roads. Rates that were less than 10 cents a mile just a few years ago are about to be 14.5 cents per mile. Rates on so-called managed lane projects, where drivers are given the choice of driving on optional tolled HOV lanes, could be 50 cents to 75 cents a mile, or even more, during rush hour.

Under pressure from local leaders demanding more roads, NTTA plans to build a half-dozen or more major toll roads in the next five to 10 years.

Meanwhile, the Spanish firm Cintra has agreed to spend billions to rebuild LBJ Freeway in Dallas and to construct the North Tarrant Express near Fort Worth. Both projects involve a mix of tax dollars and private funds, and will result in highways with free lanes and tolled managed lanes.

NTTA chairman Paul Wageman said Perry's push for private toll roads has clearly had its benefits but also comes at a price.

"It's not for me to speak to the governor's legacy when it comes to this policy," Wageman said. "But it has allowed the state to build out a network of roads that would not have otherwise been built."

On the other hand, Wageman said, "I do have concerns" that voters don't realize just how many toll roads are headed their way.

"The public needs to be educated and made aware that is what is going to happen," he said.

Some of those toll roads, and others throughout Texas, might end up being private roads despite lawmakers' decision last week.

The Highway 161 project in Dallas County, and the Grand Parkway, a 200-mile tolled loop around Houston, could still be private roads – if the public toll authorities decide they can't build them. A 2007 bill gave state transportation officials until 2011 to conclude private deals on those two projects, and some others throughout Texas.

Kris Heckmann, deputy chief of staff and top transportation expert on Perry's staff, said public toll authorities don't have much time.

"If they don't want it, then they have got to give it to TxDOT in a hurry," Heckmann said, noting that 2011 is not as far away as it seems, given how long some of the private deals can take. "There's still time, but if they screw around for six months there may not be."

Other projects, including the conversion of local HOV lanes to tolled lanes, had been expected to involve private toll road companies, but now can't unless the Legislature restores private toll road authority in 2011.

State has stood out

But whatever the impacts on local roads, one thing is clear, lawmakers have ended, at least temporarily, Texas' role as a national leader in the race among states to embrace privatization.

"Texas was huge," said Leonard Gilroy, an analyst at the Reason Foundation and one of the nation's most insistent voices in favor of privatization of government functions. "They came out with a bold agenda that was combined with a massive need [for new roads]. Other states looked at what was happening and said, 'Wow.' "

The Bush administration championed highway privatization religiously, and praised Texas' push at every turn. But President Barack Obama's secretary of transportation, Ray LaHood, has also embraced it, as have many Democratic leaders in Congress.

New York, Florida, Virginia, Georgia and Pennsylvania all have expanded authority for private toll roads. California, debt-ridden to the point of near-collapse, recently approved new laws that give a green light to Perry-style privatization.

But the legal authority for such projects has often not been followed by new toll roads, at least not to the scale and scope of the leveraged deals in Texas.

Many of the most recent privatization deals involve endeavors other than highways, such as private contracts for city parking in Chicago and Pittsburgh and even, in California, public courthouses.

And increasingly, the existing private toll roads, others note, are confronting the same problems facing NTTA, including sagging traffic and huge debts.

A much-watched deal to sell Chicago's Midway Airport collapsed this spring, and a $12.8 billion proposal to privatize the Pennsylvania Turnpike collapsed last year.

Former U.S. Secretary of Transportation James H. Burnley, who served under President Ronald Reagan and now represents transportation-related clients as a lawyer in Washington, said Wall Street's appetite for the highly leveraged toll road deals has waned.

There is significantly less capital available for those kinds of investments, he said.

"Virtually all of the public-private deals that have been seriously discussed in the past decade have involved significant leverage," he said. "As we return to a more normal economy those kinds of deals will be attractive again. But lenders [may] continue to be more conservative for many years to come, reducing availability of capital for infrastructure."

Because the need for highways is so much more than the available tax funds to pay for it, private toll roads will continue to be important, Burnley said. "But they will play a reduced role."

Break may benefit

Gilroy said a two-year pause in Texas might help strengthen support here for privatization, given that the state's need for new highways isn't going anywhere.

That could make Perry's sales job easier in 2011, when, if re-elected, his aides said he would try to put Texas back on the path to private toll roads.

"Absolutely, the governor is going to keep pushing, pushing for putting this tool back in the box," Heckmann said. "If he had waited for the Legislature to raise taxes or for Congress to send us back an even return on what we send to Washington in gas taxes, then nothing would ever get built."

Gilbert said anti-toll activists are now going to work just as hard to convince lawmakers that a modest increase in gas taxes is politically viable.

Otherwise, Texas will either return to tolls or, just as bad, keep borrowing billions in a race to keep up, he said.

"That is just as fiscally irresponsible as the [private toll roads]," Gilbert said. "The vast majority of Texans would much rather pay at the pump than at the toll booth."

That's not clear. Lawmakers haven't raised the state gas tax since 1991, when they set it at 20 cents per gallon. Congress last increased the federal rate in 1993, to about 18 cents a gallon.

Efforts by Sen. John Carona, R-Dallas, to persuade Texas lawmakers to attach a modest gas tax increase died this past session, just as they did in 2007.

Indeed, probably the most important political dynamic in Perry's push for toll roads lay in the fact that it produced billions in new revenue, without requiring elected officials to raise a single tax. Instead, they simply made it legal to expand tolling, and let it be embraced by local planning boards and toll road authorities themselves, whose members are only indirectly accountable to voters.

Heckmann said that's a good deal for Texans, since "using a toll road is an option."

But as they proliferate, especially in North Texas, and as free roads are allowed to become increasingly traffic-jammed, the notion that toll roads are optional is quickly losing its virtue.

Drivers who use toll roads are paying far more for their highways than they would if they were simply required to pay higher gas taxes. But on the other hand, drivers who don't use them, or use them only rarely, pay much less than they would if gas taxes were increased.

Heckmann said that if lawmakers decide they want to raise gas taxes, then Perry might go along – as long as it was first put to the voters in a constitutional amendment. He said his boss, however, is a political realist.

"We're not holding our breath for that to happen," he said.

WHICH PROJECTS WOULD BE AFFECTED?

Lt. Gov. David Dewhurst, flanked by two leading senators, stressed last week that the decision not to extend the state's authority for private toll roads would not have a negative impact on North Texas drivers. Still, several North Texas projects could be affected. Here's how:

STATE HIGHWAY 161: This Dallas County highway is among a handful of toll roads in Texas that have a special extension from the lawmakers' decision. That means state officials have until 2011 to sign a private toll contract. NTTA has conditionally been awarded the deal but has until February 2010 to sign it. If NTTA passes, the state will have to race to complete a private contract by 2011. Regional transportation officials advanced hundreds of millions of dollars from other projects to speed the highway's construction, and if it is not built as a toll road, they could lose that money.

MANAGED LANE PROJECTS: North Texas' network of HOV lanes has more than doubled in recent years, and scores of miles are slated for conversion to tolled lanes by 2030. Two big projects, the LBJ Freeway reconstruction and North Tarrant Express, will proceed despite lawmakers' decision. Many others won't, or they'll be delayed until at least 2011, when Gov. Rick Perry tries again to get lawmakers to authorize private deals. They include: Interstate 35E from Northwest Dallas to Denton County; I-30 in Dallas and Tarrant counties; and State Highway 183 in Dallas County.

© 2009 The Dallas Morning News: www.dallasnews.com

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"Like a pig laying in a cool pool of slop in hundred-degree weather.”

Inaction pleases opponents



7/5/09

By Josh Baugh
San Antonio Express-News
Copyright 2009

AUSTIN — At the end of the 81st Legislature's special session last week, toll-road opponents went home happy — like “a pig laying in a cool pool of slop,” as one of them put it.

The agency poised to bring toll roads to San Antonio, meanwhile, was left looking toward the 82nd Legislature in 2011, with hopeful expectation that lawmakers then will extend the life of a controversial road-building tool that could pave the way for new toll roads in San Antonio and elsewhere.

In a speedy two-day special session that wrapped up well before dinner Thursday, Texas lawmakers rested on the laurels of two pieces of legislation that extend the life of several state agencies, including the Texas Department of Transportation, and the funding of road projects.
They took the safe road on the hot-button bill that would have extended comprehensive development agreements, or CDAs, letting it die in committee and kicking the issue down the road to a later date — though its proponents vowed to bring it up again at the earliest opportunity.

The controversial measure was vehemently opposed by Texans Uniting for Reform and Freedom, or TURF — a grassroots group that fights toll roads across the state — whose members could scarcely contain their glee.

“Man, we couldn't be any happier,” TURF board member Hank Gilbert said. “I think it's kind of like a pig laying in a cool pool of slop in hundred-degree weather.”
The highly controversial element of CDAs, known as concession contracts, allow private companies to design, build and operate toll roads, and then collect revenue from them for at least the next five decades. The less controversial component of CDAs is the “design-build” agreement, which keeps control of the project with the government agency that built it.

That's a distinction that often gets lost in the vitriolic toll-road debate, and one that Alamo Regional Mobility Authority officials tried to impress on lawmakers during the special session.

Rep. David Leibowitz, D-San Antonio — perhaps TURF's best friend among the Bexar County delegation — said CDAs are nothing more than a way for wealthy private company owners to make even more money. His solution to congestion problems is rooted in the statewide gas tax, which for years has been raided to pay for nontransportation projects. Leibowitz acknowledged the difference between concession contracts and design-build contracts but said the latter is just a “lesser evil.”

But by all accounts, there was no urgency for legislators to take up the issue in the special session because no projects were at risk. There will be building pressure, however, to address CDAs in 2011 because the RMA wants to use design-build contracts to develop the U.S. 281 and Loop 1604 corridors.

By then, Gilbert says, it may be a moot point. In a few months, TURF plans to announce a “more conventional” plan for dealing with congestion problems — one that should receive widespread support from grassroots groups and industry alike, he said. Gilbert wasn't willing to provide further detail.

That aside, lawmakers say they plan to address CDAs in 2011, and Alamo RMA Executive Director Terry Brechtel said she's confident they'll authorize the use of the contracts.

“We have complete confidence that CDA authority will be extended in 2011, specifically the design-build piece that we're interested in,” she said, drawing a nuanced distinction among the contract models that fall under CDAs.

While the bill's failure won't immediately affect any projects in San Antonio, the RMA will push for CDA extension in 2011 because it plans to use design-build contracts to add capacity to U.S. 281 and Loop 1604. By the next Legislature, the RMA will have spent some $18 million on environmental studies for expansion on the two highways. RMA officials say those projects aren't in jeopardy even if CDAs were to die in 2011 because the agency could use traditional low-bid construction contracts rather than design-build contracts.

It's important to note that while the RMA has never ruled out the use of concession agreements, Brechtel said that there's no support to use that form of financing in San Antonio. “Our county judge has not supported concessions. So until our county judge supports concessions, we will not support concessions,” she said. “It's going to take political will to do a private concession in San Antonio, and I don't see the political will.”

© 2009 San Antonio Express-News: www.mysanantonio.com

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"This was a back door way to bring back the TTC...I think we killed some really bad legislation.”

Lawmakers adjourn after two-day session



7/3/09

From Staff and Wire Reports
Brenham Banner-Press
Copyright 2009

State Rep. Lois Kolkhorst said the just-ended special legislative session was as much a success because of what was not passed as it was for what was.

The Texas Legislature adjourned a two-day special session Thursday, finishing two of the issues assigned to them by Gov. Rick Perry while a measure to allow the state to continue contracting for privately built toll roads never made it out of committee.

Lawmakers passed bills to keep five important state agencies operating for the next two years and a measure authorizing the state to spend $2 billion in bonds to build new roads.

The unanimously approved agency bill will save the Texas Department of Transportation (TxDOT), the Department of Insurance and three other agencies from abolition. That’s because state law requires the Legislature to regularly review and reauthorize state agencies, but lawmakers failed to renew them during the regular session that ended June 1 because of partisan bickering.

Both chambers also passed a bill Thursday that authorizes the state to spend $2 billion in bonds to build new roads. The road bonds were already approved by voters statewide in 2007, but the Legislature still needed to authorize the spending.

House lawmakers added a provision that would prohibit the money from being used to turn existing free roadways into tollways.

The failed measure that would allow the state to continue contracting for privately built toll roads was an upset for Gov. Rick Perry, whose office tried unsuccessfully to broker a compromise in the final hours.

Contracts known as Comprehensive Development Agreements (CDAs) have been used to finance, build and operate toll roads and other projects. But opponents of such contracts worry they take control away from local governments.

Kolkhorst (R-Brenham) said the CDA proposal was another attempt to revive the Trans-Texas Corridor, a network of “superhighways” pushed heavily by Perry.

TTC would have gobbled up vast amounts of land and was bitterly opposed by many rural property owners.

Kolkhorst said there continues to be “a great distrust” for the Texas Transportation Commission and TxDOT.

“There’s a great distrust about the transportation commission, what we’ve been through with the TTC in our area. This was a back door way to bring back the TTC,” she said.

“I’m thrilled that we were able to do that. It’s not so much what you pass but what you kill. And I think we killed some really bad legislation.”

Kolkhorst also applauded a decision to bring back TxDOT back for “sunset review” in two years and approval of the bonding authority.

A proposal to allow half of the $2 billion to be a “revolving loan fund” was not allowed because of concerns private investors would tap into it, then “bundle and sell” the loans again and again.

Kolkhorst said the speed at which the Legislature moved through the special session was also a plus.

“I’m pleased with the way the special session came out. Two days is incredible,” she said. “We saved the taxpayers a lot of money.”

© 2009 Brenham Banner-Press: www.brenhambanner.com

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"Rick Perry's interest in the state's growing transportation problems appears to be limited to protecting the contracts of private firms."

LEGISLATURE '09 SPECIAL SESSION

Legislature spikes Perry's push for CDAs, transportation revolving fund

7/3/09

By TERRENCE STUTZ and EMILY RAMSHAW
The Dallas Morning News
Copyright 2009

AUSTIN – State lawmakers quickly wrapped up a two-day special session Thursday by approving $2 billion in highway bonds and extending the operations of five agencies – but they spiked Gov. Rick Perry's continued push for toll roads.

Although Perry pressed hard for legislation to allow use of public-private toll roads across the state, both the House and Senate were cool to the idea. And efforts to strike a compromise – including repeated phone calls by the governor and his aides to legislative leaders – fell flat.

"It's time to hit the road," said Sen. Florence Shapiro, R-Plano, expressing relief that the toll-road bill went nowhere during the special session. Shapiro was among several lawmakers from North Texas who disliked the legislation.

Lt. Gov. David Dewhurst and Senate transportation committee chairman John Carona, R-Dallas, said they gave up on the toll-road bill after talking to local transportation agencies around the state. None said the measure – authorizing so-called comprehensive development agreements for toll roads – is needed at the present time.

"We wanted to see if we needed to extend the time eligibility for these agreements, and what we heard from different transportation agencies is 'no,' " Dewhurst said. "We didn't see any urgency for it."

Carona emphasized that the decision to take no action will not have any effect on highway improvements over the next two years.

"No major project is gong to be left behind between now and 2011," he said. "We'll have ample opportunity to take up this issue again in the 2011 session."

The governor also suffered setback in the transportation bonding bill passed by the House and Senate, which decided against placing bond revenue in a revolving fund that could have been used for a wide variety of projects – including privately operated toll roads. Instead, the money will go into a much more restrictive account and cannot be used to convert free roads into toll roads under a House amendment accepted by the Senate.

Perry thanked lawmakers for their work on the highway bond and state agencies bills but voiced regret over inaction on the toll-road proposal.

"I had hoped to reduce uncertainty regarding several major transportation projects across the state by extending the comprehensive development agreement authority for local and state transportation agencies," he said, understating how hard he pushed for passage of the measure.

"Although the CDA bill did not pass, we will continue to work with legislators and local officials to find transportation solutions."

Both the $2 billion bond program and the bill extending the operations of five state agencies easily passed the House and Senate. Those agencies – the transportation and insurance departments, the Office of Public Insurance Counsel, the racing commission and affordable housing corporation – were authorized for another two years but will be scrutinized by lawmakers in their 2011 session.

The transportation bonds bill took a little wrangling to pass in the House, where members tacked on a handful of amendments to head off the possibility of the funds being used for toll roads. Lawmakers also agreed to allow road-building entities such as the North Texas Tollway Authority to stretch out their financing, as opposed to raising rates.

Opposition to the toll roads bill was strongest in the House. Many lawmakers said they're simply turned off by toll roads altogether. Others said it wasn't possible to vet such a divisive issue in a three-day legislative session.

The bill would have reauthorized the kinds of deals that are proliferating in North Texas, including the LBJ Freeway reconstruction, the North Tarrant Express and the DFW Connector. Without it, projects already in the works won't be affected.

But it could delay, or even derail, toll road projects still in the pipeline, such as State Highway 161 in Dallas County.

A spokesman for gubernatorial hopeful Sen. Kay Bailey Hutchison accused Perry of using the special session to line the pockets of corporate toll-road operators, and to pursue the Trans Texas Corridor under a different name.

"Rick Perry's interest in the state's growing transportation problems appears to be limited to protecting the contracts of private firms," Hans Klingler said. "The Trans Texas Corridor and the tolling of roads has been an expensive and expansive assault on the rights of property owners."

A spokesman for Perry fired back at the Hutchison camp.

"Governor Perry will continue to utilize all available resources to address the transportation needs of Texas," Mark Miner said. "Senator Hutchison has been in Washington for 16 years, and Texas continues to be short-changed, receiving only 74 cents back for every tax dollar sent to Washington for roads."

Both Dewhurst and House Speaker Joe Straus said they were delighted to finish up in such a short time.

"Members of the House wanted to pass the bare necessities. They weren't looking to delve very far into substantive policy issues," Straus said, explaining the lack of support for the toll-road bill.

The speaker also said Perry didn't put any pressure on him to steamroll the measure through.

"There were no uneasy conversations about it at all," Straus said. "I don't think there was an urgency."

Several lawmakers questioned Perry's decision to include the toll-road bill on the agenda for the special session, but they also said he deserved credit for not introducing volatile issues that could have forced the session into a partisan standoff, such as the GOP-backed voter ID legislation that was responsible for killing hundreds of non-related bills during the regular session.

© 2009 Dallas Morning News: www.dallasnews.com

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"We defeated a sold out Senate and the BIG MONEY, the lobbyists, who sank millions into pushing for the sale of Texas highways."

Stunning grassroots victory:

CDAs die, pensions protected



7/2/09

Terri Hall
Texans Uniting for Reform and Freedom
Copyright 2009

(Austin, TX) Today, ordinary Texans brought Governor Rick Perry’s road privatization, toll road, and Trans Texas Corridor agenda to a screeching halt.

The Legislature adjourned without re-authorizing private toll road contracts called Comprehensive Development Agreements (or CDAs).

The grassroots scored another victory by KILLING the revolving fund in HB 1, preventing the $2 billion in bonds from being spent to build toll roads, convert freeways to toll roads, or subsidize private toll deals, as well as protecting public employee pension funds from risky toll roads schemes that are failing all over the world.

“It is a hard-fought victory for the grassroots. We killed Goliath, not just Perry’s controversial toll road policies, but we defeated a sold out Senate and the BIG MONEY, the lobbyists, who sank millions into pushing for the sale of Texas highways,” Hank Gilbert, Texas TURF Board member and President of Piney Woods Subregional Planning Commission.

“We applaud Rep. David Leibowitz, once again, for standing up for Texas taxpayers and leading the charge to fix the bill that created a revolving fund that would have raided teacher retirement and public employee pension funds for risky toll road schemes. He authored the bill to KILL the Trans Texas Corridor and another to prevent the conversion of freeways to tollways during the regular session. He’s a proven taxpayer hero and Texans owe him a tremendous debt of gratitude,” said TURF Founder, Terri Hall.

“However, no session is without a few villains. CDA proponents and senate leaders like John Carona and Steve Ogden need to be taken to the woodshed for promising to promote the MOST expensive method of road funding, CDAs, next session, and for wanting to continue to raid public pension funds over the LOUD objections of Texans. None of this is dead in their minds, just postponed until they can resurrect this controversial public fleecing for another day,” Hall emphasized.

Taxpayers wanted Perry’s controversial and virtually universally detested road privatization schemes to die a natural death August 31 as scheduled, which will also KILL the mechanism to build the Trans Texas Corridor (or TTC). Today, they achieved just that.

However, TTC-69/I-69 was excepted out of the moratorium, SB 792, in 2007, so TxDOT has the authority to enter into CDAs for that project through 2011. TURF, in cooperation with two private property rights foundations (Stewards of the Range and American Land Foundation) and local governments, have been instrumental in forming subregional planning commissions in the path of TTC-69, and plan to use these commissions to challenge the TTC and keep it from ever being built.

© 2009 Texans Uniting for Reform and Freedom: www.texasturf.org

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Carona: "We will take this (issue) up in 2011.”

Senate leaders: Private toll-road bill DOA



7/2/09

By Mike Ward
Austin American-Statesman
Copyright 2009

Lt. Gov. David Dewhurst and Senate leaders just announced publicly what senators had confirmed an hour ago: A bill to continue to allow more privately built toll roads to be constructed is dead in the special legislative session.

And lawmakers plan to finish their other business — approving the issuance of $2 billion in road-building bonds and continuing the operations of five state agencies — and then go home later today.

Dewhurst said attempts for a compromise on the toll-road bills — Senate Bill 3 and House Bill 3 — failed amid growing questions about whether any action on the matter was needed before the Legislature convenes in regular session again in January 2011.

State Sen. John Carona, R-Dallas, chairman of the Senate Transportation and Homeland Security Committee, said the urgency of the matter waned after local and state transportation assured legislative leaders that no projects would be killed or delayed by the lack of a vote.

“If it was a critical issue, we’re here to deal with it,” Corona said. “But we have been assured … that no major project is going to be left behind … We will take this (issue) up in 2011.”

Gov. Rick Perry had called lawmakers back into special session to address three issues: The bonds, to continue the operations of the five agencies that otherwise would have shut down, and to give the authority of the Texas Department of Transportation continued authority to contract for the privately built toll roads — through deals called “comprehensive development agreements.”

Dewhurst said Perry’s reaction to let the third issue on the agenda die without action was: “roads need to get built.”

“They will,” Corona said. “It would be a mistake to do away with CDAs. But we need to take some time to look at this issue, and we can do that in 2011 without any impact on projects.”

So with the controversial issue off the table, here’s what the schedule for the rest of the special session looks like:

At 3:30 p.m., the Senate Finance Committee is expected to approve House Bill 1 (bonds). It will then go to the full Senate for a vote, probably about 5 p.m.

The House earlier today approved Senate Bill 2 (continuation of the agencies, also called the safety-net bill).

Adjournment of both the Senate and the House is expected by early this evening.

© 2009 Austin American-Statesman: www.statesman.com

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Lawmakers were "flooded with constituent e-mail opposed to the CDAs."

Legislature hoping to wrap up special session

7/2/09

By APRIL CASTRO
Associated Press Writer
Copyright 2009

AUSTIN, Texas — Two of the issues assigned to the Legislature by Gov. Rick Perry were on the fast track to becoming law Thursday while the third, a measure that would allow the state to continue contracting for privately built toll roads, appeared dead.

"Two out of three ain't bad," said Sen. Craig Estes, R-Wichita Falls, as lawmakers speculated that the special session that convened Wednesday would be adjourned by the end of the day Thursday.

The House and Senate have finished their work on a bill to keep five important state agencies operating for the next two years. After tying up some technical loose ends, the bill next heads to Perry for his signature.

The unanimously approved bill will save the Texas Department of Transportation, the Department of Insurance and three other agencies from abolition. That's because state law requires the Legislature to regularly review and reauthorize state agencies, but lawmakers failed to renew them during the regular session that ended June 1 because of partisan bickering.

Perry called the special session to deal with that and two other transportation bills. State leaders have remained committed to finishing before the holiday weekend, even though special sessions can last up to 30 days.

The House also passed a bill Thursday that authorizes the state to spend $2 billion in bonds to build new roads. The road bonds were already approved by voters statewide in 2007, but the Legislature still needed to authorize the spending.

House lawmakers added a provision that would prohibit the money from being used to turn existing free roadways into tollways. That bill was expected to get approval in the Senate later Thursday.

The measure that would allow the state to continue contracting for privately built toll roads was on the chopping block.

Contracts known as Comprehensive Development Agreements have been used to finance, build and operate toll roads and other projects. But opponents of such contracts worry they take control away from local governments.

Perry and his staff met with lawmakers in an attempt to revive the bill, but with no luck, Lt. Gov. David Dewhurst said.

Rep. Phil King, a Weatherford Republican, said he and others have been flooded with constituent e-mail opposed to the CDAs.

Sen. John Carona, chairman of Senate Transportation and Homeland Security Committee, says CDAs can be looked at again in 2011.

"No major project is going to be left behind between now and 2011," he said.

Associated Press Writer Jim Vertuno contributed to this report.

The bills are HB 1, SB 2 and SB 3.

© 2009 Th Associated Press: www.ap.org

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"In a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy."

Inside The Great American Bubble Machine

How Goldman Sachs has engineered every major market manipulation since the Great Depression



7/2/09

by Matt Taibb
Rolling Stone Magazine
Issue 1082-83.
Copyright 2009

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap.

Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage.

Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased.

They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.

The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than pot-fueled ideas scrawled on napkins by up-too-late bong-smokers were taken public via IPOs, hyped in the media and sold to the public for megamillions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.

Goldman's role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.

And what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical-commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

The history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who's Who of Goldman Sachs graduates. By now, most of us know the major players. As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multibillion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman.

But then, something happened. It's hard to say what it was exactly; it might have been the fact that Goldman's co-chairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of baby-boomer, Sixties-child, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind. Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national cliché that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline the committee to save the world. And "what Rubin thought," mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy — beginning with Rubin's complete and total failure to regulate his old firm during its first mad dash for obscene short-term profits.

After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.

It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman's last real competitors — collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investment-banking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.
Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year-old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bank-holding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict-of-interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank-holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.

The collective message of all of this — the AIG bailout, the swift approval for its bank-holding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn't a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. "In the past it was an implicit advantage," says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. "Now it's more of an explicit advantage."

Fast-forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.

Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion- dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade. The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.

© 2009 Rolling tone: www.rollingstone.com

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