Jake Bernstein

0
WP_Query Object
(
    [query_vars] => Array
        (
            [author] => 260
            [posts_per_page] => 5
            [category__not_in] => Array
                (
                    [0] => 1379
                    [1] => 6
                    [2] => 124
                    [3] => 9
                    [4] => 104
                    [5] => 93
                    [6] => 5
                    [7] => 122
                    [8] => 3442
                    [9] => 100
                    [10] => 10
                    [11] => 98
                    [12] => 80
                    [13] => 90
                    [14] => 81
                    [15] => 49
                    [16] => 85
                    [17] => 8
                    [18] => 7
                    [19] => 82
                )

            [offset] => 0
            [order] => DESC
            [error] => 
            [m] => 
            [p] => 0
            [post_parent] => 
            [subpost] => 
            [subpost_id] => 
            [attachment] => 
            [attachment_id] => 0
            [name] => 
            [static] => 
            [pagename] => 
            [page_id] => 0
            [second] => 
            [minute] => 
            [hour] => 
            [day] => 0
            [monthnum] => 0
            [year] => 0
            [w] => 0
            [category_name] => 
            [tag] => 
            [cat] => 
            [tag_id] => 
            [author_name] => 
            [feed] => 
            [tb] => 
            [paged] => 0
            [comments_popup] => 
            [meta_key] => 
            [meta_value] => 
            [preview] => 
            [s] => 
            [sentence] => 
            [fields] => 
            [menu_order] => 
            [category__in] => Array
                (
                )

            [category__and] => Array
                (
                )

            [post__in] => Array
                (
                )

            [post__not_in] => Array
                (
                )

            [tag__in] => Array
                (
                )

            [tag__not_in] => Array
                (
                )

            [tag__and] => Array
                (
                )

            [tag_slug__in] => Array
                (
                )

            [tag_slug__and] => Array
                (
                )

            [post_parent__in] => Array
                (
                )

            [post_parent__not_in] => Array
                (
                )

            [author__in] => Array
                (
                    [0] => 260
                )

            [author__not_in] => Array
                (
                )

            [ignore_sticky_posts] => 
            [suppress_filters] => 
            [cache_results] => 
            [update_post_term_cache] => 1
            [update_post_meta_cache] => 1
            [post_type] => 
            [nopaging] => 
            [comments_per_page] => 50
            [no_found_rows] => 
        )

    [tax_query] => WP_Tax_Query Object
        (
            [queries] => Array
                (
                    [0] => Array
                        (
                            [taxonomy] => category
                            [terms] => Array
                                (
                                    [0] => 1379
                                    [1] => 6
                                    [2] => 124
                                    [3] => 9
                                    [4] => 104
                                    [5] => 93
                                    [6] => 5
                                    [7] => 122
                                    [8] => 3442
                                    [9] => 100
                                    [10] => 10
                                    [11] => 98
                                    [12] => 80
                                    [13] => 90
                                    [14] => 81
                                    [15] => 49
                                    [16] => 85
                                    [17] => 8
                                    [18] => 7
                                    [19] => 82
                                )

                            [include_children] => 
                            [field] => term_id
                            [operator] => NOT IN
                        )

                )

            [relation] => AND
        )

    [meta_query] => WP_Meta_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => 
        )

    [date_query] => 
    [post_count] => 5
    [current_post] => -1
    [in_the_loop] => 
    [comment_count] => 0
    [current_comment] => -1
    [found_posts] => 88
    [max_num_pages] => 18
    [max_num_comment_pages] => 0
    [is_single] => 
    [is_preview] => 
    [is_page] => 
    [is_archive] => 1
    [is_date] => 
    [is_year] => 
    [is_month] => 
    [is_day] => 
    [is_time] => 
    [is_author] => 1
    [is_category] => 
    [is_tag] => 
    [is_tax] => 
    [is_search] => 
    [is_feed] => 
    [is_comment_feed] => 
    [is_trackback] => 
    [is_home] => 
    [is_404] => 
    [is_comments_popup] => 
    [is_paged] => 
    [is_admin] => 
    [is_attachment] => 
    [is_singular] => 
    [is_robots] => 
    [is_posts_page] => 
    [is_post_type_archive] => 
    [query_vars_hash] => 966b8d558074348055b224983950006a
    [query_vars_changed] => 
    [thumbnails_cached] => 
    [stopwords:WP_Query:private] => 
    [query] => Array
        (
            [author] => 260
            [posts_per_page] => 5
            [category__not_in] => Array
                (
                    [0] => 1379
                    [1] => 6
                    [2] => 124
                    [3] => 9
                    [4] => 104
                    [5] => 93
                    [6] => 5
                    [7] => 122
                    [8] => 3442
                    [9] => 100
                    [10] => 10
                    [11] => 98
                    [12] => 80
                    [13] => 90
                    [14] => 81
                    [15] => 49
                    [16] => 85
                    [17] => 8
                    [18] => 7
                    [19] => 82
                )

            [offset] => 0
            [order] => DESC
        )

    [request] => SELECT SQL_CALC_FOUND_ROWS  wp_posts.ID FROM wp_posts  LEFT JOIN wp_term_relationships ON (wp_posts.ID = wp_term_relationships.object_id) LEFT JOIN wp_term_taxonomy ON ( wp_term_relationships.term_taxonomy_id = wp_term_taxonomy.term_taxonomy_id ) WHERE 1=1  AND ( wp_posts.ID NOT IN (
					SELECT object_id
					FROM wp_term_relationships
					WHERE term_taxonomy_id IN (5,6,7,8,9,10,50,81,82,83,86,91,94,99,101,105,127,129,1394,3472)
				) ) AND wp_posts.post_author IN (260)  AND wp_posts.post_type = 'post' AND (wp_posts.post_status = 'publish') GROUP BY wp_posts.ID HAVING MAX( IF( wp_term_taxonomy.taxonomy = 'author', IF(  wp_term_taxonomy.term_id = '736',2,1 ),0 ) ) <> 1  ORDER BY wp_posts.post_date DESC LIMIT 0, 5
    [posts] => Array
        (
            [0] => WP_Post Object
                (
                    [ID] => 2861
                    [post_author] => 260
                    [post_date] => 2012-10-25 18:53:34
                    [post_date_gmt] => 2001-11-30 00:00:00
                    [post_content] => 

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Phasellus id lorem eget sem malesuada blandit. Pellentesque mi. Integer lorem est, consectetuer quis, commodo vel, blandit non, nisi. Quisque diam pede, tempus commodo, porta nec, ultrices eu, justo. Integer ultricies arcu. Nulla quis est. Curabitur eros. Aenean elementum tortor sit amet nisl. Donec eu justo in ligula consectetuer cursus. Suspendisse potenti. Suspendisse tincidunt massa vitae erat. Aliquam in augue. Donec fringilla justo eget dui. Phasellus porta velit sed orci. Cras vel erat sed justo varius pharetra. Proin eu diam ut enim tincidunt pretium.

Ut mattis. Nunc porta interdum leo. Donec sollicitudin tristique tellus. Donec convallis facilisis libero. Pellentesque luctus viverra augue. Nulla neque. Quisque arcu nisi, venenatis nec, interdum in, consectetuer at, urna. Nam id lacus id sem iaculis semper. Sed feugiat congue erat. Nunc at leo in libero facilisis cursus. Nunc diam. Fusce in elit. In bibendum leo id eros. Pellentesque sapien enim, fermentum et, tristique nec, fermentum sed, lorem.

Nullam vitae ipsum. Cras eget ipsum. Vestibulum quam magna, luctus eget, ultricies vitae, pulvinar eget, lorem. Mauris vehicula velit ac erat. Integer vehicula. In rhoncus massa ac ligula. Nunc dictum iaculis tellus. Nunc at diam in metus faucibus cursus. Donec neque sem, posuere ut, vulputate vel, ultricies ornare, felis. Quisque auctor.

Sed laoreet, felis eget vestibulum viverra, arcu nunc bibendum mi, eget facilisis leo ipsum vel ante. Cras ante tortor, auctor rhoncus, iaculis eu, dapibus quis, nunc. Fusce non augue. Duis purus lorem, tincidunt sit amet, hendrerit vel, faucibus vel, velit. Nunc metus pede, feugiat at, pharetra a, nonummy non, mauris. Suspendisse rhoncus pulvinar enim. Praesent quam. Nunc id erat. Suspendisse eget ipsum in lorem aliquam egestas. Etiam mauris.

Aliquam id urna. Duis non nulla. Nunc a orci. Nulla elementum felis nec felis. In fermentum, tortor nec gravida interdum, elit est sollicitudin nunc, vitae sollicitudin ipsum dolor nec nibh. Morbi sapien nisi, viverra vel, tristique in, luctus eleifend, arcu. Nullam scelerisque. Pellentesque risus lorem, aliquam vel, iaculis et, volutpat vel, tortor. Vivamus nibh velit, feugiat et, fringilla semper, semper eget, arcu. Curabitur rhoncus. Nunc et massa vel risus ultrices cursus.

[post_title] => Jack Abramoff: Off the Reservations: an Observer Web-Only Feature [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => 2507-jack-abramoff-off-the-reservations-an-observer-web-only-feature [to_ping] => [pinged] => [post_modified] => 2012-10-26 05:04:40 [post_modified_gmt] => 2012-10-26 05:04:40 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.texasobserver.org/2507-jack-abramoff-off-the-reservations-an-observer-web-only-feature/ [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 5382 [post_author] => 260 [post_date] => 2011-04-19 16:23:00 [post_date_gmt] => 2011-04-19 16:23:00 [post_content] =>

Former Observer executive editor Jake Bernstein has been awarded a Pulitzer Prize for National Reporting for his collaboration with ProPublica's Jesse Eisinger on a series of stories about how some Wall Street bankers' schemes led to the worst financial crisis since the Great Depression. We congratulate Jake and Jesse for this distinguished honor.

This article is from the Wall Street Money Machine series, first published by ProPublica.org.

The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going

Update October 29th, 2010: This story has been corrected in response to a recent letter from Magnetar. Read their letter, along with our response .

In late 2005, the booming U.S. housing market seemed to be slowing. The Federal Reserve had begun raising interest rates. Subprime mortgage company shares were falling. Investors began to balk at buying complex mortgage securities. The housing bubble, which had propelled a historic growth in home prices, seemed poised to deflate. And if it had, the great financial crisis of 2008, which produced the Great Recession of 2008-09, might have come sooner and been less severe.

At just that moment, a few savvy financial engineers at a suburban Chicago hedge fund helped revive the Wall Street money machine, spawning billions of dollars of securities ultimately backed by home mortgages.

When the crash came, nearly all of these securities became worthless, a loss of an estimated $40 billion paid by investors, the investment banks who helped bring them into the world, and, eventually, American taxpayers.

Yet the hedge fund, named Magnetar for the super-magnetic field created by the last moments of a dying star, earned outsized returns in the year the financial crisis began.

How Magnetar pulled this off is one of the untold stories of the meltdown. Only a small group of Wall Street insiders was privy to what became known as the Magnetar Trade . Nearly all of those approached by ProPublica declined to talk on the record, fearing their careers would be hurt if they spoke publicly. But interviews with participants, e-mails , thousands of pages of documents and details about the securities that until now have not been publicly disclosed shed light on an arcane, secretive corner of Wall Street.

According to bankers and others involved, the Magnetar Trade worked this way: The hedge fund bought the riskiest portion of a kind of securities known as collateralized debt obligations—CDOs. If housing prices kept rising, this would provide a solid return for many years. But that's not what hedge funds are after. They want outsized gains, the sooner the better, and Magnetar set itself up for a huge win: It placed bets that portions of its own deals would fail.

Along the way, it did something to enhance the chances of that happening, according to several people with direct knowledge of the deals. They say Magnetar pressed to include riskier assets in their CDOs that would make the investments more vulnerable to failure. The hedge fund acknowledges it bet against its own deals but says the majority of its short positions, as they are known on Wall Street, involved similar CDOs that it did not own. Magnetar says it never selected the assets that went into its CDOs.

Magnetar says it was "market neutral," meaning it would make money whether housing rose or fell. (Read their full statement. ) Dozens of Wall Street professionals, including many who had direct dealings with Magnetar, are skeptical of that assertion. They understood the Magnetar Trade as a bet against the subprime mortgage securities market. Why else, they ask, would a hedge fund sponsor tens of billions of dollars of new CDOs at a time of rising uncertainty about housing?

Key details of the Magnetar Trade remain shrouded in secrecy and the fund declined to respond to most of our questions. Magnetar invested in 30 CDOs from the spring of 2006 to the summer of 2007, though it declined to name them. ProPublica has identified 26 .

An independent analysis commissioned by ProPublica shows that these deals defaulted faster and at a higher rate compared to other similar CDOs. According to the analysis, 96 percent of the Magnetar deals were in default by the end of 2008, compared with 68 percent for comparable CDOs. The study was conducted by PF2 Securities Evaluations, a CDO valuation firm. (Magnetar says defaults don't necessarily indicate the quality of the underlying CDO assets.)

From what we've learned, there was nothing illegal in what Magnetar did; it was playing by the rules in place at the time. And the hedge fund didn't cause the housing bubble or the financial crisis. But the Magnetar Trade does illustrate the perverse incentives and reckless behavior that characterized the last days of the boom.

At least nine banks helped Magnetar hatch deals. Merrill Lynch, Citigroup and UBS all did multiple deals with Magnetar. JPMorgan Chase, often lauded for having avoided the worst of the CDO craze, actually ended up doing one of the riskiest deals with Magnetar, in May 2007, nearly a year after housing prices started to decline. According to marketing material and prospectuses , the banks didn't disclose to CDO investors the role Magnetar played.

Many of the bankers who worked on these deals personally benefited, earning millions in annual bonuses. The banks booked profits at the outset. But those gains were fleeting. As it turned out, the banks that assembled and marketed the Magnetar CDOs had trouble selling them. And when the crash came, they were among the biggest losers.

Some bankers involved in the Magnetar Trade now regret what they did. We showed one of the many people fired as a result of the CDO collapse a list of unusually risky mortgage bonds included in a Magnetar deal he had worked on. The deal was a disaster. He shook his head at being reminded of the details and said: "After looking at this, I deserved to lose my job."

Magnetar wasn't the only market player to come up with clever ways to bet against housing. Many articles and books, including a bestseller by Michael Lewis , have recounted how a few investors saw trouble coming and bet big. Such short bets can be helpful; they can serve as a counterweight to manias and keep bubbles from expanding.

Magnetar's approach had the opposite effect—by helping create investments it also bet against, the hedge fund was actually fueling the market. Magnetar wasn't alone in that: A few other hedge funds also created CDOs they bet against. And, as the New York Times has reported, Goldman Sachs did too. But Magnetar industrialized the process, creating more and bigger CDOs.

Several journalists have alluded to the Magnetar Trade in recent years, but until now none has assembled a full narrative. Yves Smith, a prominent financial blogger who has reported on aspects of the Magnetar Trade, writes in her new book, "Econned," that "Magnetar went into the business of creating subprime CDOs on an unheard of scale. If the world had been spared their cunning, the insanity of 2006-2007 would have been less extreme and the unwinding milder."

Magnetar Gets Started

The guiding force behind Magnetar was Alec Litowitz, a triathlete, astronomy buff and rising star in the investing world. In 2003, Litowitz retired from a Chicago-based hedge fund, Citadel, one of the most successful in the world, where he had spent most of his career and became a top executive. He promised to stay out of the business for two years.

As he waited for his non-compete agreement to expire, Litowitz and his wife traveled through Europe collecting antiques to stock a big house they were building on the shores of Lake Michigan.

By spring 2005, Litowitz's wait was over. Then 38 years old, Litowitz quickly raised money to start his own hedge fund. The fund, Magnetar, attracted $1.7 billion from investors and opened in April.

Litowitz, who declined to be interviewed, had an approach to investing that emphasized scale and simplicity. He told those he hired: "Figure out a way to make money and figure out how to repeat it and do it over and over again," according to a former employee. The firm handed out T-shirts emblazoned with a confident slogan: "Very Bright, Very Magnetic." Employees privately joked about working for a fund named after something like a black hole.

Litowitz brought on board David Snyderman. A New Yorker with a serious mien, Snyderman, in his mid-30s, began hunting for investment opportunities in Wall Street's burgeoning market in mortgage-backed securities.

It didn't take them long to find something promising.

Snyderman and Magnetar focused on Wall Street's mortgage assembly line, which had been super-charged during Litowitz's time away from the business. Banks bundled pools of mortgages into large bonds, which they combined to create even larger investments. These were the now-infamous collateralized debt obligations. Each month, homeowners paid their mortgages. Each month, payments flowed to investors. (Here is an excellent video explaining CDOs .)

Large investors across the globe snapped up the CDOs, which took the hottest investment around—the U.S. housing market—and transformed it into something that supposedly had little or no risk. Wall Street preached that the risk had been diluted because it was spread out over such large collections of mortgage bonds. (CDOs can also be based on side bets that rise and fall with the value of other mortgage bonds. These are known as "synthetic" CDOs. Magnetar’s deals were largely synthetic.)

Just as they did with mortgage-backed securities, investment banks divided CDOs into different layers, called tranches. As the mortgages were paid, money flowed to investors holding the top tranche. Since they were the first to get paid, and thus took the least amount of risk, they earned low interest rates. Next came the middle levels—the so-called mezzanine tranches.

Last in line for money were investors in what's known as the equity. In return for being at the bottom, equity investors got the highest returns, sometimes 20 percent interest—money they would receive only as long as the vast majority of mortgage holders made their payments.

Even back then, Wall Street insiders called the equity "toxic waste," and as anxiety built in late 2005 that the housing boom was over, investment banks struggled to find takers.

To Magnetar, the toxic waste was an opportunity.

At a time when fewer investors were stepping up to buy equity, the little-known hedge fund put out the word that it wanted lots and lots of it. Magnetar concentrated in a particularly risky corner of the CDO world: deals that were made up of the middle, or mezzanine, slice of subprime mortgage-backed bonds. Magnetar CDOs were big , averaging $1.5 billion, about three times the size of earlier deals built on subprime mortgages.

Magnetar's purchases solved a crucial problem for the banks. Since the equity was so risky and thus difficult to sell, banks didn't like to create new CDOs unless someone committed to buy them. Indeed, such buyers were so crucial that Wall Street referred to them as the CDOs' "sponsors."

Without sponsors, Wall Street's mortgage bond assembly line could grind to a halt, and with it bank profits and banker bonuses. A top CDO banker could earn $3 million to $4 million annually on the CDOs he created and sold.

Usually, investment banks had to go out and find buyers of the equity. With Magnetar, the buyer came right to the bank's doorstep. Wall Street was overjoyed.

"It seemed like a miracle," says one mortgage market investment banker, because "no one" had been buying equity.

"By the end of 2005, the general sense was that the CDO market would slow down. These trades continued to fuel the fire," says Bill Tomljanovic, who worked for a firm that helped build a Magnetar CDO. Magnetar was "a driving force in the market."

According to JPMorgan data, Magnetar's deals amounted to somewhere between a third and half the total volume in the particularly risky corner of the subprime market on which the fund focused.

Outsiders thought Magnetar was piling in at exactly the wrong time. A March 2007 Business Week article titled "Who Will Get Shredded?" would later put Magnetar near the top of its list. The hedge fund, said the magazine, "showed bad timing."

How could Magnetar hope to make money on such risky stuff? It had a second bet that was known only to insiders.

At the same time it was investing in the equity, the fund placed bets that many of the same CDOs it had helped create would actually blow up. It did that using one of the most opaque corners of the investment world: credit default swaps, which function as a kind of insurance on CDOs and other types of bonds.

Credit default swaps work roughly like an insurance policy: You pay a small premium regularly, on any bond you want—whether you own it or not—and if it goes bust, you get paid off in full.

Nobody but Magnetar knows the full extent of its bets. Hedge funds are private and they don't disclose the details of their trades. Also, credit default swaps are mostly unregulated and not publicly disclosed. Magnetar says it didn't bet only against its own CDOs. The majority of its credit default swaps, says Magnetar, were on other CDOs. (Update April, 9:We have added additional detail from Magnetar’s response in which the hedge fund says it was “net long” on its own CDOs, an assertion on which the fund has declined to elaborate.)

Since it was the sponsor, Magnetar had privileges. Placing the risky equity was so important to banks that they typically gave those who bought it a say in how the deal was structured. Like all investors, equity buyers had to weigh risk and reward, the goal being to maximize returns while minimizing the chances that your investment will blow up.

But people involved in Magnetar's deals say the hedge fund took a different tack, pushing for riskier bonds to go inside its CDOs. Doing that would make it more likely that Magnetar's bets against the CDO would pay off.

The equity bought by Magnetar represented just a tiny fraction of the overall CDO. If it costs, say, $50 million, an entire CDO could be 20 times that, $1 billion. And if the CDO begins to go south and you're smart enough to have taken out enough insurance, you can make hundreds of millions of dollars. That, of course, would take a bit of the sting out of losing your original $50 million investment in the equity.

Magnetar Does Its First Deal

As Magnetar set up its CDO shop, the hedge fund hired Jim Prusko, a smart and affable investor who had worked previously at the Boston money-manager Putnam Investments. He would shoulder much of the work of courting Wall Street bankers and managers who worked with the hedge fund. He operated out of Magnetar's office in midtown Manhattan around the corner from Saks Fifth Avenue. In an office of 20-somethings, Prusko, then 40 years old, stood out as the "old man."

Prusko and his boss at Magnetar, Snyderman, began approaching investment banks, offering to buy the riskiest, highest-yielding portion of CDOs. They always wanted a middleman, known as a CDO manager, on their deals. Many CDOs are operated day to day by such independent firms, who are often brought in by investment banks.

The managers also played a vital role in creating deals. When an investment bank created a CDO, it would often give what amounted to blueprints to the managers, who would then go out and find the exact bundles of bonds to fill the CDO. The managers had a fiduciary duty to represent the CDO fairly to all investors, ensuring investors got accurate and equal information.

Magnetar's deals were numerous and big, and just like for investment banks, the bigger the deal, the larger the fee for managers.

"Prusko's job was to butter up the CDO managers and the bankers," said one banker who dealt with him.

By relying on a manager rather than managing the deal itself, Magnetar had no legal obligations to the CDO or others who bought it.

Magnetar completed its first deal in May 2006. In what became a habit, it named the CDO after a constellation, in this case, "Orion," known for the trio of stars that form the mythological Greek hunter's belt. For its maiden CDO, Magnetar enlisted a partner to buy risky equity alongside it, an internal investment fund within Deutsche Bank.

Deutsche and Magnetar didn't reach for a Wall Street powerhouse to put the deal together. Instead the investors worked with Alex Rekeda, a young Ukrainian immigrant who was then working for Calyon, the investment banking arm of the French bank Crédit Agricole.

Magnetar and Deutsche were deeply involved in creating Orion. "We want to make sure we control the deal," a banker who worked on it recalls them emphasizing.

One person involved in Orion recalls Deutsche's point person, Michael Henriques, and Magnetar's Prusko pressuring the CDO manager, a division of the Dutch bank NIBC, to include specific lists of bonds in the deal.

Prusko and Henriques told this person that the investors "needed more spread in the portfolio." More "spread" means more return and more risk.

This person recalled Magnetar asking, "Would you consider these bonds?" Their suggestions were invariably for riskier bonds. "Let's just say we didn't think their suggestions made a lot of sense," the person said.

He said the CDO manager refused Magnetar's requests to put riskier bonds in the deal. Still, it was an eye-opening experience. "I began to realize there were things you had to defend yourself against," he said.

Magnetar and Deutsche declined to comment on Orion specifically . Magnetar says it made suggestions about the general outlines of the CDOs. But, the hedge fund says, it "did not select the underlying assets of the CDO at any time prior to or subsequent to transaction issuance."

Other buyers of the CDO could have figured out they were getting relatively risky bonds, but they would have had to look hard at the minutiae of the deal. By this point in market history, the ratings had less and less meaning. Two sets of bonds rated AA could have very different levels of risk. Most investors chose not to dig too deeply.

One investor in Orion was a fund affiliated with IKB, a small German bank. Eventually, it invested in at least four more Magnetar deals. In mid-2007, because of the disastrous investments in subprime securities, the German government was forced to bail out IKB. The failure of the bank was an early warning sign of the global financial crisis.

Deutsche's Henriques would later quit the bank and join Magnetar.

Orion lost value but never defaulted. That was better than every subsequent CDO that Magnetar helped create, according to ProPublica's research.

Magnetar's (Nearly) Perpetual Money Machine

By buying the risky bottom slices of CDOs, Magnetar didn't just help create more CDOs it could bet against. Since it owned a small slice of the CDO, Magnetar also received regular payments as its investments threw off income.

With this, Magnetar solved a conundrum of those who bet against the market. An investor might be confident that things are heading south, but not know when. While the investor waits, it costs money to keep the bet going. Many a short seller has run out of cash at the gates of a big payday.

Magnetar could keep money flowing -- via its small investments in CDOs -- and could use that money to pay for its bets against CDOs.

Similar, commonly traded, assets appeared in multiple Magnetar CDOs. Experts say the benefit of that overlap to Magnetar was that when the hedge fund bet against non-Magnetar CDOs, the CDOs still had similar characteristics to the ones Magnetar had invested in.

Soon enough, bankers and CDO managers had a sense of how it worked. "Everyone knew," said one person who managed Magnetar CDOs. "They used the equity to fund the shorts."

Magnetar further increased its odds by insisting that the CDOs it helped create had an unusual construction. Typically, cash flowing to the last-in-line equity buyers is cut off at the first signs of trouble—such as a rise in mortgage delinquencies. Those at the top of the CDO—who accepted lower returns for less risk—received that cash, leaving none for the high-risk holders.

Magnetar wanted its deals to be "triggerless," meaning lacking these cash-flow dams. When the market turned shaky and homeowners began to default, money kept flowing down to the risky slices that Magnetar owned.

Even today, bankers and managers speak with awe at the elegance of the Magnetar Trade. Others have become famous for betting big against the housing market. But they had taken enormous risks. Meanwhile, Magnetar had created a largely self-funding bet against the market.

E-mails Give Glimpse of How Magnetar Worked

[4]By the fall of 2006, housing prices had already peaked and Magnetar's assembly line started producing, helping to create CDOs it would bet against. The hedge fund's appetite seemed insatiable. The deals were the talk of CDO desks across Wall Street.

Between the end of September and the middle of December 2006, Magnetar had a hand in spawning at least 15 CDOs , worth an estimated $23 billion. Among the banks involved with those deals were Citigroup, Lehman Brothers and Merrill Lynch.

E-mails obtained by ProPublica from that time suggest Magnetar's clout. The firm was involved at the start of deals and pushed for riskier bonds to be included.

After Magnetar expressed interest in buying the equity, the French bank Société Générale began to build the CDO, and selected a New York-based manager, Ischus Capital Management, which would choose the exact bonds to go into the CDO.

Magnetar wanted to name the CDO after a small constellation in the southern sky called Hydrus, which means "male water snake." But by late September, Magnetar and Ischus began sparring over the composition of the deal.

Magnetar pressed Ischus to buy lower-quality assets for the deal, according to three people familiar with Hydrus. In an e-mail to bankers at Société Générale and Ischus executives, Magnetar's CDO specialist, Jim Prusko, wrote on Sept. 29, 2006 , "The original portfolio target spreadsheet that I have... had a strangely low spread target. That of course would not at all be beneficial to us. I have attached the target portfolio that I would like for this deal with target spreads."

The portfolio Magnetar outlined didn't list specific bonds, but executives at the CDO manager Ischus felt that they understood what Prusko wanted. A request for higher-spreading assets means more risk in the deal.

Andrew Shook, an Ischus executive, answered forcefully on Oct. 3 , "We will not assemble a portfolio we are not proud of and feel strongly about in the name of a spread target."

Prusko dialed down the pressure, responding within an hour. "Of course, the actual security selection is totally your purview," he wrote . "I just wanted to make sure the overall portfolio characteristics worked for our strategy."

Shook declined to comment on the e-mail exchange. Magnetar says that the deal as originally conceived wouldn't have been profitable and that it was merely trying to get a higher return—a higher "spread"—to balance out the risk it was taking in owning the bottom-rated slice of the CDO.

The two sides subsequently drifted apart, partly over Ischus's unease with Magnetar's pressure, and the deal was never completed.

Concerns About 'Reputational Risks'

As part of the big business Magnetar was doing in the fall of 2006, the hedge fund put together a CDO with Lehman Brothers named for the constellation Libra. John Mawe, a banker who worked on Libra, remembers that "there was a back-and-forth fight" about the assets between the bank's CDO manager and Magnetar, with the hedge fund pushing for riskier assets.

Mawe says Lehman's CDO in-house-management arm, which handled the deal, never put assets into Libra that it thought were bad investments.

Among the other banks that Magnetar approached during that time was Deutsche Bank, with whom it had teamed up to do its first deal months earlier. Deutsche Bank was anxious for business in order to maintain its standing as one of the top CDO banks, according to one of its bankers. Deutsche recommended CDO manager State Street Global Advisors.

The State Street managers were "highly skeptical" of doing a deal with Magnetar, according to one participant. "State Street wanted their deals to do well," said the participant, and with Magnetar, there was "a lot of reputational risk to be concerned about."

Hoping to close the deal, Magnetar's master salesman Jim Prusko drove up from his home in the New York suburbs to State Street's headquarters in Boston, to mollify executives in the management team. After the meeting, the deal went forward. As one banker explained, "there were other managers who were dying to do this deal" and get the millions in fees.

After subprime losses, State Street closed the business that managed its CDOs in late 2007. Frank Gianatasio, who worked in State Street's CDO business says, "We were comfortable with every transaction we put into our CDOs."

Deutsche, Magnetar and State Street called the $1.6 billion CDO they created Carina, a constellation whose name in Latin means a ship's keel. In November 2007, Carina had the distinction of being the first subprime CDO of its kind to be forced into liquidation.

State Street and Magnetar declined to comment on their negotiations over Carina.

A Lawsuit Suggests Merrill Lynch's Role

By early 2007, the mortgage market was falling apart. Lenders were reporting big losses [19], delinquencies were mounting [20]—and Magnetar's business was booming.

Between late February and April, banks rolled out five Magnetar-sponsored deals, with a value of about $7.2 billion. Among them was a $1.5 billion CDO named Norma. Following Magnetar's branding convention, Norma is a constellation in the Southern Hemisphere named for the Latin word for "normal." This CDO was anything but.

Details about Norma, which was created by Merrill Lynch, have emerged through an ongoing lawsuit between Merrill and Dutch bank Cooperatieve Centrale Raiffeisen-Boerenleenbank, known commonly on Wall Street as Rabobank. (The Wall Street Journal had the first detailed report of Norma, in late 2007.) The dispute involves a side transaction that Rabobank made with Merrill involving Norma. Magnetar is not a party to the litigation. Yet the allegations are scathing in their depiction of how the CDO was developed.

"Merrill Lynch teamed up with one of its most prized hedge fund clients—an infamous short seller that had helped Merrill Lynch create four other CDOs—to create Norma as a tailor-made way to bet against the mortgage-backed securities market," the complaint reads. (Emphasis in the original.)

"[T]o facilitate the selection of assets that would allow Norma to operate as a hedging instrument rather than an investment vehicle, Merrill Lynch hand-picked a beholden collateral manager that was willing to ignore its fiduciary duties to Norma's investors."

The manager for Norma was a small shop out of Long Island, N.Y., called NIR Capital Management. Run by Corey Ribotsky, the firm's primary line of business before entering CDOs was speculating in penny stocks.

NIR brought in a team of experienced bankers to run its CDO business. The firm also had a variety of other ventures. At one point, they put money into a documentary called "American Cannibal," that profiled the aborted launch of a reality television show in which contestant were stranded on an island and goaded into cannibalism. (The New York Times found it "absorbing.") Ribotsky is now under investigation by federal authorities for misleading clients about its investment returns. NIR and Merrill Lynch declined to comment on dealings with Magnetar; Merrill Lynch denies liability in the litigation. Magnetar declined to comment.

Norma began to suffer setbacks even before the deal closed in March 2007. According to the lawsuit, by the time Norma was completed, its value had already declined by more than 20 percent.

JPMorgan Gets Into the Game -- And Loses

Despite the bad news in the mortgage market, Magnetar continued to find a few willing bankers to do CDOs, including a new one: JPMorgan Chase.

JPMorgan had avoided many of the complex financial transactions that decimated the banking industry. As the market grew frothier, JPMorgan pulled back from the CDO business. In 2005, the men who ran JPMorgan's CDO unit told their bosses that they couldn't see how to complete a CDO without sticking the bank with the large top tier, which would not appeal to investors because of its low returns. Other banks dealt with this problem by retaining these CDO layers on their books.

But by mid-2006, JPMorgan joined the herd. It hired bankers to expand its CDO team and got to work.

A few months later—in early 2007—Magnetar and JPMorgan banged out a deal. Unlike the earlier CDOs Magnetar helped create, this one wasn't named after a constellation. Instead, the deal was called “Squared,” after the term for a CDO that was made up of other CDOs. Squared was filled in part with other CDOs Magnetar had helped create.

According to a person familiar with how the deal came together, Magnetar committed to purchase $10 million worth of Squared's equity. Magnetar's purchase allowed JPMorgan to create and sell a $1.1 billion CDO. As it had on previous deals, Magnetar pushed the bankers to select riskier bonds. "They really cared about it," said the person involved in the deal. "They wouldn't pull punches. It was always going to be crappier."

The hedge fund requested that Squared have slices from many Magnetar CDOs, including Auriga, Carina, Libra, Pyxis and Virgo. They all went into the deal. Magnetar also successfully pushed for Squared to include slices from one of the Abacus deals, a group of CDOs that, as the New York Times later reported, Goldman Sachs had created and bet against.

JPMorgan earned $20 million in creating Squared, according to the person involved in the deal.

JPMorgan's sales force fanned out across the globe. It sold parts of the CDO to 17 institutional investors, according to a person familiar with the transaction. The deal closed in May 2007, nearly a year after housing prices had peaked. Within eight months, Squared dropped to a fraction of its initial value.

Just about everybody lost out, including Thrivent Financial for Lutherans, a Minnesota-based not-for-profit fraternal organization, whose $10 million investment was wiped out. Thrivent declined to comment.

Small pieces of Squared, as well as Magnetar's CDO Norma, also ended up in mutual funds run by Morgan Keegan, a regional investment bank based in Memphis, Tenn.

The funds, advertised as conservative investments, cratered after betting on various exotic assets. Morgan Keegan was sued by individual investors who claimed that they were misled about the risks. Among the investors was former Chicago Bulls player Horace Grant, who was awarded $1.4 million in arbitration. This week, the SEC accused two Morgan Keegan employees of misleading fund investors about the value of its holdings in CDOs. Morgan Keegan called the charges "factually inaccurate" and promised to defend itself "vigorously." Morgan Keegan did not respond to a request for comment on the specifics of the two Magnetar CDOs.

The biggest loser was JPMorgan Chase itself, which had kept the large, supposedly safe top slices of Squared on its books, without hedging itself. The bank lost about $880 million on the CDO. JPMorgan declined to comment on the details of the transaction.

Magnetar came out a winner. The fund earned about $290 million on its bet against Squared, according to a person familiar with the deal. Magnetar declined to comment.

Magnetar's Exit: A Deal so Bad Even a Credit-rating Agency Balked

Prusko was buoyant as Magnetar's trades began to make money as its short bets rose in value. One friend recalls Prusko ribbing him: "What are you going to do after this blows up?" (Magnetar declined to comment on the exchange.)

In the spring of 2007, Magnetar began to have a problem: The hedge fund was sitting on hundreds of millions of dollars' worth of CDO equity and other low-rated portions of its deals. With the decline of housing prices accelerating, off-loading these pieces would be very hard.

Magnetar needed a buyer and some deft financial engineering. It found the answer through its former partner, Alex Rekeda, who had been the banker on Magnetar's first CDO. Rekeda now worked at Mizuho, one of Japan's biggest banks. Mizuho was eager to get into the CDO world. It hired Rekeda in part because he could bring Magnetar's business, according to one CDO manager who worked with him.

Rekeda and Magnetar came up with a remarkable CDO. They took their risky portions of 18 CDOs they had helped created -- and repackaged them to sell them to others. Bundling up the dregs of a CDO was rare, if not unprecedented.

This deal, Tigris, which closed in March 2007, tied together $902 million of Magnetar's risky assets. Rekeda convinced two rating agencies, Standard & Poor's and Fitch, to rate it. Fitch designated $259 million of it as triple A, the highest rating. S&P rated nearly $501 million as triple A. (When contacted for this article, S&P said it was comfortable rating Tigris; Fitch didn't respond to questions about the deal.)

In a highly unusual move, the third major rating agency, Moody's, refused to rate Tigris. Rekeda lobbied Moody's for a rating, according to a person familiar with the deal. But Moody's then-head of CDOs, Eric Kolchinsky, wouldn't budge.

Magnetar got $450 million from Mizuho, which in return received income from assets in Tigris, according to several people familiar with the transaction. It was what's known as a non-recourse loan: If things went wrong, Mizuho could only lay claim to what was in Tigris.

In response to ProPublica's questions about this deal, Magnetar said the fund "as a matter of general practice, and as do most hedge funds, enters into non-recourse financing on specific assets in its portfolio."

By September, just six months after Tigris had been created, Fitch downgraded most of the CDO's slices. By the end of January 2008, the CDO had gone into default. The Japanese ended up with the paper, which was worthless. Mizuho eventually wrote Tigris off, as part of about $7 billion in total losses from its subprime missteps. Mizuho declined to comment, as did Magnetar.

Just as with a refi gone bad, when Tigris was wiped out, the hedge fund walked away from the house—in this case its collateral. A person who worked on Tigris boasted about how innovative the deal was. If it hadn't blown up, he says, it would have been "deal of the year." For Magnetar, it may have been.

Records it shared with investors show Magnetar had a spectacular 2007. Founder Alec Litowitz pulled down $280 million, according to Alpha Magazine. That spring, a trade journal awarded Prusko and Snyderman "Investor of the Year" honors. The Magnetar Constellation Fund, the firm's fund that had the most exposure to the CDO trades, was up 76 percent in 2007, according to a presentation Magnetar gave to investors in early 2009. The main fund, the Magnetar Capital Fund, was up 26 percent that year. By the end of 2007, Magnetar had $7.6 billion under management, up from the $1.7 billion it began with two years earlier. Magnetar declined to comment on its performance.

ProPublica has learned that the SEC has been looking into how the Magnetar deals were created, but it's not clear how much progress the investigation has been made or who might be the target. In a statement yesterday, Magnetar said:

Our understanding is that for some time, the SEC staff has been looking broadly at the sales, marketing, and structuring of CDOs. In connection with that inquiry, the SEC staff has from time to time requested information from Magnetar and other market participants, and Magnetar has been cooperating and responding to the requests. We are not aware that this inquiry is focused on any particular person or firm.

ProPublica Research Director Lisa Schwartz and researcher Kitty Bennett contributed to this story. ProPublica’s Ryan Knutson also helped with research. Finally, a big thanks to This American Life’s Alex Blumberg.

Follow on Twitter: @eisingerj, @Jake_Bernstein

[post_title] => Former Texas Observer Editor Wins Pulitzer Prize [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => former-texas-observer-editor-wins-pulitzer-prize [to_ping] => [pinged] => [post_modified] => 2013-01-07 03:48:07 [post_modified_gmt] => 2013-01-07 09:48:07 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.texasobserver.org/former-texas-observer-editor-wins-pulitzer-prize/ [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 2954 [post_author] => 260 [post_date] => 2007-10-05 00:00:00 [post_date_gmt] => 2007-10-05 00:00:00 [post_content] =>

The fat man sidled up to the two children with an invite, his pitch a simple one. "I'm a fat man," Gary Gibson said. "I like candy."

Midland's Sabor 2007 festival started off appropriately enough with a piñata, star-shaped and colored the green, white, and red of the Mexican flag. Youngsters lined up by the entrance, where organizers had hoisted the giant star. All but the very young knew the drill. Adults on their way into the festival area next to Midland's Grande Communication Stadium stopped to watch.

Several dozen children beat the piñata, but its cardboard frame proved resistant. "This is beginning to look like work," Gibson observed after about 40 minutes of abuse yielded nothing but a small gash. With some prompting, the children honed in on the hole, taking turns pounding the spot. When the first pieces of candy fell, the kids rushed the piñata, gleefully punching and gouging to release its sweets as the jovial Gibson provided color commentary.

I had traveled to Midland to try to catch a glimpse of the Texas of tomorrow-and to hear some good music at the third annual Sabor Midland music festival. It's no secret that Texas is turning increasingly Hispanic. Towns all around the Panhandle and West Texas would be losing population if not for this demographic shift. The wry joke about the Panhandle is that Anglos are its only export. Remarkably, most of the Hispanic growth is not coming from foreigners, but from migration within Texas or by natural increase, according to Karl Eschbach, interim director of the Texas State Data Center. "If you are looking at the region as a whole, we are seeing that the natural increase of the much younger and growing Hispanic population is counterbalancing the stagnation and eventual decline of the Anglo population," said Eschbach, who notes that this trend is projected over 40 years. The area's growth, when compared with the increasingly urban corridor of Houston-San Antonio-Dallas, is slight.

When oil prices are high, as they are now, Midland has always been a prosperous enclave. Last year, Hispanics in Odessa, Midland's more blue-collar gemelo, accounted for 47.9 percent of the population, according to the Odessa American. Midland's population is slightly larger than Odessa's, but its percentage of Hispanics is only 34.2, according to the Midland Hispanic Chamber of Commerce. And with oil above $80 a barrel, the Permian Basin is thriving. "It's booming for everybody," said Guillermo Guzman, director of community development for the Hispanic chamber. Guzman laments that 9/11 is making it increasingly difficult to bring in people from Mexico to work legally despite a labor shortage.

As I checked into a Midland hotel on Friday evening, a soccer team from the Mexican border town of Ojinaga piled into the reception area behind me. They had endured the wait at the border and driven four hours to Midland for the first UNICOPA Tournament. Play began that evening, September 14, and would end on Sunday the 16th. Fútbol is a passion in the two-thirds world. It's the ideal sport for the poor-all one needs is a field and something to kick. In Latin America during a World Cup, entire cities are stilled as the populace watches the matches on every available television.

Sponsored by the local Univision station and Tecate, UNICOPA featured 12 teams from Texas and Chihuahua state in Mexico. Local squads came from Midland, Odessa, Amarillo, Lubbock, and El Paso. Most of the Midland teams were eliminated the first day, with the stragglers mopped up on Saturday. It was hard to find anyone in town who was aware of the tournament. The Odessa Linses made it to the quarterfinals, but fell to Chihuahua 3-2 in overtime before a small crowd in a nearly empty stadium. The El Paso Indios faced Ojinaga for the trophy and a chance for photos with three teenage blondes sent by the local beer distributor. It felt like the Mexicans had been schooling the Texicans all weekend; then Ojinaga ran out of gas, and the Indios won 3-0.

Mariachi Cisne

Shortly after the victory over the piñata, the Dallas Cowboys cheerleaders arrived. A man representing festival sponsor West Texas Ford and a Midland police officer escorted Andrea Rodgers and Abigail Jordan Klein, a perfectly matched brunette and blonde, respectively, to a table shaded by a small tent. The women whipped out a stack of cheerleader team photos and some pens. Most everyone in the still-thin crowd milling about on the lawn in front of the stage wore some item of Dallas Cowboys clothing. More than a dozen men, women, and children formed a line to meet the ladies. Whether it was team loyalty or simply the attraction of opposites, for the next several hours, as long as they were at the table, so was the crowd.

About 30 minutes into the autographing bout, Jose "Bo" Zeurteche came to fetch the cheerleaders. Zeurteche is a jack-of-all-trades: promoter, developer, and musician. He helped start Sabor, which means flavor in Spanish, three years ago. It began as a restaurant tasting event. Zeurteche wanted to build on what he already knew to be successful: cookoffs. (In addition to the classic chili cookoff, the area also boasts a popular menudo-tripe soup-cookoff.) The mid-September weekend he chose is the most nationalistic holiday in the Mexican calendar, the one marking the historical Grito de Dolores usually known as dieciséis.

Zeurteche took the cheerleaders backstage to meet the Mexican consul based in Presidio, Héctor Raúl Acosta. The consul had come to lead the crowd in the gritos, or shouts, of "¡Viva!", a few of which Mexican priest Miguel Hidalgo is said to have proclaimed in his call for insurrection against the Spanish on September 16, 1810.

Acosta primed the crowd. "Don't you feel honored?" he asked after telling them they were part of "the most poignant (emotivo) moment of all the country's ceremonies." In Spanish, the consul asked the crowd, which now numbered about 1,000, to stand, and nearly everyone immediately rose to their feet. They echoed most of the chants tepidly, but "¡Viva Mexico!" animated the audience a bit. Zeurteche then introduced the cheerleaders, who gave a quick wave before returning to autograph purgatory in their tent.

Zeurteche may have picked the right Saturday for his tasting event, but economics interfered. With the oil boom, restaurants are having trouble filling positions. A stand selling fajitas, along with the traditional Texas festival fare of giant turkey legs, seemed one of the few concessions left from the original concept. Since Zeurteche found few takers for the taste-off, he turned it into a music festival.

This year, Zeurteche wanted to make a statement, bring in a national act, one that would bridge cultures with crossover appeal. He knew he'd be taking a chance. He describes area audiences as "finicky." His ideal audience is still elusive in Midland-Odessa-Mexican-Americans with a foot in each culture and a willingness to experiment musically with what that means.

"Country is what works out here," he said when reached by telephone a week later. "Tejano works, and regional Mexican works. You try to do blues and rock and R&B, it's a little bit of a risk."

Corporate radio hasn't helped. "You can't find any Tejano stations," Zeurteche said. "It's a segment that lacks identity. It's hard for [them] to really associate with anything 100 percent. The group is assimilated enough to listen to general market and look at non-Spanish television stations, but with regard to the Hispanic roots, there is not a whole lot here to really ground the segment, to link them together."

Zeurteche decided to book the ultimate multi-genre band, the powerhouse from East Los Angeles, Los Lobos. Forged in 1973 at a time when brown power meant more than numbers, Los Lobos, along with groups like the Texas Tornados and Santana, have been at the forefront of creating a new American idiom of rock and roll, Latin-style. But to Zeurteche's disappointment, the audience didn't come. No matter that the night was starry and temperate and the tickets only $9. He estimates the crowd at several thousand. Zeurteche fears that the lack of Tejano music scared away a potential audience, or maybe his ideal listeners simply haven't reached their demographic maturity yet. Nonetheless, he remains optimistic. "I think today people are probably saying, 'We missed Los Lobos," he said. "They are going to be reluctant to continue passing on these opportunities in the future."

Los Lobos

Los Lobos pulled up to the stage in a stretch white limousine SUV provided by Zeurteche. The two local bands the promoter had booked to open for them had been a mixed bag. The front man from the first, Los America, had candidly told the audience, "I just want to remind you that the more you drink, the better we sound." Unfortunately, the event didn't serve anything harder than beer. The second band, Brothers Z, featured Zuerteche himself playing guitar. Brothers Z performed covers from groups like Los Lonely Boys and Santana. The band's at-times overly exuberant lead guitarist, Steve Alvarez from Odessa, dominated the set, generally to good effect.

Before going on, Los Lobos posed for photos with the sponsors. I asked band member Louie Perez to what did he attribute the group's longevity. "Our creditors wouldn't have it any other way," he quipped. Turning serious, he noted that they had grown up together. "We were all friends from the same neighborhood," he said. "We didn't get our bass player out of the phonebook."

They started out playing old-timey Mexican music and then gravitated to rock and roll. The band is known for sterling musicianship, mastery of multiple instruments, and eclectic tastes. A Los Lobos set is as likely to include an Allman Brothers cover as Guantanamera, and the band can nail both with equal skill and bravado. Through the years, critics and fellow musicians have acclaimed the wolves, but popular support has lagged. Their biggest hit was La Bamba, which they covered for the soundtrack of a biopic about Latin rock pioneer and martyr-to-the-cause Ricardo Steven Valenzuela, better known as Ritchie Valens. Characteristically for Los Lobos, they then refused to sell out. Their next album was an exquisitely crafted collection of acoustic folk songs from various regions of Mexico called La pistola y el corazon.

Perez noted that Los Lobos' fan base is 90 percent Anglo and that the band has had difficulty crossing over. Yet at concerts the audiences are starting to reflect the demographic change occurring in America. Where it is most in evidence is in Anglo-dominated areas like Vermont or Virginia. In the past where there might have been one Hispanic at a show, he's now seeing five or 10. Maybe there will be an uptick, Perez muses, once they "put down the drawbridge and call off the crocodiles."

The band opened the show by inviting a young woman from the audience up to the stage. "¡Viva la Independencia," she shouted. "¡Viva México!"

Cesar Rosas, in a black silk shirt with black jeans and his trademark sunglasses, chimed in, "¡Y que viva la raza!

"This is the first time we've ever been in West Texas," he said. "Que viva West Texas!

It took a few songs to warm up. They introduced the third tune as coming from "El Fernando Valle" and then launched into the Valens' hit "Come on, Let's Go." David Hidalgo tore it up on guitar while bassist Conrad Lozano beamed with pleasure. Then Steve Berlin, wearing shades and a porkpie hat, let loose with a fiery saxophone solo. Berlin is an accomplished music producer as well as the honorary Chicano of the band, having joined Los Lobos in the mid-80s. Suddenly the music had a smoky, roadhouse feel, and Los Lobos sounded like one of the better bar bands on the planet. The band delved into a deep exploration of Latin rhythms with a song called "Chuco's Cumbia." Rosas then slowed the tempo down to croon "Sabor a Mi." The song by Alvaro Carrillo is a great example of the wonderfully exaggerated lyrical landscape of much of Los Lobos' music from Mexico. "Yo no soy nada. (I am nothing)," Rosas sang soulfully, vamping a bit. "Yo no tengo vandidad. (I have no vanity.)"

The band played on rented instruments driven in from Albuquerque because there isn't enough high-end gear to be found in West Texas. But it didn't seem to make a difference.

The meatiest part of the set began with a funked-out version of the Temptations' "Papa was a Rollin' Stone," which morphed into crowd favorite "Oye Como Va." Berlin played keyboards, and Perez soloed on guitar. Hidalgo, with a voice as smooth as water, then sang the Valens classic, "Donna," and for a second it was like that four-passenger Beechcraft Bonanza didn't wipe out in a cornfield in '59, taking a chunk of rock-and-roll royalty with it. The band then launched into a breakneck paced "Carabina 30-30," an old Mexican Civil War song extolling Pancho Villa, segueing into "Soy México Americano," then into the classic "Volver, Volver." The set ended with "La Bamba," bookmarked by "Good Loving." Rosas urged the crowd to sing along, "Come on Chicanos!"

Los Lobos encored with one of their songs called "Cumbia Raza." The soloists from Brothers Z joined them onstage. After one played a nice turn, Rosas looked on approvingly and said into the microphone, "That's the way we do it in Midland."

Observer intern Leah Finnegan contributed to this report.

[post_title] => Demographic Destiny [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => 2601-demographic-destiny-slowly-but-surely-hispanic-culture-will-define-west-texas [to_ping] => [pinged] => [post_modified] => 2012-10-26 05:06:04 [post_modified_gmt] => 2012-10-26 05:06:04 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.texasobserver.org/2601-demographic-destiny-slowly-but-surely-hispanic-culture-will-define-west-texas/ [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 2873 [post_author] => 260 [post_date] => 2007-06-15 00:00:00 [post_date_gmt] => 2007-06-15 00:00:00 [post_content] =>

When all was said and little done, the gavels dropped, and adjournment let lawmakers escape from the political implosion that was the 80th Legislature. Like high schoolers who had just blown up the science lab, Texas' three leaders stood dazed and giddy at having survived.

Gov. Rick Perry, Lt. Gov. David Dewhurst, and House Speaker Tom Craddick entered the session with grand ambitions. Looking to fortify his legacy as the state's longest-serving governor, Perry seemed to have his eye on the history books or national office. Dewhurst was eyeing Perry's job and wanted a legislative portfolio to undergird an expected gubernatorial bid in 2010. Craddick's sights, as always, were fixed on the exhilarating exercise of raw power and the rewards it brings to friends and supporters.

What's remarkable is how quickly it all fell apart. As leadership dissipated, chaos rushed in to fill the vacuum.

PERRY'S SELF-INFLICTED PREDICAMENT

The governor seems to have awakened to this year's session in a fit of hubris. Few saw it coming. After all, if ever a situation called for humility, it was Perry's. He had barely squeaked to re-election, winning as the least unpopular choice in a crowded field. Before the session, he had infuriated parts of the electorate by trying to speed up state approval of 11 coal-fired power plants, and to ram through his sweeping plans for superhighways and toll roads. Legislators were wary of Perry's agenda from the day they arrived.

Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Tom Craddick

Nonetheless, in January, he issued an executive order requiring that Texas girls be vaccinated against a cause of cervical cancer, human papillomavirus, before entering sixth grade. The unprecedented mandate made headlines across the country. More significantly, it startled Republican legislators who might have been Perry's allies had he bothered to give them advance notice. Then Perry proposed selling the state's lottery to a private company, using the cash to make Texas the nation's unrivaled leader in cancer research.

Backlash against the HPV vaccine mandate was swift. Conservatives in and out of the Legislature argued vaccination would encourage promiscuity. They complained that government was usurping an important decision rightly belonging to parents. More cynical critics saw evidence of pay-for-play: Merck & Co., the only maker of HPV vaccine, stood to make millions from Perry's mandate. One of the company's lobbyists was Mike Toomey, Perry's former chief of staff.

To many, Perry's failure to seek legislative input was more offensive than the HPV order. Questions about a governor's authority to issue such a mandate led to an informal ruling by Attorney General Greg Abbott, who said Perry's order had no legal weight. (Abbott's reasoning also threatened to undercut a previous Perry order fast-tracking state permits for the 11 new coal plants.)

Angleton Republican Rep. Dennis Bonnen quickly introduced House Bill 1098, which not only overturned Perry's HPV executive order, but also prohibited state agencies from requiring the vaccine for school enrollment. When the bill was heard in committee, opponents attacked the science behind the vaccine, arguing its safety was suspect and testing incomplete. Rep. Jessica Farrar, a Houston Democrat who agreed with Perry on the vaccine's merit, called it a "campaign of misinformation."

Perry turned to public relations, bringing in a woman with terminal cervical cancer for press briefings and photo opportunities. But Bonnen's bill passed early enough in the session that lawmakers had time to overturn a potential Perry veto. The governor harshly criticized legislators and announced that he would let the bill become law without his signature. Debate on the merits of Perry's idea, Farrar observed, got lost amid his ill-conceived tactics. "It was the first time I've seen him abuse his power to do good for somebody," she said.

Perry's notion of selling the lottery sank almost as quickly as it surfaced. But lawmakers did agree to let voters decide in November if they want to issue $3 billion in bonds to fund the Cancer Prevention and Research Institute of Texas. Another Perry priority-capping increases in property tax appraisals-met a similar fate, which rankled many longtime GOP members, including Tom Pauken, the former state party chair who headed a task force Perry appointed to gin up the plan. "The Republicans have squandered a majority," Pauken told the Houston Chronicle. "We could have gotten a lot more done if we'd had strong Republican leadership. We've got to quit simply saluting because they are Republicans."

By midsession, Perry had begun to turn his situation around. Capitol wags agree that most of the credit goes to a Democrat-Perry's legislative director, former Victoria Sen. Ken Armbrister. Despite overwhelming support for a toll road moratorium, the governor emerged with a compromise that did little damage to his vision of privatized roadways. While an ambitious homeland security agenda foundered, Perry managed to expand his authority in this area as well. After he threatened to veto the entire higher education budget, legislators coughed up $100 million in incentive funds for colleges and $145 million more for financial aid.

"The last 140 days reminded me of watching an old Clint Eastwood movie. It was a session that featured the good, the bad, and the ugly," Perry told reporters at session's end without a hint of irony. "If Texans have a bad taste in their mouth from the session, I would say that I couldn't blame them. Not because progress wasn't made, but because there was way too much acrimony."

At press time, Perry had 12 days to use his veto pen. There is still time for a little more acrimony.

DITHERING DEWHURST

Remarkably, among the cognoscente Lt. Gov. Dewhurst is known for his ability to master policy. His political ineptitude often obscures this talent. This session will be remembered as the one in which Dewhurst's political instincts trumped all else-with disastrous results.

Dewhurst ran the Senate like a man about to hit the campaign trail. Senators groused that the agenda, which catered almost exclusively to Republican primary voters, was driven by polls rather than policy. How else to explain Dewhurst's focus on child predators and voter fraud? The lieutenant governor forced votes on issues the senators would have happily avoided. What made it worse, some said, was that it's probably all for naught. Many assume U.S. Senator Kay Bailey Hutchison will join the race for governor in 2010 and obliterate Dewhurst in the primary.

Dewhurst pushed something he calls his "Texas Children First" program. If you think that means investing in worthwhile initiatives like the Children's Health Insurance Program, you're mistaken. Dewhurst spent most of the session resisting a proposal that would allow kids to stay on CHIP for a year instead of having to renew every six months. He focused on steroid testing for high school athletes, better access to defibrillators in schools, criminal background checks for school workers, and the death penalty for violent child predators. Those all passed, though it wasn't always pretty. The sentence enhancement for child predators, known as Jessica's law, was rushed through the House with "emergency" status from the governor. Then it sat for months while Dewhurst petulantly refused to address concerns of senators and even prosecutors. He eventually agreed to changes, and the bill was approved unanimously.

Requiring voters to show photo IDs at the polls wasn't one of Dewhurst's initial goals, but the GOP is vertically integrated, and Karl Rove, at the top of the pyramid, has made voter fraud a priority. Democrats had just enough votes to block the bill in the Senate, but one of them happened to be deathly ill. Dewhurst's threat to bring the bill up kept Houston Democratic Sen. Mario Gallegos on the Senate floor against his doctor's orders.

The lieutenant governor saw his chance when San Antonio Democratic Sen. Carlos Uresti missed a morning roll call because he was home sick with the flu. Then Dewhurst bungled the opportunity. He called the vote without all Republicans present. Short one, he tried to invalidate the vote of Houston Democratic Sen. John Whitmire, the Senate's longest-serving member, on a technicality. Finally, he caved and allowed a second vote, but let senators stall long enough for Uresti to rush to the chamber and restore the stalemate.

The next day, Dewhurst's office released an angry letter calling Senate Democrats un-American and saying Whitmire "tried to make himself a victim." Dewhurst then insisted he hadn't authorized the letter and that a staffer had written it. The Senate took a day off so they could caucus privately. Members sent three delegates to Dewhurst's office for an airing of grievances.

For the next week or so, the lieutenant governor avoided the dais in the Senate chamber. In a meeting with reporters after the session, Dewhurst claimed victory for everything positive that came out of it. But with a pained look on his face, he carefully explained that he'd just "rather not get into" the voter ID debacle. Freshman Republican Sen. Dan Patrick, the conservative Houston radio host who also might challenge Dewhurst for the governorship in 2010, was less reserved. "If you're going to run a play, you'd better make sure you run it right," he told the Observer. "We're the ones in charge. We have no excuses."

Speaker Tom Craddick leaves the floor flanked by his parliamentary muscle, former Austin Rep. Terry Keel and former Houston Rep. Ron Wilson.

CONTROLLING CRADDICK'S CRASHES

Even in the best of times, Speaker Craddick looks uncomfortable: reserved, shoulders rounded, at most a thin, impermanent smile traced across his face. But in the last hours of this legislative session, Craddick was downright joyful, sporting a broad, lopsided grin as he backslapped and joked the final minutes away. A near-death experience will do that.

At the beginning of the session in January, Craddick may well have thought the unpleasantness was over after he survived the first floor challenge to a sitting speaker in 40 years. Few in Texas are as adept as he at the insider game of politics. Craddick skillfully divided the opposition, in all likelihood seeding it with at least one double agent, while winning the allegiance of an unlikely group of mostly minority Democrats. With a slim majority in place, a somewhat contrite Craddick then promised members he had heard their complaints and would do better in this, his third session.

"It's hard for a leopard to change his spots," said Houston Democratic Rep. Senfronia Thompson at the time.

Remarkably for an institution that produces so much bad policy, the main complaints against Craddick were about process. Under past speakers, controversial legislation that could become campaign fodder was handled in committee to avoid potentially damaging floor votes. Committee chairs were given a fair amount of leeway to run their committees and reach consensus. The knock against Craddick was that he holds too tight a leash, often on behalf of special interests, limiting what his chairs can do and forcing members to take bad votes. The result was that policy was created, even entire bills written, on the House floor. It was here that the speaker ruled with absolute authority, at times through a capricious interpretation of the rules. Craddick didn't change his modus operandi much during the session. When it started to fall apart is hard to pinpoint. An event in early May seems to have been key. One way that Craddick controlled the chamber, and punished enemies, was by deciding which bills could be heard for a vote. Since he had many enemies this session, a number of them couldn't get their local bills onto the calendar. Local bills matter most to constituents. For this reason, when a local bill of a Craddick lieutenant, Rio Grande City Democrat Ryan Guillen, received special treatment by jumping ahead on the calendar, many members were upset. Thompson raised a point of order that the bill's appearance on the calendar violated House rules. The speaker overruled her. Then something happened that hadn't occurred since 1973. Craddick's ruling was challenged, and after much discussion, a vote of the House overturned it. Suddenly, Craddick looked vulnerable again. The insurgency rebounded.

Removing Craddick depended on the Republicans. Democrats could deliver a bloc of votes, but not enough to elect one of their own. Republicans who wanted Craddick gone faced the same problems they had in January. Each of the rebellion's leaders wanted to be speaker, so no consensus candidate emerged. And they couldn't trust each other. Some on the team seemed to waver between the two sides.

This uneasy status quo might have continued until the end if not for a question asked of the speaker on the Friday before the end of session. The insurgents had speculated on how a sitting speaker could be removed. Euless Republican Rep. Todd Smith asked Parliamentarian Denise Davis whether Craddick would have to recognize a member for a motion to vacate the chair. Davis apparently told him that while Craddick didn't have to recognize, the ruling could be appealed. Enough confusion remained that Waco Democrat Rep. Jim Dunnam, head of the House Democratic Caucus, decided to ask the speaker himself from the back microphone of the chamber.

Dunnam posed a parliamentary inquiry on whether he or someone would be recognized on a motion to vacate the chair. At this point, Craddick could have said he would not rule until the motion was made, and that would have been the end of it. The insurgents probably didn't have the votes, and the challenge would have likely fizzled. Instead, Craddick responded no. Dunnam then asked whether that ruling could be appealed. Craddick again responded no. The answer sent shock waves through the chamber. Craddick-ruling against his own parliamentarian-was saying there was no way he could be deposed during the session. It was an incredible demonstration of raw power and steely resolve.

Parliamentarian Davis and her deputy promptly quit. Craddick took a hurried recess as they were escorted from the building. The speaker returned hours later with two new parliamentarians-former Reps. Terry Keel and Ron Wilson-who had been privately advising him for at least a week. The rest of the session was akin to a mouse in a box sniffing out each side to determine the shape of its confinement. As it became clear that the box was solid, the antics of the insurgents grew more theatrical, culminating on the session's last Sunday night with an aborted roll call to remove Craddick, and then an impromptu walkout.

While Craddick survived, it may have been a Pyrrhic victory. Even his stalwarts doubt he will be re-elected in 2009. The only way to change that dynamic would be to elect new, Craddick-friendly members to the House. This will make for an interesting election cycle.

David Pasztor, Matt Wright, and Patrick Michels also contributed to this report.

[post_title] => A Fish Rots from the Head [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => 2519-a-fish-rots-from-the-head-with-these-three-in-charge-the-session-was-a-stinker [to_ping] => [pinged] => [post_modified] => 2012-10-26 05:04:50 [post_modified_gmt] => 2012-10-26 05:04:50 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.texasobserver.org/2519-a-fish-rots-from-the-head-with-these-three-in-charge-the-session-was-a-stinker/ [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 2878 [post_author] => 260 [post_date] => 2007-06-15 00:00:00 [post_date_gmt] => 2007-06-15 00:00:00 [post_content] =>

The homeland security and border funding legislation passed during the regular session will rank among the most important state policy changes never publicly debated. Don't get us wrong. There was plenty of debate. Unfortunately, little of it focused on what was actually at stake. Instead the Lege-reversing more than 130 years of tradition-helped abet a power grab, allowing themselves to be bullied and frightened into relinquishing constitutional power to a governor who won re-election with 39 percent of the vote.

Going into the session, the legal basis for the governor's authority on homeland security was tenuous at best. In 2003, the Lege passed House Bill 9 mandating that the governor "direct homeland security in this state." It did not create a homeland security office, instead instructing the governor to develop a "strategy." The bill conflated two distinct responsibilities: emergency preparedness (including disaster response) and terrorism prevention. The first is undeniably the governor's responsibility. The other arguably is a law enforcement task that should be partitioned from political considerations. Any concerns that the governor might misuse law enforcement responsibilities were only heightened when his acting director of homeland security in 2003, Jay Kimbrough, contacted the FBI in Oklahoma trying to track down Democratic legislators who fled the state in an effort to halt mid-decade congressional redistricting.

In November 2005, the governor released the Texas Homeland Security Strategic Plan. It, and a few executive orders of questionable authority, seemed to provide the basis for Perry's new homeland security director, former FBI official Steve McCraw, to anoint himself Texas' top cop. The plan featured two particularly troubling elements. Guarding the border-historically a federal responsibility-became a key state concern. "Border security is fundamental to the prevention of terrorism," the report alleged. "Al Qaeda plans to use alien smuggling organizations to infiltrate terrorists across the Texas-Mexico border." Perry used this new focus to launch several multimillion-dollar initiatives, passing out money to border sheriffs, with most going to those who endorsed his re-election and embraced his plans. There was little accountability for how the funds were spent.

The plan also mentioned, obliquely, a new database called TDEx [see "The Governor's Database," April 20, 2007]. It was to be "a pointer index capability for all law enforcement agencies in Texas, so that the law enforcement community can quickly locate the law enforcement data they need." In fact, McCraw hoped the database would include every Texan's interaction with the criminal justice system from traffic stops to open police investigations. All of this would be accessible by the governor. It was a political opposition researcher's dream.

This session, McCraw and Perry hoped to legalize retroactively the steps taken since release of the strategic plan. Their vehicle to do so, House Bill 13 carried by State Affairs Chairman Rep. David Swinford, a Dumas Republican, created a state office of homeland security in the governor's office. It gave the governor broad authority over intelligence collection, made local officials responsible for enforcing immigration law, and created a formal mechanism to funnel money to border sheriffs. In the budget, Perry pushed a $100 million slush fund he could use for "border security."

The legislation ran into trouble almost immediately. The Observer published its expose on TDEx in April, and legislators responded by forcing language into the bill moving the database to the Department of Public Safety. Houston Democratic Rep. Rick Noriega and others began questioning how Perry was spending border security money and who-McCraw or DPS-had command and control. The homeland security director didn't do himself any favors when, on Perry's stationery, he sent out a letter belittling Noriega. McCraw wrote: "Since it is your position that our border does not pose a terrorist threat, and because of that position you believe it is unnecessary to expand resources in protecting our border, I will make myself available to you or your staff immediately to provide a detailed briefing on why this mistaken position can cost lives." Noriega happens to be a lieutenant colonel in the Texas Army National Guard who has served in Afghanistan and on the border.

Swinford found himself fighting to keep his legislation alive while apologizing for McCraw "[He's] not a good people person," Swinford said. "[The letter] was a huge error, and I have talked to him about that." Swinford's rhetoric and histrionics-at several key moments he broke into tears when he didn't get his way-grew more heated as his bill faltered. By the end, Swinford was accusing those who disagreed with him of favoring drug traffickers.

The rhetoric obscured the real issues. In response to abuses by a governor, the Texas Constitution of 1876 created a weak executive without law enforcement responsibilities. Swinford didn't want to talk about that. After his bill died on a point of order, he seethed at a press conference. "I am upset because the time we spent on the border, and seeing that they are winning and we are losing," Swinford said. "The crime and the drugs are moving, looks like, about 50 to 100 miles inland every year. So two years from now, if this bill doesn't come about, you can expect them to be taking over a lot more communities."

In the senate, The Woodlands Republican Sen. Tommy Williams rejected Perry's request for the $100 million border security slush fund. Instead, Williams and his budget subcommittee came back with $274 million for homeland security-most of it going through DPS. "They are our chief statewide law enforcement agency," Williams said. The governor invited Williams, Republican Sen. Steve Ogden of Bryan and Democratic Sen. Juan Hinojosa of McAllen to his office and demanded that he be given the money to spend as he liked. (In addition to Perry's personal demands, his staff urged local officials to lobby their legislators on his behalf, and activated his campaign organization, the Perry Alliance Network, to demand the governor get his way.) The senators held their ground.

In the final budget, Perry received $43 million for local law enforcement on the border, with tight restrictions on how it is spent, including monitoring by the Legislative Budget Board. The governor's office had one last gambit. In the session's final days, another homeland security bill, Senate Bill 11, by San Antonio Republican Rep. Frank Corte, was still alive. Corte shoveled parts of HB 13 into his bill in conference committee. With Dallas Republican Sen. John Carona as his cosponsor, the two convinced Valley Democrats Hinojosa and Rep. Juan Escobar of Kingsville to sign the conference committee report. The bill contained useful legislation on mutual aid and disaster preparedness in addition to expanded wiretapping, a border security council run by the governor, and an intelligence data center controlled by the governor. The language moving TDEx to DPS was gone.

Corte, the Republican House Caucus chair, ratcheted up the pressure with e-mail blasts accusing bill opponents of fighting legislation "that is quite literally a life and death issue for many Texans." Asked about the politicization of the issue, Corte shrugged and said unapologetically, "There is a partisan aspect to this environment."

The scaremongering helped. Noriega publicly supported SB 11, explaining later that it had improved and that the "implication was that we were being unpatriotic and against border security. ... We wanted to question the process without putting members into harm's way."

After its passage, Corte was jubilant about formalizing Perry's control over the law enforcement and intelligence aspects of homeland security. "The governor is responsible for public safety," Corte said. "TDEx is going to be a great tool to look at pending cases."

Noriega said the Mexican American Legislative Caucus will hold hearings in the interim on border and homeland security. Next session, DPS is up for sunset review, and many expect a more thorough discussion about the role of intelligence and homeland security. But as long as there is still crime on the border and the possibility of another terrorist attack, chances are that discussion will be a muted one.

[post_title] => Legislative Terror [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => 2524-legislative-terror-lawmakers-buckle-to-perrys-homeland-security-power-grab [to_ping] => [pinged] => [post_modified] => 2012-10-26 05:04:54 [post_modified_gmt] => 2012-10-26 05:04:54 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.texasobserver.org/2524-legislative-terror-lawmakers-buckle-to-perrys-homeland-security-power-grab/ [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post] => WP_Post Object ( [ID] => 2861 [post_author] => 260 [post_date] => 2012-10-25 18:53:34 [post_date_gmt] => 2001-11-30 00:00:00 [post_content] =>

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Phasellus id lorem eget sem malesuada blandit. Pellentesque mi. Integer lorem est, consectetuer quis, commodo vel, blandit non, nisi. Quisque diam pede, tempus commodo, porta nec, ultrices eu, justo. Integer ultricies arcu. Nulla quis est. Curabitur eros. Aenean elementum tortor sit amet nisl. Donec eu justo in ligula consectetuer cursus. Suspendisse potenti. Suspendisse tincidunt massa vitae erat. Aliquam in augue. Donec fringilla justo eget dui. Phasellus porta velit sed orci. Cras vel erat sed justo varius pharetra. Proin eu diam ut enim tincidunt pretium.

Ut mattis. Nunc porta interdum leo. Donec sollicitudin tristique tellus. Donec convallis facilisis libero. Pellentesque luctus viverra augue. Nulla neque. Quisque arcu nisi, venenatis nec, interdum in, consectetuer at, urna. Nam id lacus id sem iaculis semper. Sed feugiat congue erat. Nunc at leo in libero facilisis cursus. Nunc diam. Fusce in elit. In bibendum leo id eros. Pellentesque sapien enim, fermentum et, tristique nec, fermentum sed, lorem.

Nullam vitae ipsum. Cras eget ipsum. Vestibulum quam magna, luctus eget, ultricies vitae, pulvinar eget, lorem. Mauris vehicula velit ac erat. Integer vehicula. In rhoncus massa ac ligula. Nunc dictum iaculis tellus. Nunc at diam in metus faucibus cursus. Donec neque sem, posuere ut, vulputate vel, ultricies ornare, felis. Quisque auctor.

Sed laoreet, felis eget vestibulum viverra, arcu nunc bibendum mi, eget facilisis leo ipsum vel ante. Cras ante tortor, auctor rhoncus, iaculis eu, dapibus quis, nunc. Fusce non augue. Duis purus lorem, tincidunt sit amet, hendrerit vel, faucibus vel, velit. Nunc metus pede, feugiat at, pharetra a, nonummy non, mauris. Suspendisse rhoncus pulvinar enim. Praesent quam. Nunc id erat. Suspendisse eget ipsum in lorem aliquam egestas. Etiam mauris.

Aliquam id urna. Duis non nulla. Nunc a orci. Nulla elementum felis nec felis. In fermentum, tortor nec gravida interdum, elit est sollicitudin nunc, vitae sollicitudin ipsum dolor nec nibh. Morbi sapien nisi, viverra vel, tristique in, luctus eleifend, arcu. Nullam scelerisque. Pellentesque risus lorem, aliquam vel, iaculis et, volutpat vel, tortor. Vivamus nibh velit, feugiat et, fringilla semper, semper eget, arcu. Curabitur rhoncus. Nunc et massa vel risus ultrices cursus.

[post_title] => Jack Abramoff: Off the Reservations: an Observer Web-Only Feature [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => 2507-jack-abramoff-off-the-reservations-an-observer-web-only-feature [to_ping] => [pinged] => [post_modified] => 2012-10-26 05:04:40 [post_modified_gmt] => 2012-10-26 05:04:40 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.texasobserver.org/2507-jack-abramoff-off-the-reservations-an-observer-web-only-feature/ [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) )