of similarly situated firms and allocate resources for the most proficient providers are unfortunately, the actions taken during the past year have a reinforced the idea that some financial organizations are too big to fail. the notion of too big to fail creates a vicious circle that needs to be broken. large firms are able to raise huge amounts of debt and equity and given access to the credit markets as favorable terms without sufficient consideration of the firm's risk profile. investors and creditors believe their exposure is minimal. says they also believe the government will not allow these firms to fail. the large firms leverage these terms and become even larger. which makes investors and creditors more complacent and more likely to extend credit in funds without fear of losses. too big to fail must and. today, shareholders and creditors of large financial firms rationally have every incentive to take excessive risk. they enjoy all the upside, but the downside is capped at their investment. and went to big to fail, the

government even backstops that. for senior managers come visit us are even more spassky appeared paid in large part to stock options, senior managers have an even bigger economic stake in going for broke because their upside is so much bigger than any possible loss. . .

of its sector and into the hands of better management. it also sends a message to the market investors and creditors will face losses when an institution fails. so called open began assistance which precious before that the government should be prohibited. make no mistake, i support the actions the regulators' collectively taken to stabilize the financial system. lacking an effective resolution mechanism we did what we had to do. but going forward, open banking systems by any banking entity should be allowed only invoking the systemic risk procedures and even then, the standard should be tightened to prohibit assistance to prop up any individual firm. moreover, whatever system support is provided should be based on a specific finding that such support would be least costly to the government as a whole. in addition, potentially systemic institutions should be subject to assessments that provide disincentives for complexity and high risk behavior.

i am very pleased yesterday the president expressed support for the idea of an assessment. funds raised should be kept in reserve to provide working capital for the resolution of large financial organizations to further insulate tax payers from loss. without a new comprehensive resolution regime we will be forced to repeat the costly ad hoc responses of the past year. in addition to the credible resolution process, there is a need to improve the structure for the supervision of systemically important institutions and create a framework that proactively identify issues that pose risks to the system. the new structure featuring a strong oversight council should address such issues as industry's excess of leverage, and adequate capital coming over reliance on short-term funding a council of regulators will provide necessary perspective and expertise to view the financial system holistically. a wide range of views makes it more likely will capture the next problems before they happen. as with the fdic board a

systemic risk council can act quickly and efficiently in a crisis. the combination of the unequivocal prospect of an orderly closing, stronger supervisory structure and counsel that anticipates and mitigates risk developing both within and outside the regulated financial sector will go a long way to assuring the problems of the last several years are not repeated and that any problems that do arise can be handled without cost to the taxpayer. thank you very much. >> thank you very much, chairman bair. the chairman shapiro. >> thank you, chairman donner, ranking member shelby and members of the committee i'm pleased to be with my colleagues from the fed and fdic. there are many lessons to be learned from the recent financial crisis and a key one is we as regulators need to identify more mature and reduce systemic risk before they threaten the stability of the financial system. however in efforts to minimize the potential for institutional

failures to threaten the system we must take care not to unintentionally facilitate the growth of large interconnected institutions whose failure might later pose even greater systemic risk. to best address these risks i believe we must rely on two lines of defense, first traditional oversight and regulation. this includes enhancing existing regulations, filling gaps in increasing transparency and strengthening enforcement to prevent systemic risk from developing. second, we should establish a workable regulatory framework and resolution regime that can identify reduce and on wind systemic risk if they do develop. closing regulatory gaps is an important part of reducing systemic risk. if financial participants realize they can achieve the same economic in this with your cost by flocking to a regulatory gap they will do so quickly often with size and leverage. we have seen this time and again most recently with over-the-counter derivatives

instruments which major institutions engaged in the enormous virtually unregulated training and synthetic versions of often highly regulated financial products. we could do much to reduce systemic risk if we close these caps and ensure similar products are regulated similarly. in addition to filling gaps we need to ensure greater transparency of risk, transparency helps reduce systemic risk by enabling market participants to better allocate capital and giving regulators more information about risks that are building in the financial system. transparency has been utterly lagging in the over-the-counter derivatives, hedge funds and dark pools. additionally we need to recognize the impornce that vigorous enforcement plays in sending a strong message to market participants. as the second line of defense i believe there is a need to establish a framework for macro provincial oversight a key element of the administration's financial regulatory plan. within that framework i believe

the most appropriate approach consists of a single system chris regulator and a very strong council. in terms of a systemic risk regulator i agree their needs to be a governmental entity responsible for monitoring the financial markets for system like risks. this could be performed by the federal reserve or a new entity specifically designed for this task. the systemic risk regulators should have access to information across the financial markets about institutions that pose significant risk. and it should be able to monitor whether institutions are maintaining appropriate capital levels and should have delegated authority from the council to respond quickly and extraordinary circumstances. most importantly the system eckert said regulators should serve as a second set of eyes upon those institutions whose failure might. at the same time, i agree with the administration this systemic risk regulator must be combined with a newly created council. but i believe in the council

must be strengthened well beyond the framework set forth in the administration's white paper. the council should have authority to identify institutions, practices and markets that create potential systemic risk and set standard for the equity, capital and other risk-management practices systemically important institutions. this hybrid approach can minimize systemic risk in a number of ways. first a council would bring different perspectives to the identification of risks that individual regulators might mess were considered too small to warrant attention. second the members on the council would have experienced regulating krin types and sizes of institutions so the council would be more likely to ensure capital and leverage requirements do not unintentionally foster greater systemic risk. third the council would include multiple agencies thereby significantly reducing potential conflict of interest and

regulatory captured. finally the council to monitor the growth and development of financial institutions to prevent the creation of institutions that are either too big to fail or too big to succeed. and most times i would expect the council and systemic risk regulators to work with and through primary regulators who are experts on the products and activities of the regulation in to these. the systemic risk regulator can provide a second layer of review over the activities, capital and risk-management procedures of systemically important institutions as a backstop to insure no red flags are missed. to ensure that authorities checked and decisions are not arbitrary the council would remain the place where general policies set and differences remain between the council and primary regulator the more stringent standards would apply. for example in questions of capital the new system eckert screen works only be in a position to raise standards for regulatory capital for these institutions not to lower than.

this would reduce ability of any single regulator to compete with other regulators by lowering standards driving a race to the bottom. and finally the government needs a credible resolution mechanism for unwinding systemically important institutions. currently banks and broker-dealers are subject to resolution process these but no corresponding resolution process exists with a holding companies of systemically significant financial institutions. i believe we have an opportunity to create a regulatory framework that will help prevent the type of system cresco that created havoc in the financial system and i believe we can create a credible regulatory regime that will help restore investor confidence i look forward to working with you to address these issues and doing all we can to foster a safe dynamic and more nimble financial system. thank you. >> thank you very much, chairwoman shapiro. the dam, welcome to the committee once again. >> thank you, mr. chairman,

members of the committee. my prepared statement sets forth the federal reserve on a number of the proposals that have been brought before do so i thought i would use these introductory remarks to offer a few more general points. first, i think the title to have given this hearing captors the task while establishing a framework for systemic risk regulation. the task is not to enact one piece of legislation or established one overarching systemic risk regulator and then move on. the shortcomings of the regulatory system were to widespread, the failure of risk management and financial firms to the evasive and the absence of market discipline to apparent to believe there was a single cause of much less single solution for the financial crisis. we need a broad agenda of basic changes at the regulatory agencies and in financial firms and sustained effort to in that market discipline and financial

markets. second, the two big to fail problem looms large on the agenda. therein lies the importance of proposals to ensure systemically important institutions are subject to supervision. to promote capital and other kind of rules that will apply more stringently as the system of importance of an institution increases and to establish a resolution mechanism that makes the prospect of losses for creditors real even at the largest of the financial institutions. but too big to fail for all of its importance was not the only problem left unaddressed for too long. the increasing the tightly wound connection between lending and capital markets including the explosive growth of the shadow banking system was not dealt with as leverage built up throughout the financial system. that is why there are also proposals before do pertaining to derivatives, money market funds, rating agencies mortgage products, per cyclical regulations and a host of other

issues involving every financial regulator. third, in keeping with my first point on a broad agenda for change, let me say a few words about the federal reserve. even before my confirmation i had begun conversations with many of you on the question how to ensure the shortcomings of the past would be rectified and the right institutional structure for rigorous and efficient regulation put in place particularly in light of the need for a new emphasis on systemic risk. this colloquy has continued through the prior hearing committee conducted and in prior subsequent conversations i have had with many of you. my colleagues and i thought a good deal about this question and are moving forward with a series of changes to achieve these ends. for example instituting closer coordination and supervision of largest holding companies with emphasis on horizontal reviews the simultaneously examine multiple institutions.

in addition building on an experience with the s cap process that drew so successfully on the analytic financial capacities of them on supervisory divisions of the board we will create a quantitative surveillance program a will to use a variety of data sources to fight and fight developing strains and imbalances affecting individual firms and large institutions as a group. this program will be distinct from the activities of the on site examiners to provide an independent perspective on the financial condition of the institutions. fourth and finally, i would note there are many possible ways to organize or reorganize the financial regulatory structure. many are plausible but as experience around the world suggests, non-is perfect. there will be disadvantages as well as ed and chichester evin good ideas. one criterion though that i suggest you keep in mind as you

consider various institutional alternatives is basic principal of accountability. collective bodies of regulators can serve many useful purpose is examining latent problems, coordinating response to new problems recommending new action to plug renu khator gaps and scrutinizing proposals for significant regulatory initiatives from all participating agencies. when it comes to specific regulations or programs or implementation though, collective bodies often diffuse responsibility and attenuate the lines of accountability which i know this committee has paid so much attention to. achieving an effective mix of collective process and agency responsibility with an eye towards relevant institutional incentives will be critical to successful reform. thank you very much mr. chairman i would be happy to answer any questions. >> thank you very much, dan

testimony and involvement with the committee as well. i ask the clerk to put on six minutes and try to keep an eye on that. we have got a lot of participation this morning and want to make sure we get around to people and ask the staff to give a very accurate account of the arrival of members in terms of the order in which they will be asked to address the questions to the panel. let me begin tarullo, if i can. i suspect a lot of the questions i'm going to raise are going to be a theme will emerge here. and you testified the administration's proposal to give the fed system chris supervision is incremental, built on the robust authority, which already have under the bank holding company and you also detail your plan for new surveillance program which you mentioned here for a large complex financial organizations that will look at emerging risks to the system as a whole. obviously speaking about you because obviously you are new to

this but given the federal reserve's history and record as an institution as we look back, why should we or this congress have any confidence in the federal reserve other than what is being said today and i appreciate what is being said today that given the history of the federal reserve you could argue this authority is already existed. we don't need new authority. the bank holding company had that authority a long time. certainly all the power, the personnel, the resources to do the job and yet there was an abysmal failure when it came to these institutions. so why at this juncture should this committee will the congress have any heightened degree of confidence the federal reserve having failed in that function given the authority for years should be granted expanded authority in that same area? >> well, senator let b.c. a couple things. first, as you know in my prior capacity i had a fairly broadbased said criticisms about

the fed and regulatory system as a whole. i continue to believe that when the final history of the financial crisis is written there will be a lot of blame to go around to the bigotry institutions, private institutions. this wasn't a single billing, this was broadband and as we have seen at home as well. second and let me be clear when that includes an inadequate or flawed approach to supervision at the banking agencies including the fed. second, i will say that i think that history shift and the relative agency shift over time. i remember when i was in law school was studying this set of issues the federal reserve was regarded as the most aggressive of the regulatory agencies and

the other agencies were regarded as somewhat more accommodating so i think there is a rhythm that goes with the times, the leadership of an agency and general orientation of public policy. so since i of got into the fed or i began having conversations with he and other members of the committee, what i have been trying to determine is the degree to which the capacity and the resources are present but to do what is in some sense the same job that should have been done better to be honest in some sense is a different job because i don't think anybody actually was focused on the systemic part of the problem as much as they ought to have been it was a more siloed approach to the regulation. and that is why i think both with respect to making some changes, some of the changes in prevailing law so that it is clear supervisor of the holding companies has authority to do the examinations of functionally

regulated subsidiaries when it is necessary. those sorts of things need to move forward but i think more fundamentally one has to be done as a kind of thing i mentioned a moment ago which is to put in place a system within the institution that has its own kind of cross checks drawn on the substantial resources of the agency and there are substantial resources there and got research and monetary affairs parts of the board to provide exactly the kind of information that will enhance supervision. and that's, that is i think the task someone has to perform, senator, and that it's either going to be done by the federal reserve or another agency. it has got to be done somewhere. my belief is based upon my six months experience at the fed that under chairman bernanke's leadership it can be done but i

don't think anyone should underestimate the task and i would second something you sit in your introductory rem@rks i hope people are not expecting anything the fed or sec or fdic were anybody else does is going to eliminate all potential for systemic risk. it's just not -- that is not going to happen. and i think -- that is where we have to keep that in mind. let me say one final thing. the proposal the administration's proposal very and how much they mean to invest in a particular agency back up the march hearing you and i talk back and forth a good bit about the different possible functions of a systemic risk regulator. i don't -- with a possible exception of some of the proposals for the council as they have been described, most proposals don't talk about a systemic risk regulator. they talk about allocating a

particular set of responsibilities to particular agencies or collective groups and i think that is probably the way it should be. i really don't think you need or want so much responsibility as well as authority larger than any one agency to say you have responsibility for giving out anywhere in the financial system where there is a problem and you have the authority to do whatever you think is necessary. >> thank you for that. let me, speed, turn to you and then play the devil's advocate in a sense as well and i am still soared at an agnostic on this although i am leading towards the council's approach. let me take the side of the argument the administration opposes and raise it with you and i will give my best shot in giving their side of the argument. this is a new idea we are fooling around with the council here, agencies that don't necessarily have the kind of expertise and background of the federal reserve. we are going to spread this out among a different agency so no one is in control of authority.

the federal reserve has experience. the have done a bad job of this over the years but historically, they have the capacity and knowledge and so forth to do this. we know about the fed. you are asking me to create something that is altogether new and it may not function well at all to handle the issue of systemic risk and very important issues. why should i take a leap of faith in something here creating a whole new entity that may include the fed is going to have a problem of spreading out their responsibility in such a way that you never figure out who is running the shop in the sense systemic risk will be suffering despite you've given it an ice cream and hired a bunch of people it will not make the kind of decisions we need to have it a single regulator with experience that has to do the job. why is that not a bad idea? >> i think copiously we disagree. we think the council with real teeth and rulemaking authority needs to have some authorities. it would be highly effective

morsel in monitoring for systemic risk in taking action to address it. immortalize you have looking at this from different perspectives and quickly if the fdic has a different perspective from the fdic or the sec or the fed is bringing the multiple perspective together is going to strengthen the entity and not weaken it. you're talking about tremendous power being invested in with that for this entity is going to be and i think in terms of checks and balances it is also helpful to have multiple views being expressed and coming to a consensus. we do a lot of this informally now that there is no forcing mechanism. there's a lot of discussions now about otc derivatives and trying to harmonize capital on the margin standards but having it have a formalized group with a head who is charged with dealing with those crosscutting issues harmonizing standards to make sure there is no regulatory arbitrage and making sure brisk throughout the system is properly addressed i think is extremely important. i would say the one thing we have a bit of a middle ground in institutional regulation we would not advocate the fed losing its holding company's

consolidated supervisory authorities the of the reservoir for the expertise to the extent there are other systemic institutions that are not under their provincial framework we think the council should be able to make a determination regarding that but then we would say that it would be fine for the fed to be there for this institution specific institutions, but i think the kind of power that is contemplated in the white paper and we think frankly is needed is much better tested in a council of regulators who i do think work together. our own board has three agencies represented. we make decisions quickly. >> i was going to ask you, i will wait for another round of the consumer financial product safety agency idea. i will delay that for later. let me turn to senator shelby. >> thank you. governor tarullo, in your testimony you appear to endorse the obama administration's regulatory reform proposal. all i am curious to know if you arrive at this position as a member of the board of governors

after conducting an independent assessment of the plan which i hope is the case otherwise it would call into question the so-called independence of the fed. could you provide the committee with the data and analysis you use to make the determination that the obama plan was an optimal approach? >> i senator would not say that the board's position is an endorsement of the administration's plan. i think what you saw in my testimony, prepared testimony which reflects the position of the board is a sense that the administration is moving in the right direction on these key components that there are obviously lots of details many of which by the way we don't know and we didn't know based on the white paper and we are beginning to find out as they send up legislation to you. i think that -- >> our legislation dewaal send

it up, and don't you think we should be preparing our own legislation? >> absolutely. but i am saying is we couldn't figure robinson cases a exactly what one of their proposals and which is why de -- y the testimony is phrased in such a way as to agree with the concept of needing to have every systemically important institution supervise and needing a resolution mechanism. as you probably saw the fed is not endorsing a the proposal of the administration to create the new consumer agency. it isn't posing it either. >> let me get into that. safety and soundness regulation very important. in your testimony you state there are synergies between the monetary policy and systemic risk regulation in order to capture the synergies you argue the fed should become a systemic risk regulator as i understand to read yesterday chairman bernanke testified that he believed there are synergies

between provincial bank regulation and consumer protection. this argues in favor of establishing one consolidated bank regulator. do you agree with chairman bernanke that there are synergies between prudential supervision and consumer protection? and if so, do you believe that the obama administration's call for a separate consumer protection agency would undermine the soundness we have? >> as i sit in my introductory comments, there are multiple ways to organize or reorganize financial service regulation. many times you've got competing ideas each of which has merits and each of which has demerits. with respect to the consumer protection issue, the administration has made a proposal which i think a lot of people have sympathy with because when it focuses on consumer protection. we say we are going to give one

agency the exclusive authority to regulate on consumer matters and thus they will be 100% devoted to doing that. what we have in the testimony is meant only to suggest that there are some things that would be lost by doing that as well as things the would be gained and what the chairman i think was suggesting yesterday is that there is a synergy or interaction between provincial regulation and consumer protection regulations at least if they are both being done well. that synergy is both in the substance of things that is having some sense what makes an effective consumer protection regulations because you know the way in which the institutions operate. but also in a practical sense that as you have got one corev examiners has a certain economy of scope and having them look at the multiple sets of issues within the same organization. so why the family don't think

there are synergies. there are benefits that go back and forth. if you take consumer protection away and put it in another agency you probably lose some of those. i guess the administration's position would be yeah but you gain some things along the way. .. >> will the government signal that will not allow these to fail? >> we have do as a special class. at the same time we recognize

there might be very large financial entities that are not subject to federal consolidated supervision. some type of formal designation you need to think hard about. any recognition of a institution should be stigma losing designation not something that favorable. and this is why we do feel so strongly that it needs for very large financial organizations to be combined tour recognize that they maybe systemic. >> government, i want to get back on the consumer production. there's testimony here last week on that. this would change the whole model from a classical approach to consumer protection to a behavior approach. have you done some work in that area? have you looked at that closely

yet? >> senator, i have to honest. i'm not sure what that refers to. i can only tell you the way -- based on what i've learned since i've been at the fed. the way in which the division does consumer protection and generated proposals is one that has an important orientation up to and including the fact that the extensive consumer testing done before regulations are presented to make sure, for example, that what you are trying to do is disclose terms of a consumer contract that the kind of terms you disclose will mean something to a consumer and be useful to them. in that sense it's not just a top, down how would the rational personal think but you try to determine how real people really do think. >> we put a lot of power on the bureaucrats. >> to create -- >> no. if we created something like

that, it'd put a lot of power in the bureaucrat. >> if depends on the mandate and the scope. that obviously is to be determined by all of you. i think that people at the fed would agree strongly with the proposition that there needs to be good solid consumer protection in the financial services area. obviously we also think that should be done in a well organizized fashion with due process for everyone involved. >> thank you very much. i want to point out that it was jim that has pointed out we gave that fed the authority in 1994. it took them 14 years to prom mule gait any protection. >> thank you. i will start with chairman, it's a general question for everyone.

as i understand the goals of the white house, the ots would be eliminated. effectively all financial holder company would be lodged under the federal reserve. that there would in fact be a at least a review or holding company act, those institutions would be financial holding companies upon the federal reserve. so direct regulation after this legislation by the fed would be comprised most if not all the systemic institutions. say perhaps the insurance companies that might be outside, we have to deal with that. and some very large hedge funds or maybe not so large hedge funds but operating very recklessly. so with that framework, what does the council council -- how does the council regulate to a regulator that have full direct

authority and would eliminate the function of the deference to that fed i think could look through every part of the institution? what role does the council play there or should play there? >> well, i think there are still issues regarding across markets and different functions within the holding company. there will still be some practices in the products that maybe outside that may other nonsystemic institution maybe doing. it is a prime example. a lot of very small mortgage brokers originang some pretty bad mortgages being funded through nonregulated financial companies, et cetera. so i think there is plenty of opportunity for risk to be assessed across the system by any entity in terms of products and practices and within those large holding companies there will be reservoirs from the

banks and state charters from the new prudential regulator and the fdic. i think in particular applying them across the board, maybing sure there are no opportunities going forward. i think that was a very major issue. i can see derivatives. they are going to be traded on exchanging. some are going to be on central counting parties. seeing how capital across the system effects incentives, whether the incentives can get together, those are all matters that cry out for coordination and cross agency rule making. i see a lot for the council to do even preserving feds for the major holding companies. >> just specificically, would the council in your view designate the tier one or the entities? >> yes, i think that's

tremendous power to say to an institution whether you want to be regulated or not, we're going to bring you in. i think the power needs to be exercised by a council by some checks and balances. >> and the council could formally begin the resolution process? >> i think we could discuss that. we have been talking about that a lot internally. i think for systemic institutions, that might be further. obvious the other hand, the sent resolution will involve short-term assistance. i think the current will be called the three keys, the fic, fed, and treasury. those are the entities that have to put the money on the table to deal with the system. that's the way the system works now. if you rely on that system, we think the systemic risk should

be tightened. it's much harder to provide assistance to individual institutions. let me -- i do want to tell him too. but mayor? >> thank you. i really agree very much with what sheila has said. i think a council is critical to bring the views of the deliberations of all the regulators. and this diversity of views really does need to reach across equities, futures and derivatives markets, the banking institutions, the clearance and settlement systems, and across a huge variety of different products. if we don't bring the perspectives together we run the risk of any one regulator not appreciating a risk that's developing or not understanding the risk that may impact other financial institution for which they don't have direct responsibility. i think both the able to designate the institutions that need to be subject to risk-type regulation and establish capital

standards, liquidity, other procedures for those institutions in conjunction the primary regulators is a very important backstop. >> this is the lightning round. >> so senator, i think it depends a lot on how you structure things. i guess one model which maybe is what sheila is mary are talking about. one model has the council basically as the rule-making entity for things that are systemically important. designation to the tier one, capital rules, deposit insurance premium, and money market fund regulation. and then the question for you and everybody is going to be do you want a system in which each major regulation that has systemic importance as chairman

said, do you want it done or do you want it to be done through a lot of scrutiny and discussion. as well as from the agencies to ask the hard questions, to require the agency that has responsibility and accountability for that regulation to defend it, to make it a better regulation. but then ultimately to itself have the responsibility to implement it. and i think that's the choice. that's what i was illuding to earlier. >> thank you. thank you, senator. >> thank you, senator reed. >> mr. chairman, thank you. and thank each of you for your testimony. chairman, very much as you know support your outlook as it relates to the resolution issue. and surprised that the

administration proposal in wanting to continue to support companies that fail much like us being down the tarp and hope that will evolve. let me ask you this, on the issue of systemic risk, if there has been a resolution mechanism in place, would that not have actually, on though there was risk in the market, would that not have actually reduced the risk to some degree? in other words if you had the appropriate ability to deal with the lee monobrothers or aig, would that have reduced the rest of the system in the first place? >> i think it would have for two reasons. one if it had been in place, i think it would have better market discipline. second of all, when the problems hit, we'll always have cycles. hopefully never as severe as this one. there would have been a systemic

stash that could be appelleed to all of these which would tell you what is going to be next, who is going to win, and who is going to lose. i think it would have. absolutely. >> i think that's really a big point. i think that's something that we're looking at creating something new. and i know we'll debate this, and we may come up with the right solution. the fact of the matter if we had just had effective market disciplines in the first place where there weren't entities that were too big the fail, the risk itself would have been ss. i think that's an important one. let me ask you another question. i've served on several public company boards. certainly not of the size of the companies we're talking about here. but i've been before lots of them. and each of the board members typically are respected individuals that have a focus on

their own companies. and i respect people in that position very much. but is there something we should be thinking about as it related it boards? my guess most board members show up, really don't know excuse the language squat of what going on inside the company. it's a social event. >> is thisn admission on your part? >> in. i wasn't serving on highly social boards. you know, it's a fact. let's face it. the board members really as good as they are, the respected individuals, they have their own companies, they have their own fish to fry. they really don't know what's happening inside these companies. and the greatest regulation would just be knowing and actually understand what's happening inside the company. i know most ceo's don't like that much.

but i wonder if you might respond to mary and sheila, excuse me, chairman and charm to that. >> mary is just fine. i think governance is an issue. i don't think it's by mall intention or neglect that some of these institutions got in trouble. i don't think it's the board that didn't understand. i think from the perspective fcc there's a couple things we want to do with that. one, we propose some new rules that require much greater disclosure about a board members qualify -- qualifications, and a risk committee or other committee that might require particular expertise. so we can encourage boards to nominate who bring that value to

the company. i think the second big problem is with compensation screams. -- schemes. some of these schemes really incentiveize risk taking. and the link between compensation programs and risk taking will help shareholders do a better job of holding the boards accountable for having utilized compensation. >> yeah, i think the direction the fcc is going is great and much needed. our own focus with regulated banks, obviously, we look to the board. we want it make sure the board has people who understand banking and can oversee management. also their primary responsibility is to make sure the management knows how to run the bank and we will. we have put a focus on this throughout the holding company level. we want real boards. we want person who are experienced.

people who know what's going on and the risk they are taking and the compensation structures interact with the behaviors. >> the board members, the first question they ask the company is how much insurance do you have? right? i want to be able to be on the this board and i don't want any liability. if the insurance is enough, i'm not coming on. i think that's something we have to consider not without any disrespect to the individuals themselves. on a systemic -- so i think if resolution had been in place, the risk would have been less. if we had boards that somehow had some steak in the game or some different relationship, that would reduce risk. so let me move back to the notion of systemic regulator. which i know we will debate. but what powers, mr. turullo, if

one company was doing something unintelligently, what the power of the regulator be to stop that action? >> senator, again, it depends on how congress would choose to define a systemic risk regulator. if you are asking about how the federal reserve could deal with it, it would depend of course on whether it is a supervised institution. because if it was not, we have no authority over them. >> just tell me at the end of the day, if you're going to give the systemic regulator the ability to do something, if they saw something that was creating a risk, what power would be given? i think we'd all like to understand. what exactly would they do in

that case? >> i think here it's important to draw this distinction. right now if we have a supervised institution, there's a set of rules and supervisory expectations. there are a rules on leverage, capital, liquidity. they are supposed to be confirming to those. if they are, there should be a containment to the kind of risk you are talking about. the back up effort there is supervisory examination which goes beyond the rules and identifying these things. and then it will allow the supervisor to give guidance to the firm to say we think you aught to be moving away from this practice. i think your question raising an important point. which is if this were, assume the administration proposal on tier one, there would still be a

substantial universe of firms without there which would not be regulated by the fed which might be engaging in the kind of practices you are talking about even if no one firm is systemically important. in the aggregate, a practice engaged in by a lot of firms can still create problems. you have to ask who would be able to regulate that. >> my time is up. i think that answer was interesting, mr. chairman, from this stand point. nothing. i mean the answer is nothing. the notion of having a single person, single entity overseeing so they can act swiftly is not even relevant. because there would be no power. it's again it's all conversation, looking with regulation, those things can be done by a group. and i just think that's worthy of hearing one of the governor's saying, no action. >> senator -- can i -- just

slately amendment or add to what i said. it is important to look to see what those roles are that prevail. the rules on leverage, capital, the rules on liquidity are themselves supposed to be based on concepts of risk. and i believe they are based upon concepts of risk which should contain these kinds of risks. i think that if you set the rules properly, you have gotten a fairway down the line to containing risk within those institutions. what i was saying before about the back up supervise reauthority is somehow we are invading the rules. and then you need to determine whether it is an unsafe and unsound practice and make a judgment about that. but i don't -- so i don't think

anybody should promise to you that as soon as any firm starts doing anything dangerous that some regulator is going to see it and be able to stop. it's going to have to evolve over time. you should be containing a good bit of that to continue. >> thank you very much. thank you, mr. chairman. many -- all of you have talked about gaps and systemic risk in all of this. mr. tush result low one of the points you made was on accountability, you can't diffuse the responsibility. later on you talking about silos and opposing one agency to determine the solution to be problem. i may be wrong, but that's what i thought i heard. i want -- we're at the point

where we know there are regulatory failures. i think there's an opportunity to fix it. i think that's the president put forth with this proposal. but shouldn't be push for further consolidation to stop the gaps to allow ourselves to really focus and have that accountability that you talked to one of your main points? more consolidation than even here. >> so -- so -- this is i keep referring to my prior life. it turns out to be relevant for this job. i guess it's a good thing. i spent a good bit of time actually as an academic looking at the different ways in which countries structure their regulatory systems. there are some countries uk and japan, notable among them, that have tried to consolidate all financial regulation in a single

entity. i don't -- i don't think there's any denying that there's some advances to that. you do get some of the cross pollination of views. you do kind of balance your incentives to sponsor the system but protect the insurance fund. you get a lot of those incentives. i think people in those countries that say there are downsides to that as well. they suggested to a lot of people that that model wasn't a fail safe either. i would -- i should say the fed does not have a position on more consolidation or less. just as kind of a policy observation, i think there would be gains to trying to get more focus on consolidation. so that you have some sense of who's accountable for what. but i think most of us and i suspect all three of us at the table here would also agree that

some measure of reden dan si is actually not a bad thing. it's sometimes i want accountability, but sometimes it's not worse thing in the world to have multiple pairs of eyes and even somewhat overlapping authority. >> i would agree with that. but then what happens with the instrument that's developed that has no regulation and falls in those gaps that we talked about. and then everybody says -- >> that's absolutely. i think that is a very good point. i think the question for you will be in the architecture that you all choose to legislate, do you provide that somewhere there's doing to be default authority to address the unanticipatory. >> chairman, the administration proposes factoring in the size and leverage and the impacts and the impact is failure would have an on financial system and the

economy we're determining as the firm is systemically important. it is kind of a two-edge sword once again. if the firm's size is in the metrics are developed around that. we can talk about what those metrics might be. and we might if we have time. but wouldn't that provide from a safety stand point, wouldn't that provide competitive advantage for those bigger banks versus community banks if in fact their size and leverage determined them to be -- they can't -- they can't fail so we're going to make sure they don't through the regulation? >> well, we think any designation of systemic should be a bad thing not a good thing. if that occurred, that's one of the reasons why we said there should be a special resolution to resolve large firms that do the same that applies to small

banks. also they should have to pay assessments to reserve the working camp. we're not sure you need a special category. we think it could be anyone who could be systemic perhaps based on some other criteria, could be used as a means of the first cut of who should pay the assess assessment. but you are right. if you to that without authority and we think assessments would be helpful as well it's going to beiewed as a reward. it's going to reinforce, and you want to end it. >> so i'm not tracking as a consumer how would you stop it from being a reward and not -- >> because you'd have a revolution mechanism. if it became nonviable, government wouldn't support them, they would be sold off. >> excuse me, but too big to

fail would go away? >> well, i hope so. i certainly hope so. i think that should be the policy goal. i think right now it was a doctrine that fed into the market discipline that contributed to the this crisis. i think the problem is worse. lacking an accurate resolution, we've had to step in. >> and i've heard from other participants just like your perspective, they would go away by increased regulation. >> no, i think increased supervision with increased market discipline. >> thank you. >> senator mark -- johanns. q. tell you what i said a few weeks back, maybe a couple months back. i tend to favor the council.

at least today that's where i'm thinking about this. but the discussion today has really raised i think in my mind at least some very important fundamental questions. seems to me if you have a counsel and chairman, i would tend to agree with you that the council would designate who is classified as somebody who would fit within this. but that raises the issue, how broad is that power? which probably brings us back to a more fund manial question of what are we meaning by systemic risk? is that an institution that the so entangled with the overall economy that if they go down it could literally shake the economy or bring the economy down? is that what we're thinking about here? >> i think you are.

and i think it should be a very high standard. and i believe through more robust regular grace, higher standards, and assessment laconism, that will provide incentives for institutions to become that large and complex. the incentives are to become so big that they can blackmail us. this is one of the things that we lacked. the government seemed to provide a resolution on the basis. it rewards them for being large and complex. >> so understand that analysis, very, very clearly, you could have a large banking operation fall. you could also have a large insurance company. you could have a very large power generating company fall within that. what i if somehow have the wealth and capital access to

start buying power generation and all of the sudden some day you kind of look up and i own 60% of it. now that's a huge risk to the economy if i go under, power generation is at risk. is that what we're talking about? >> i think we are talking about financial intermediaries . :

>> i would also say that i really don't think a very large plain-vanilla property-casualty jerk, i don't think it would be systemic. i think aig guide in tel aviv is it deviated from its redbud or property-casualty injures. and it was a very high risk on untracked activity. i think you'll reinforce an institute, more basic lower risk activities. as opposed to getting into the high risk endeavor's that can create systemic risk.

>> chairman schapiro, do you agree with that? >> i do agree with the. i think if you have an adequate resolution mechanism that the marketplace understandable in fact be used, it can cancel out effectively a competitive advantage that might be perceived to exist for an institution that is systemically important and therefore the government will not let it go. if people understand in the marketplace that institutions will be permitted to fail, then they shouldn't have that competitive advantage that too big to fail would give them. i also think that council will be much better equipped to make an expert judgment across the many different types of financial institutions that we have in this country about which ones are systemically significant and important. >> governor? what your thoughts? >> senator, i guess i basically agree but maybe with a couple of qualifications.

i do -- i do think the resolution mechanism is an important component of any program to address too big to fail, but as with each of the other components, i don't think we should look at it as a panacea. this is not something that we had them before. it is something we think needs to be done. and i agree with what senator corker's earlier observation, if it had been in place before, it would have reduced risk but he didn't say eliminate, eliminate the risk and eliminate the problem. and i agree with that. i think you're going to need a good sound resolution mechanism. i think you're going to need other mechanisms to enhance market discipline. referring to the capital structure of the firm, for example. and i think you are also going to need sound transparent regulations. because i don't think going forward we can rely on any one instrument.

we are going to have to rely on a set of instruments to try to contain this problem at. >> my time has expired but if i could just offer this, this thought. i think that chairman is absolutely right. i don't notice any political agenda here. i don't think it's a partisan sort of thing we are trying to come to grips with. my hope is that as we start working through this, and putting pen to paper, that the administration will look at this from the standpoint that there are a lot of ways of dealing with this problem. in preventing what happened. and avoid locking down on just a single approach, like it has got to be the federal reserve board can't be be anything. because i do think we can come at this from a number of different angles, but having said that i will again reiterate, i am hoping at some point we can move beyond the who

manages this and resolve the issue. because there are some very, very important issues about who does this apply to? what are the unintended consequences of trying to define that? and i think that's where you really get into where the rubber meets the road here. it's how you structure this in a way that makes sense that deals with the problem, without going off on a cul-de-sac that really is not where we to be today. thank you, mr. chairman. >> let me just say, and i appreciate my friend and colleague's comments because he is on track and i agree with you. my senses with the administration as well. this is a dynamic process that they are sending up ideas and proposals to us. as they should do. but my sense of it is as well, i don't get a lockdown view on this. so i think we are still very much in a dynamic process of thinking through these ideas. and you're absolutely correct. we're spending a lot time on the

who. bob corker raised an important question. is not just the who, but what, what policy. just identifying who's going to be a systemic risk is such an important question, but what powers are you going to give him is an equally important question. if you're going to give him any powers at all. i think you are really a lot of important issues and again i am very optimistic about the process that we are having in place here, arriving at some of these answers. so i thank my colleagues very much for his observation on the. senator bennett of colorado. >> thank you, mr. chairman. i want to pick up right where you left off and were senator johanns of golf, because i think, this is a fascinating conversation. i appreciate you all being here today. i think this is fraught with incredible amount of potential unintended consequences. and we need to be enormously careful updating our mind, or our focus on what is the problem that we are trying to solve

here, because i'm enormously skeptical of our ability to prict other regulatory agencies ability to predict these economic cycles and to be able to respond in a way that doesn't actually compound the problem that we are facing. and i think we have just seen 20 years of leverage piling up on our system, and lack of attention to that that has led to the destruction of, you, our economy and the dreams of a lot of people in my state and other states. i fully agree that we need to -- that having a resolution authority in place would have made an enormous difference in this case and kept us out of the house in wonderland world that we are in now where we are having conversations here about how people get paid in private institutions where the taxpayers axley to the rescue of firms that we should never have had to

rescue. i think both the chairman and the treasury secretary are doing good work trying to get us out of here. and i think they are right to say we were left with an assortment of terrible choices, and we took the least bad. i think our objective here needs to be to make sure we never find ourselves in that place again. and i guess the question that i have for you, chairman bair, is when you talk about a council, and again i don't have anything against a council or any others. and it might help. when you talk about a council that anticipates riss, i think i get that, a little skeptical but i get a. you also talk about a council that mitigates risk. can you tell us more about what that means? can you put some flesh on the phone for us? >> mitigator reduced risk. you can get risk to flee out of the system that we are a capitalist system so that has to be some risk and return. but i think excessive risk perhaps it should be a better example.

i think in terms of the powers of a systemic risk council requirement output of the top of my list, and capital and marching and other constraint on leverage. there is too much leverage that hasn't built up up on the system. and i would say that we believe this council should have the authority to set minimum standards. so if the council decides that the fdic is setting up high enough capital standards towards its bank or the fed is not sitting high enough standards for its bank holding companies, or having high enough standard for the quality of capital, the council could step in and raise those standards. so i think there's some checks and balances as well that you get to you may not with investing all of this power and once you indicate. >> that's an interesting idea. and the effect of that would be to remove some of the risk of regulatory capture of the other agencies. >> i think that is exactly right. >> question for the panel, generally. one thing we've learned in his

economic crisis is that the united states economy is in no way isolated from the rest of the world. as we think about this set of new laws and regulations, how should we think about how we connect to the rest of the world, the regulars connect to regular across the globe wrecks. >> no, i think we should leave the world. i don't think we should wait for the world. that could be a very long time at least on my limited expert with some of these international groups. i think especially in resolution authority are looking to the united states to define the model. so i think you should seize the moment and forge ahead in lead, not follow. i do think they are still other folks looking to us for leadership and i think we can help define what international standards alternately will be. >> mr. chairman, i will end by saying i hope that whatever it is we arrive at here, whatever we do, the administration leads towards a bias that when firms need to fail, they fail. and we can make sure we do that in an orderly way and that we are not ever again in the

circumstance we are in today, which is to prop up institutions simply because we had no other good choice. these were problems that were avoidable, and it's just a shame that the taxpayers have found themselves we are. thank you, mr. chairman. >> thank you very much. i couldn't agree more. and the options being one to pour billions in or to collapse them. there has to be alternatives within those two bookends. give us a far more flexibility to respond to these situations. if we don't do anything else, i think resolution mechanism will be tremendously important contribution in his. again, as i listened, as the chair this committee my job is to listen to all of my colleaguecolleague s. and as i listen to this, while we haven't settled on a processor, i certainly am beginning to sense consensus developing around the importance of the issue. so i thank my colleagues for raising that issue again. >> thank you, mr. chairman. i would like unanimous consent

to enter my opening statement in the record. okay. chairman bair, i have asked you this question before, and probably will ask you again. when do you expect to end the temporary liquidity guarantee program? to october 31. >> for sure? >> for sure. yes. all indications we will be able to exit the program, yes. the balance mcginty balance down, the use of the program is down significantly and ideas they will be in a very good position to exit october 31. >> good. this is for all of the witnesses, so this question has two parts. as i've said before i doubt we can create a regulator that will be able to see and stop systemic risk. so the first question for each of you is if you really think government can't assemble a regulator that will not be

outsmarted by wall street, first of all, in other words, can the government really understand what the financial industries are doing and spot the risk ahead of time? or at least as they are happening. and second, it seems to me a more practical and effective way to limit damage firms can do is to limit their size and exposure to other firms not. nordby interactions between major firms. that also has a benefit of allowing the free market to operate, but within reasonable limits. my question for each of you is, do you agree with that? and answer also the first one if you will. you can all take a shot at it. >> in no order.

[laughter] >> i will be happy to. i think, look, we can have better quality regulation. we can have more even regulation. the regulation will never correct all of this. you need more robust market discipline which is why we have, i sound like a johnny one note but you really need a mechanism and the market will understand that these institutions get in trouble, those who invested in them or extend credit to them are going to take losses. on interconnected exposures, yes, senator, i think you're absolutely right to focus on that. one thing we suggest in our testimony that would be an area ripe for consideraconsideration for a council if it was formed to be to look at whether there should be some limits on the firms reliant and short-term liabilities. >> should we include everything though? we are talking about things that are not regulated at all, and subcommittee chairmen reed and myself are having hearings on those things outside the regulatory bodies right now.

>> i think you are right. the relationships of the you look at these three players and their legal troubles the last couple years. plaxico burress, two-year sentence comes as a result of criminal weapons possession. donte' stallworth got 30 days in jail for d.u.i. manslaughter that resulted in the death of man in miami while michael vick's sentence came as the result of various charges related to a dogfighting ring that crossed state lines and he spent 18 months in federal prison after being sentenced to 23 months. on the field today in training camp, that time of year. people just get hot, angry. jeremy shockey getting into it with demarco ryan during a saints-texans scrimmage today. all broken up. everybody is fine. >> on the field, pennant races heating up.

get that squeege out. messy day in detroit. mariners-tigers. alex avila. single up the middle scores two. tigers cut a 6-3 lead to 6-5. in the ninth, same score. brandon inge, fly ball to center field. franklin gutierrez will grab it and throw home. carlos guillen is coming in hard and he is safe as the ball gets away. game tied at six. that's clete thomas time. that will find a hole on the right side to bring in miguel cabrera, and the tigers win it 7-6 on thomas' second career walk-off hit. detroit trying the hang on to the a.l. central lead. they're now 27-15 in day games. meanwhile, matt cain and the giants in cincinnati where the reds have lost five straight. this is aaron harang. always had very good stuff. when he's on, he is on. aaron rowand there.

one earned run over seven innings. he struck out four. matt cain pitched well, but he gave up a run. that was his biggest mistake. lance nix takes him to center field. ties it at one. no decision for cain. bottom tenth, bob howry off the pole in left field. it's a walk-off shot. stubs' first major league home run. how about that? we'll remember that. five-game losing streak is over and another quality outing from cain is wasted by the giants. he went eight innings, one earned run, no decision. over his last five starts, his e.r.a. just under 3, but he's 0-2 in terms of his record. >> all right. in berlin today, usain bolt, the world's fastest man, lining up for the final of the 200 meter world championship, an event in which he already held the world record. the day before his 23rd

birthday. >> it's a fair start and bolt wastes no time. seizes the lead immediately as they come to the top of the home straightaway. here they come to the line, to the home straightaway. and usain bolt has the lead. mullins is second. shawn crawford on the outside. again, no contest. no contest. lightning strikes twice as he crosses the finish line. >> oh, my gosh. >> and he's done it. 19.20, another world record for usain bolt. >> just as he did in the 100 meters, bolt knocks off 11 ps 100ths of a second from his own world record. it is now 19.19. remember michael johnson. >> i didn't feel so well yesterday. but that's how i felt in beijing. i said i'll wake up this morning, see how i feel, do my warm-up. what the heck, it won't hurt to try to come out here and break the world record. i tried and i got it. it's all about training and dedication. for me, i know what i come out

here and do every night. i come out there focused and ready. as i said, i was tired. i'm tired as hell now, but i've got the work done so i'm okay. this is what we work for, me and my coach, we work for the championships. we don't worry about anything else, even if i get beat in the season, it doesn't matter because this is where it matters. >> usain bolt, 19.1-9d after breaking johnson's record of 19.32 last summer at the beijing olympics. that time he trimmed just two 100ths of a second. now he's knocked off 11 100ths. two world records in one week's time. the i go's phenomenal. >> still ahead, more nfl talk, including chris mortensen in bucs

>> chris mortensen traveling the country in search of nfl knowledge. his camp tour continues, 6,500 miles and count sog far. today we find him in tampa florida, florida, where the buccaneers are under new management. let's talk about plaxico burress today. roger goodell has already made a decision about reinstating plaxico. what's the news there? >> last wednesday they had their meeting. during that meeting and hearing, roger goodell made it clear to plaxico and his representatives that he was going to be sat down for a year. plaxico's intention was to

manipulate the legal system, get through the year, have a trial next year and deal with it then and hope for maybe a half, four-game or eight-game suspension, but commissioner goodell made it clear yourself, going down for a year. because of that, that precipitated this guilty plea and the deal they made with the government. so that was a signal sent. he was really hoping to play some ball this year. >> all right, mort. as for the buccaneers, if there is a theme to training camp under new head coach raheem morris, what would that theme be? >> well, it's youth and energy for sure because raheem morris by one month is the youngest coach in the nfl with josh mcdaniels being the same age. raheem is a month younger. one player, one veteran player told me what raheem has done is brought a "we're all in this together" type theme. jon gruden had a lot of success in oakland. he comes here and won a super bowl. after he won a super bowl, hey, it's my show. raheem has brought this thing, it's our team. they're buying into it. i'll say this much, they better

buy into it. the first seven games of their v schedule is as tough as it is in the nfl. >> they have some quarterback issues to work out. leftwich is battling. >> how big of an edge does he have? at >> i think he has an edge over luke mccown.ey an they drafted josh freeman with the 17thch pick., that's where joe flacco wasdr te taken last year with bawl. s flacco had the ravens' defense.e you don't know what you're, getting with this particular defense. leftwich is the leader, and i think he's the leader becauseoc. he's had 12 wins under his belt as an nfl starter.a g he's a veteran. he has confidence. cou he has swagger. luke mccown they like a lot, fits the offense well, good athlete, but i got a feeling if leftwich has a good night against his old team the jaguars in two nights that it's going to be him to start the season. >> mort, cadillac williams is due back for the third preseason game. how confident are they that he and his knee will be healthy

throughout the regular season? >> they feel really good about cadillac williams, but here's what they really feel good about. they have a good offensive line and good receivers, and they have what the new york giants had last year they believe because they went out and signed derrick ward, who was the number-two guy behind brandon jacobs as a free agent. they have earnest graham, who is their starting running back, an they think cadillac is almost back to form. they feel like the giants, they are three deep at running back and they'll be one of the strongest points of their team. >> also a new tight end in camp in kellen winslow. what kind of expectations does morris and bucs' management have for him this year?ightre >> well, they expect him to be a vital part of their offensedo, obviously. the you don't trade for kellen winslow and pay him the type of money they paid him without utilizing him. you think with antonio bryant, who unfortunately has a knee injury and is missing training camp and preseason but should be ready for the regular season, they have some weapons. the big part of it is leftwich and the schedule. i mean, anybody who has not looked at the buccaneers'

schedule, look at the first seven games and tell me how they'll navigate through that thing. >> i'll do that right when we're done here. first some unwanted news in camp today. quarterback aqib talib was arrested on simple battery and rescissing arrest charges. what are the bucs saying about him? >> mark dominik the general managers of the buccaneers said he's been in contact with the commissioner's office. they've decided to work together and let the commissioner's office review. the bucs have already started that process. clearly one word he used was getting talib some counseling. that's what it's going to take, get him counseling, anger management, whatever you want to call it, that's one measure. the disciplinary measures, that's a wait-and-see thing. the team might do something discipline-wise. talib is expected to play in the preseason game against the jaguars right now. >> mort, we appreciate it. at that time of the world some time between 4:00 and 7:00 every afternoon you can pretty much expect a downpour.

get yourself away from the camera and get yourself dry. >> rumbling right now. >> more stops from mort ahead. next up jacksonville and then south florida and the miami dolphins. still ahead, our top stories around the bend. john calapari's memphis tigers and their 38-win season no more. and the latest on plaxico burress' plea deal coming up.

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 the following is a masn presentation. >> well, today is a very, very special day in the nation's capital. a guy named mike rizzo, you know mike as the acting general manager of the nationals, today he got the "interim" label removed. we'll talk about it when we come back on masn.   . welcome everybody. nats extra pregame. johnny holiday along with ray night. we welcome you to nationals park and the final game of the three game series against the washington naltsdz and the colorado rockies. they escaped with one-rub wins in two ball games, but tonight

the nats will try to take care of that and send them out of town on a (l)ing note. what a day it's been for mike rizzo. 27 years in baseball and today he has been named the vice president and the permanent general manager of the franchise. just another feather in the cap of the organization with the signing of stephen strasburg and now one of the good guys, mike rizzo as the general manager. >> slid filing is the word i think about johnny. the way they have gone about with the changes in the players, with mike rizzo as the general manager, rizzo now as the manager, with the acquisitions of nigel, burnett, bringing in mcdougall, getting rid of some players that weren't necessarily the right type of people, and this organization is on the way up. there is no question about it. and it just makes that statement, what they said from the beginning of time "we're going to build from the ground up and build through our minor

league system," mike rizzo one of the best since he was with arizona -- >> uh-huh. >> they brought in upton, brought in reynolds, all the way to jackson, drew, steven drew, and brought that organization to the top organization in all of baseball as far as minor league prospects. >> there you see the information about mike rizzo, what he has done in his professional career, but nothing can be compared to having the title today given him about 90 minutes ago here at nats park by the president of the nationals, stan kasten.   . >> over the last year, year a half, mike has begun to take over more day-to-day duties in the front office. something that he hadn't done a lot of before he got here, but he has been working with over the last year and a half. then, of course, in march we had the turmoil that we had and we asked mike to step in and every job that we needed done got handled flawlessly and our operation continued seem leslie through today. since that time all mike has

done is gained the respect of everyone in our organization, all the fans in dc, and baseball people throughout the country. so i couldn't be happier to be making this announcement today appointing my friend and colleague mike rizzo as gm. i'm going to work diligently to make it work for us and, in the 2 1/2 years i have been here, they have really opened their hearts and their homes to me, and i, as mr. lerner said to me just the other day, that we're all family now. so i embrace that and i thank you very much. i didn't know that they would do it yet but i always felt i was the choice. you know, i have a confidence level in myself and i felt i was well prepared for the job. one thing i kept drawing on is the learners are good business people and i knew they were going to pick the right guy for

the job. and with that in my mind i always thought it was going to be me. >> interesting comment that mike said. he didn't know that they knew it but he knew it. we kind of followed that. we hoped this would be the announcement. look at some of the guys, he has made some good moves to solidify this ball club. >> trades aren't easy to make, not trade for good young ball parks, speed pitchers and outfielders that can shore up your defense. another thing, strasburg got signed, another guy that was added to this ball club that has been an integral part of the growth has been mcdougall in that bullpen. and i also think that you have to point to the people that are gone, but the shells, the hinkleys, go down the list, cabrera who they signed hoping he was going to do the job. steven shell, ledezma was a guy that through the baseball extremely well but just did not have the right make up.

mike rizzo picked guys with make up. a guy that he could look into their eyes, he can figure out by the person that they are, and there is a lot of back ground, johnny, that goes into this, they know who your school teachers are, they are extensively checking on these kids and finding out type of kids they are and what kind of character they have. this is an organization built on character and ability first and built in with that. >> and mike rizzo has the respect of everybody in this ball club. debbie, down at the field, you sampled some of the players. you know how positive it had to be. >> reporter: no question johnny, he is a top-notch guy, a great baseball mind, and the players agree, and here is a few of them weighing in.   . >> i'm not surprised. you know, the job that he has done in the short amount of time that he has been here. you know, i think that everybody in this clubhouse and

probably in the organization either expected or really wanted it to happen. so you know, for me personally, i'm -- i couldn't be happier. >> deb: what do you think is going to make him an effective leader here? >> probably two reasons. his relationship with the players and the coaches, that's a big part of it, and he is in here each and every day, you know, same attitude whether we're playing bad or playing great, and you know, too, obviously he is a very smart baseball man pulling off the trades he has pulled off and making this team so much better in the short amount of time that he has been here. >> he is a guy that deserves it. i came from pittsburgh, we have had a few gms go there and nobody has been as good as this guy. he is in the clubhouse, you can talk to him, he is like a friend, another guy, where i have come from gms aren't like that, you hardly ever saw them, and he is a pretty neat guy, pretty special, he is -- with

this late trading he looks pretty good so it makes him look good right now. >> deb: what about his effectiveness as a leader, is it because he is approachable? >> he walks up, sees how your day is goin', different from what i have seen from other gms. he is a great buy, a lot of guys were pulling for him to get the job, we're happy for him. >> he has done a lot of freight things, great person, gets along with all of us great and a smart baseball guy, knows what he is doing, he should be good for us. >> deb: what do you think is going to make him an effective leader of this ball club? >> you know, it's tough for us to say. i think, as long as he keeps to continue to get good players around and good guys we all can get along and build a team around, you know, everyone will be at the level. so he is a hard worker and a great guy and i think they made the right choice. >> deb: i tell you what too, he is a great example for these young players and my favorite

line of the day came from the press conference. what's the best advice that your father, phil, ever gave you, don't lie, always tell the truth, and be true to your convictions. that sums have mike rizzo to a t. back over to you. >> johnny: our congratulations to mike rizzo. terrific guy and a great day. we'll be back with much more. on "nats extra" pregame. peter who nicknamed zimmerman peter franchise, we'll talk about them when we return.

now at chili's -- start your three-course meals with a shared appetizer. choose two entrees from over 15 chili's favorites, then share a decadent dessert. chili's --  . this is t plus talking about nats extra. disjoe johnny holiday and big play ray.   hauling.   . >> that's my boy, huh. >> johnny: that's the b- off batter in baseball, right there, nigel morgan. welcome back everybody. johnny holiday and -- >> ray: what did he call you, big play ray. >> johnny: speaking of nigh

gear, how about a 368 batting average on this ball club, 22 stolen bases and a .405 average in the last nine games. >> jony he scored 6 runs, 7 stolen bases, on base percentage .450, you just don't get on base 45% of the time. putting pressure on the defense, getting base hit after base hit, hitting the ball all over ball park, it's not a slap type guy, he drills the ball down the right field line, the home run he hit a week or two ago, fastball inside, very quick on the inside part of the plate but better than that has a real good idea at the plate and knows how to go deep in the count. >> has averaged .405 the last five games, got 7 multi-hit games, on base percentage of .450. but also in this lineup, which is a pretty good lineup that jim wriggleman is fielding every night, is an all-star third baseman ryan zimmerman.

you talk about a guy that has been smoking in the month of august, ryan is just that guy. >> i'll say. 16 games, .431, 15 runs, 13 r.b.i.s, picking everything at third base, four cowboys doubles, four home runs, and you know, one more time johnny. what am i gonna say. >> johnny: yeah. >> ray: he is the best third baseman in the league, defensively, growing that way as a hitter, and putting together probably his career year, johnny. when you look at what he has on the behind the baseball and driving the baseball, emerging as a leader, much more open this year and much more x trough verted. >> johnny: you wonder what his numbers are gonna be when he finally hits 25 years of age? considering how young he is? >> ray: putting up some numbers in a hurry. said this, we have mentioned this, i didn't get to the big leagues until i was 25, this isn't about me playing every day but this kid is gonna have numbers that, you know, close to a thousand hits by that

time, 130 home runs probably at that time. he is putting together quite a res you may, certainly he is paid handsomely for that but he deserves that, in a short time as a young player he has established him as one of the best players in the league. >> johnny: we have got something special coming up, picnic in the part, visit the nats dugout, you can run the bases, player autographs, photographs, plus a q and a with national broadcasters and special guests, that will be coming up on saturday. also, masn presents maximum access fantasy baseball. log onto masn sports.com. you can play masn's maximum access for a chance at the weekly prices and the opportunity to have lunch with jim wriggleman. log onto masn ports.com, you can use the million dollars salary cap to select your fantasy baseball roster, fans can play on their own or form

their own leagues, invite friends, play maximum access fantasy baseball and do it too today. lots more to come after these messages. it's... no, not yet. it back that way. it's on. ( ding ) book now at southwest.com.

 . >> johnny: "nats extra" pre on masn brought to you in part by corona and corona light. kick back and relax with corona and lime. relax and do so responsibly. tomorrow is a very special day at nats park. 2:00. big press conference live at masn and masn hd. pregame ceremonies at "nats extra" pregame. the introduction of stephen strasburg here at nats park. $1 tickets on sale for the game and the press conference tomorrow between noon and 2:00.   the press conference starti at 2:00 which you can see if you're not here in person live on masn and on masn hd. but those dollar tickets, better get them between noon and 2:00 tomorrow. let's take a look at the colorado rockies starting lineups tonight, batting fifth,

and playing right field. brad haunt, 1 for 3, a double last night in that 5-4 pin, he has homered 7 of his last 8 hits, has an extra base hit. 9 r.b.i.s his last 11 ball games, here is the lineups tonight. carlos gonzalez will lead it off. center field, thank you tulowitzki, haunt in right field, he and stewart at third, cliff bar miss at second, tore yamaguchi a will be catching, and jason hamel on the mound tonight, they trying to sweep the series, they are on the season 57-53. batting clean up and at first base, always dangerous adam dunn, over his last 30 games he is hitting .365, among the national league leaders in homers and walks and r.b.i.s. an on base percentage, 8

homers, 24 r.b.i.s, and is, when he is hitting .365 the last 30 ball games and six straight 30 home run series. adam dunn will be batting clean up. nigh generator morgan leads it off tonight. you have three consecutive .300 hitters. adam dunn, another .300 batter in josh willingham, elijah dukes in right. josh bard will be catching. on the mound for tonight trying to win and snap this little two- game slide against comes. welcome back. i'm johnny holiday and ray knight. and mark zuker man joining us from the washington times in the hot corner segment. the hottest news in town today is that permanent label given mike rizzo as general manager and senior vice president and had to be a great day for mike? >> an epic day, a day he had kind of looked for for a long time. he has been in baseball for a lot of years. in this kay and age there is a

lot of young gms that kind of get handed this on a silver platter, he took the long road. an area scout for 11 years, logged a lot of hotels and miles, you can tell what this meant for him today and i think for him and his family, his dad was a long-time scout as well, how emotional that has been for them. >> ray: total accessibility. always as a gm you're not going to want to give away every state secret but he has been pretty good and actually i think has grown into the idea of his public persona, he didn't have to deal with the media a lot prior to this season, prior to this job, an kind of learned a lot on how to do that and i think he is a lot more comfortable on camera and dealing with us than he was back in march when he got into this fire. >> johnny: stan kasten said this is the easiest decision he had to make. he brought him here, he was there, this is the guy. there were other names that

made us uncomfortable. >> there were names. stan did give a thorough search. he was telling us he, back was he was starting in march, he came up with 75 to 80 names to start with, he pared, narrowed that down very quickly to 15 or so that he wanted to give strong consideration to. he met with all of them either in person or over the phone. he whittled that down to maybe another 5 or 6 finalists, i think a few of those names we saw got out, jerry depoet oh and jeff boyer, there were a few other names that didn't get out publicly that were given consideration but i think really for maybe the last month or so it became clear rizzo was going to be the guy and after he wrapped up the strasburg negotiations monday night how can you not give him a shot for that. >> and when he was able to make the trade for morgan and a little difference between he and jim boeing. you dealt with them. >> yeah, bowden is a very public guy, very smooth, very, you know, you want to say maybe into himself a little bit. mike is not that guy. >> i could say that.

>> he is, mike is all about the team and not much of a self- promoter. maybe at times he needs to be more of a one. even philosophy as far as building a team. jim was very interested in pure, raw, athletic talent, the toolsy guys, and it works in some cases, doesn't always work in some. rizzo looked at it and said "there's some specific needs we need like a center fielder who can go catch the ball" and nigh generator morgan was that guy. >> johnny: mark in the couple seconds we have, hobby an update on the jesus flores situation. >> jesus last night through from 45 feet, the first time he played catch since he had the shoulder surgery. probably not going to make it back in time but getting back in shape and wants to play some winter ball in venezuela as

well a. austin kearns, if we see him at all it is going to be late in the season. zimmerman had his tommy johnny surgery, operated on the correct arm, nothing like that happened. they took a tendon out of his left leg, put it into his right elbow where the torn ligament was and he'll start the long rehab process trying to come back. >> good. good stuff. mark, always good to have you with us. mark zuker man, from the hot times. guess what time it is. >> hold 'em time. >> hold of the day, fox, brought to you by just for men hair color. sean burnett for the nats, acquired, that 18 innings pitched, 1 strikeouts, three holds, and a batting average