earlier hurricanes have brought structural responses from the u.s. government of the weather bureau was formed in 1870 with a mandate to gather data on the weather. even though the weather bureau was in place it wasn't able to offer warnings of the category four that hitç galveston, texa and only warned a few for the within that hit miami in ç1929. by 1930 the weather bureau had better models and data but regarding that hurricane the weather bureau experts and general public never saw it coming. i would ask, are our regulators and policy makers any better equipped today than the weather bureau of 1938? in 1970 president nixon created no no wah with a mandate to do a number of things.

develop newç analytic and fors tools. and lee to conductç central long-term research to underlie the models. noaa's current realtime analysis is impressive, significant, continues to bring substantial benefits to our society. butç they were madeç possibly mainlyç enlarging the research efforts of noaa. d like to offern observation and the question. clearly, our financial markets are at least as important and complicated as the weather. if that is the case, why do we not have the equivalent of no law for the financial markets? -- of noah for the financial markets. this concludes my oral remarks. i would be open to any questions.

>> thank you, professor. professor engle, please. >> thank you. it is a great pleasure to be here today. i appreciate the invitation from the committee. mr. chairman, mr. courter, mr. reed, it is a pleasure to be here. i recently co-authored a report that summarized a workshop of technical capabilities needed. this research council is the operating arm of the national academy of sciences, the national academy of engineering, the institute of medicine, all chartered by congress to advise the government on matters of science and technology. the workshop and its report was sponsored by the sloan foundation and were actually in response to a letter from senator reid. before i summarize the report, i

would like to give you some personal opinions on the national institute of finance and the questions that were in that call. our one-day workshop came to the following set of conclusions, i think. first of all, we're all convinced that with better data and analyticalu! tools, the problems of reducingñr systemic risk were actually solvable. okthe research necessary to accomplish this goal is already underway in bothç academic and regulatory settings. it is now being carried out with purely market-based data, and therefore does not have access to the full range of information that would be needed to make these models as accurate as possible. additional data collection

across asset classes with counter-party position collateral information would be extremely helpful. nevertheless, it was clear at the meeting and that many participants were unsure of exactly what data would ultimately be needed. there is an important question that keeps coming up -- çwhethr the total range of everything that you can think of is required and how would you select the subset of data that is really needed? the first step in this process would be the standardization and classification, particularly of contracts, and this would be a substantial benefit to the industry as well as to the regulators if this could be

accomplished. it is one of the goals. even more important, as dr. mendelowitz said just a moment ago, than the data, are the models. the debt alone will not tell us about risk, liquidity, bubbles, and other figures that are necessary in order to understand the risks that face our financial system. the analysis is extremely important as well. that concludes my brief summary of the meeting the national research council had. the full summary i would ask to be attached to the record. let me say a few other things. data gathered by supervisory agencies is already being used in attempts to try to calculate

and evaluate systemic risk. this data, however, is often available on an as-asked basis. in other words, it does not flow regularly. they need to request it from the agency's they supervise. -- agencies they supervise. this gives them a partial picture, in any case. this is available to regulators, but again, they cannot get this on a regular basis and there is difficulty sharing it across regulators. the same is true about reports. they are reported by financial institutions on a daily basis, but these reports assess the risk of the firm, and not the risk of the system. thus, they do not have

important kinds of counter-party information that we would really want to understand across the system. in summary, regulators do have a substantial amount of information available, but it is not on a systematic basis, and it cannot easily be shared across regulatory agencies. let mexd make just a couple of more points on more general topics. it seems to me there is a question of the independence of the national institute of finance. i am a supporter of the proposal for the national institute of finance. the idea that it is an independent organization is important because it needs to be insulated from pressures from corporations and government, however this independence could

also be achieved if it were house, i believe, within a regulatory agency that is already independent in that same sense. there could be substantial cross-savings from such a location. the international effects of this are extremely important. the location of the national institute of finance would necessarily -- it would be very important that it be able to collaborate and share data and analytical tools with sister agencies around the globe. otherwise, we only see a partial picture of the financial system. one final comment -- the security of the debt is extremely important to

preserve, but i think that an ultimate goal would be to make as much of this data in a delayed and aggravated form available to the public as quickly as possible. transparency is a great supplement to regulation. it is cheaper and it may be more effective in many ways than much of the regulation that we consider. an ultimate goal of the national institute of finance would be to disseminate as much misinformation as possible and that would require congressional guidance. >> thank you, very muchç -- thk you very much, professor on go -- professor engle. >> thank you. my name is stephen horne. i spent over 30 years building

complex databases and making data into usable information. i've testified on the impact of the financial meltdown and the needç for systems designed to capture the opera. real time information -- to capture appropriate real time information. legislation that would recruit -- legislation that would create such a data base has been introduced by senator warner. it passed the house by a vote of 421 to nothing. using the same basic infrastructure of the data base that would be created under the legislationw3 that içó describe at dow jones have identified over 400 leading indicators that when used together identified a

potential systemic risk. also, i want to add many other parts of the economy,ç whichç expands upon what our presenters have presented. they would be able to make are caused by a variety of factors. for example, in las vegas, a huge influx sociologist of groups worked into thei+zç regin moved into the market. ççone of these groups is reti. these americans were living on fixed incomes, savings, and their social security. but retirement homes. they still incurred new debt. the income from retirement

accounts went negative. it had to dip into principles. as foreclosuresç grew around them, the value of the homes decreased. those who have mortgages are now upside-down. those have see -- some have seen a lifetime ofç savings dwindle. with a major portion of their principal gone, they cannot afford to live on their fixed income and may have to go back to work. they owned their own home. new mortgages are very difficult. reverse mortgages are not an option because of the reduced availability of these programs. the combination of these factors shows that the market of retirees yen las vegas is a systemic failure i am expanding on the concept of systemic failure to talk about the markets as well as the systems that supports those markets. the example of this process --

if we can indicate -- if we can implement this data into a data base, we can implement surgical solutions that would apply the appropriate solutions to the most serious problems. databases applied to the potential systemic failure of the real-estate market was issued just days ago. we are currently observing markets in north carolina and tennessee that are at risk. if the proposed agency was in place, the government would be able to tackle these problems proactively. unfortunately, the data cannot talk to each other. the value and is in the ability to provide and analyze this data. the transformation of this data is neither easy nor expensive, however it will save significant

taxpayer dollar. it will make more efficient the targeting of resources. it would serve the greatest need. it would enable the government to ensure that the appropriate actions were taken before systemic failure occurs. it would help prevent waste and fraud with taxpayer puts the money. -- with taxpayer money. the use of commercial data is sufficient to protect as a commission. in addition, the language included in the legislation provides a greater protections. the system being proposed is designed to expand to cover global data. some of the debt overseas may not be acceptable -- accessible. other data is in better shape than our own and could be built into systems. in summary, the data technology

exists to equip regulators with the tools necessary to monitor a systemic risk. the only thing lacking is government action to make it happen. i wanto i wantç to thank you again,ç senator reed,q fort( your time attention and i'm happy to answer any questions youç may have. >> thank all ofç you for the excellent testimony and let me begin with theç comments you ç made, that it is very difficult to review objectively your own decisions and actions. i think that isç a very strong rule in every type of humançç endeavor and particularly these endeavors and arguesç for some type of independent agency. we can also factor in that there are particular cultures in agencies thatç obscure, illuminate and obscure the analysis of the data. i wonder if you might comment on

the issue of independence and i ask all of you gentlemen to do so. >> it has been a while since i haveç been inç this hearing r as a witness.ç senator, there are a hundredful of critical things associated with the proposalç and independence is one of those th that is essential. if someone hasç açç control the purse they are not independent. foundation, they are not independent. if they would have to investigate its own actions, they would not be unbiased. we feel very strongly that this is an essential component no matter how and where the institute is placed and structured. unless it has those safeguards, it cannot be effected. that is one of the reasons we suppose -- we proposed that the directorç be a presidential

appointee nominated to a fixed term. ççit is interesting. not only is this independence critical at looking at backwards decisions, but it is critical going for. one of the reasons our proposal includes the fact that they would not have regulatory authority is the fact that if the nifç i]had to do the analys and act on the analysis, its ability to report clearly, its findings would be compromised. the example i would like to give is a provision in law that i was involved in which requires the treasury department to make an annual report to the congress on foreign countriesç that manipulate trade rates for a trade advantage. those with filed this issue know

that over the years a number of countries have a clearly he most obviousç exampe value of the chinese currency. despite all of the evidence that has been there, i do not believe the treasury department has been able to conclude that any country was using its rate for their -- for another country's the advantage. i like to say that if systemic regulators use the data and analysis appropriately, that t(regulator would only be subjet to criticism. if he or she is successful, we would never see the next systemic event, and the actions would have taken some progress away from someone and would have slowed down the good times.

if the regulators reached the conclusion and the the time would come to present the conclusion publicly, i can just hear the wheels turning in the mind of the director and he or she would say "i do not know if we should released this. let's wait a little while." this issue of independence is essential and critical to the ability to do its job. >> thank you. there is a similar relationship with cbo. the degree of independence we appreciate and sometimes we disparage. i believe that director is appointed for a term of five years. he or she serves independent of

the. they have proven that. i wonder if anyone else has a comment on independence? >> i would be happy to. i will echo what dr. mendelowitz has said. the importance in terms of political pressures, the institution is able to act in the best interest of the country. if i have a -- i have five reasons for being here. my children. i want to have a safe, secure financial system. i want them the same opportunities that i had when they start providing for a family. you need to have someone who has the ability to speak the truth in the middle of a crisis. there are really two roles that you think about in terms of state regulation. seeing an understanding the risk and the second oneç is the

actual implementation -- the action you might take in terms of how capital requirements or the institute's themselves are regulated. it is absolutely essential. a second point that you might want to consider in terms of why you want to keep it independent and why you might also want to have someone of high stature involved with a presidential appointee, who was one to be able to serve not at the will the president, but in a fixed term, if there is a crisis and a system is in place, all eyes will turn to the national as to the finance. it used to have absolute credibility it needs to be like the national oceanic administration. it speaks because it is trying to serve the best interests of the nation.

>> i want to invite the other panelists to comment. one other factor that strikes me goes to your point about surprise. i thought your analogy with the hurricane of 1938 -- i will borrow it. it seems very compelling. part of this is that it was never seriously discussed at a national level. this coming in the growing housing bubble. the national characteristics. the growing derivatives trade. as a result come it sort of got lost in the shuffle. i think one of the purposes of having an agency like this is to get critical topics on the agenda of congress and the regulators. then it is our responsibility. if you did not have authority give institutions supported by

data doing that, the problem you will have is that the next time it will be something different. it will not be housing bubbles and some prime mortgages. it will be something we are not thinking about and itç will coe up. regulators will talk about it. i am sure the fed debated the housing both internally, but it never broke through. no one said this is a systemic risk or should be considered. that is my opinion. dr. and go -- professor engleçk >> i think independence would be effected -- effective. a systemic regulator has exactly the sameç target. it has the same goals that you both phrased.

ut more of a tool for understanding which data series needs to be çexamined, which institutions n be ignored for thei] momentxd ar woulñ have to beç studied late. çwithout having that decided by the end i asked itself, -- n aideeby the nif itself. >> thank you. go ahead. >> the words come to mind, and it is probably worth hearing -- moral dilemma. i think this is what it is all about. again, my esteemed panelists have brought up the concept of

what i think is a moral dilemma. if you are inside of an agency whose job is to support the financial markets in terms of being directly involved and assist in and begin growing and expanding, and at the same time regulate them, there is a moral dilemma. if you are in spite -- >> the issue that we haveç andi can only speak for my company, i work " is that if we did not get the date to correct, we are dead in the water because people will stop buying it. our moral dilemma is getting the facts correct. we either do it right or wrong. if we get it wrong, we are out of business. part of the issue that i have is that i do believe there is the need for an independent agency outside of the government to deal with these issues without having to face the moral dilemma. i believe there are issues that

must be faced by congress but this will take a while to come together. i did not think you canq contine to move forward with the state of the economy as it is in the current system of bubbles that are occurring all across the country without having the information necessary to provide information about words you currently are today. you are in very many cases at a point of stones, chisels and knives turning data into comparisons to the commercial market in terms of managing their own information. many of these companies that i know of personally are now all of a sudden spending hundreds of ofg their own internal risk ofg management and analytic systems including probably all of the

top 20 banking and investment firms. they have incredible plans for building their own and structure which should be done. this will probably improve their capabilities and therefore improve the trade of information between the parties. i think there is a long-term situation worse you need to get away from the moral dilemma. the short situation is the information given to the people that can do something about it because there are bubbles on the horizon that could pop. unless you understand them and address them, unless you spend less money than throwing it at the whole market, suspended at the appropriate places, you are going to have a greater push back from the taxpayer and having the tools and possession to do the things you want to do. >> thank you. >> thank you for your

outstanding testimony. something very appealing about the presentation and we thank you for spending time with our personal office talking about it. there is a piece of it that is almost eerie. it is the chaos of the market system and the companies you are talking about investing that money to get one 10th of a point off and they are taking advantage of anomalies that exist to make money. i mean that in a positive way. on the other hand, we are talking about the professor creating a model. you talk a little bit of thenoabout noah which is intereg

except it is talking about what is going to happen with the weather and there is nothing you can do about it. it is going to happen. on the other hand, you are talking about setting up models to keep anomalies or a huge systemic risk from happening. how do you keep yourself from interfering from this chaos that can be positive or actually creating self-fulfilling prophecies by virtue of the model they use about? >> >that >> it is an excellent question because it comes to the heart -- this analogy does break down when you think of the financial system because it is not a bunch of pressure systems and equations. it is more complicated. it is a game, really, large

scale game. i think if you borrow from the general scientific tradition, the first thing you try to do in science is understand and explain. then youç try to predict. finally, you see if you have have any level of çcontrol. there is this progressive improvement that happens in your ability to gain scientific knowledge andç understanding about a system. i'm not sure how far we can go in terms of that ççpath. i'm not certaini] because we haven't gone down that path in the research sense. but i think there are a lot of things you can borrow because it is a game and if we study it from different perspectives and build a competing set of models -- i want to echo what was said that you really want to have multiple people contributing to it. you can take the hurricane modeling approach. there is not one model that is

used. they use a collection of competing models that give them a multiple set of perspectives about how that hurricane is approaching and the impact. now, would we potentially impact -- the system -- potentially impact thee1 path of the econom if they interceded in certain ways? that isç a very hard question r me to answer. but i do believe we can start to find answer goes we set up this type of analysis. we begin to understand when there are serious risks and understand how to prepare ourselves better, i fink we have -- i think we will have made progress. >> if you are setting up models to ensure that a systemic risk does not occur and information is being made public, the and

not automaticallyç affect the economy or at least financial markets. how can you not do that if that information is being made public? it seems that this evidence that is when to occur. >> i think that when people approach the financial markets, they typically approach from it statistical perspective. even though it is too complicated to really model effectively. there is a big simulation study and tokyo or that are trying to do modelingg but typically, you have to look it aggregates and model from that perspective. we have a lot of information that is out there which is why we disseminated. we talked about adding more useful information. when you start to begin to have

problems for people began to influence is if you have people altering types of behaviors. many people are making mortgage- backed securities and selling them off to pension funds. a lot of similar bidders happening and a shot comes through and everybody has to respond in a similar fashion. the model collapses down to a much simpler system because everybody is forced into a corner and how they are going to behave for the most part, giving more information and modeling is not going to have an impact because i do not know anybody will have the ability to know the system one way or the other. we hope that you will find that the system that's the point where there could be bubbles and collapses and what might trigger those, how you respond to that is going to be carefully thought about by systemic regulators when they have that information under the they want to talk to banks publicly or privately.

i am not prepared to lay that out and decide that now. >> you are not thinking of creating a worldç full of elevator music. we would still have some degree ofç chaos in the marketplace. >> yes, it would be very complicated. >> you mentioned making information available and just for a layman like myself at a different level as far as mathematical modeling, what would beç the first three piecs of publici] information that mit come out of an institute like this that would be helpful for people to know. >>ç what i was going to sit before is also related.

the systemic regulator is going to have to use the incentives in the marketplace to achieve his goals. he is not going to be able to legislate one thing or anotherç and our use of capital standards and capital controls are ways of trying to nudge the institutions to take less risk or change their behavior. systemic taxes are designed to encourage institutions who have systemic risk to avoid the taxes by shedding the systemic risk. the reason i think that making data public is useful is seen in

the derivatives market where every time you enter a contract, you have a counterparty. this counter party has a risk that they will form is the terrific it turns out to have the values you wanted to. ç-- you want it to. considering these extra risks, it is hard to assess the risk of your counterparty if you did not know very much about what the counterparty is doing. if we had more information on the health of counter parties, how much exposure they have to these same types of contracts, the prices of the same deal with two differentok counterparties might be the same. you could decide whether you

want toç take the weak or strog counterparty and you would get a different price. t(that way, you would understand what risks you are takingko and the weak counterpart is would not be able to amass positions. the poster child for this example is aig who wrote a lot of credit default swaps but did not have enough capital behind and investment bankers and final users fought a great -- bought a great deal of these contracts without recognizing they should have gotten a big discount on getting them because they were not really being paid off because aig had such a big position. çif you could make public information on a s basis that

said for each counterparty, how exposed and how many positions does this counterparties have one week ago on these kinds of contracts. this would give the market a way ofxd the body witting the risk that there were taking with each counterparty. -- that would give the market the way ofçxd knowing the risk there wery 0lj÷were taking with counterparty. the regulation has a dual role. it would encourage the migration of products to centralized clearing which we think would reduce systemic risk and it would allow investors to understand the risks and press the risks that are taking better and thereby both of these would reduce systemic risk. >> how long would it take for

something like this to become law, how long before an entity like this was providing some of the basic information that would be useful to somebody who is looking at systemic risk. >> i am not an expert. i have spoken to people who have built up large institutions. it does speak to the fact that you want this institution to be very high stature. you want high-quality individuals to the extent that you can build a world class institution. it works in the favor of all of us into the economy. the way you would start out as you would take existing data that is in the marketplace that you could find.

you could require reports that would be straightforward. i believe within 18 months to two years we could put together rudimentary maps of the entire system and you would see aggregation and some of the low hanging fruit. you could see a standing positions that are too large for that institution like the aig example. you remove yourself towards integrating counterparty information and the repositories -- in of the repositories. what science models will need to build from that? you could do longer-term more sustained research. i would imagine that it would

take six to eight years to see yourself what all the way up to the full vision that we see with the very fine grained view of the entire country party network and be able to do large-scale simulations to understand how different shocks to the economy might go to that network and what the critical points of that network are and how they might have cascading failures and where you might seek liquidity failures occur. i would envision that 10 years, he would see a fully functional system. you would see the label information along the line in shorter time frames. >> thank you. >> if i may add, i think the difference between what we are talking about here is mostly the fact that the nif are talking about building a very structured

approach and building models that can take all different sorts of views and looks at this problem and over periods of time, ascertain how to bridge approach these problems from an academic and regulatory approach. this becomes a platform for what they are eventually to when to do. i did not know if the two pieces will ultimately fit together but that is a possibility. the data that is available right now today is capable of being integrated into a platform where regulators to start looking at the government's rules that are in place today and figure out as compensation analysts do, if you

think about their role, youxd he a huge sales force that is saying i am going to try to break every rule so i can make the most money i possibly can. i am not concerned about profit because it is not built into my compensation but if some portion of the compensation has profit built into it. qtheyçç then say they are not responsible for all the mechanisms that trap the product so maybe i should notç be responsible for profit. you start getting into all these types of analogies as to how you should compensate people and how you should incentivize people to move forward. the same is true with the financial markets. the dilemma of brought up earlier is the same problem. you brought up the issue about influencing what these markets do. what i am thinking is it would be better to use the short term data we are talking about to help with some of the regulatory

rules to get people on the same path and direction and possibly those are things looking at specific pieces of law that may be in conflict with systemic risk. with shorting issues, that could be a neighbor -- a major driver of systemic risk. with a model, you could take that out and you could find out that there is a factor that should be reconsidered. from a government perspective, if you have the information and the short-term to do these things, these models become incredibly valuable over time because they start really showing the dynamics and the interconnections of potential failure that can exist within the market. for the near term, you have to use some of the information that can be converted from the data

to figure out how to manage. what i believe we have now is a lot of broad stroke rules that to not allow@@@@@@@@ government and the taxpayers are not facing the moral dilemma of each other. >> thank you. i would like to go back to one of the issues you raised about interfering in the market. we relied on markets to allocate

capital because they do it efficiently. we know from history that when other societies have tried to rely on command and control systems to do those, they have failed miserably. for financial markets or any other kind to do its job switches allocate resources efficiently, there have to be a number of conditions met. if they are not present, the market cannot do it. the challenge is that it is clear with this recent crisisç, financial markets are prone to the financialç equivalent of sudden cardiac arrest. i would like to take credit of that -- credit for that but it was not me who came up with that. government intervention was needed to deal with thezv sudden cardiac arrest.

there was a time when if you suffered cardiac arrest, there was not much of the medical committee could do for you. there are now dramatic interventions so we are at the situation where you stave off cardiac arrest with long-term care to lower cholesterol and are more careful about what you eat. you exercise and feed a healthier lifestyle. you are able to reduce the risk. we could contribute the financial market equivalent to a healthier lifestyle. >> thank you. i have gone over a long time. >>ç i have a lot of questions.

we have gotten a chance to know you and i am sure we will be talking with you over the course of the next week. you are looking at housing in north carolina and tennessee. i wondered if you would tell me why and what you found. >> i appreciate that. alliance sorry i didç not put ó into my record. we look at indicators. we have to look it indicators manually because they are separate pieces. we look at the parcel of land that is identified. we know those are under water relative to mortgages and a note

who is delinquent on mortgage payments. one of the key ratios that are leading indicators are the 90 day delinquency rate on mortgage payments. relative to their peers, if you look at the chart, states like nevada, arizona, florida, have a huge market viability from being upside down on their mortgages. seven out of 10 homes in nevada are in-value relative to the mortgages that exist -- are in negative relative to the mortgages that exist. the 90-day delinquency rate of the past three months have increased -- has increased drastically. that shows me there is a leading

indicator that says people are not able to pay their mortgages. i start with that. then i look at plant closings and ships and on a " rigid ships in unemployment. -- i look at plant closings and shifts in unemployment. a start looking at the retail sector. çcommercial failure for the retail sector is up and that is also a leading indicator of the potential of people not having potential cash because they are unemployed and therefore start becoming delinquent on bills like their mortgage. we did not have the database built yet so i cannot run a model and come up with every county for every congressional district and tell you what the

combination of those factors would tell us in terms of the potential for systemic risk or failure of any of those given markets. i can tell you from leading indicators that these are pieces of information telling me that there are potentials for problems. the dublin -- the delinquency risk factor is one that we wait heavily relative to other factors. it is telling us people are having a difficult time paying their bills. that is why i bring that up. relative to other states in the same range of being under water, they did not have the same to legacy rate problems xlthat those states are facing. çççç>> thank you. i wish i didn't ask. [laughter] >> thank you for your leadership on this. that answer, irrespective of the

not good news, it's an indication of some of the kinds of data that one might generate an could in fact be useful even though you looking at different types of financial instruments. i appreciate that explanation. >> certainly. >> thank you for your leadership on this and so many other issues. i do not want to ask any more questions about physical localities. i did not mean to be disrespectful but given your access to all of this data, when did you and your colleagues first get the sense that there was a national housing problem? >> i have known there has been a problem since the first time that our partners, one of which

is the largest collector of the deed tax and more control property information in the country, when i started analyzing their data and combining it dow jones information about the individual market segments and the tremendous volumes, and started looking at various trigger event, things that show in action taking place that are either positive or negative, we saw this occurring before 2007. we saw the bubble before the bubble. the problem is this is macro data. they usually look at it within the housing market within a specific segment of the database they have. we have not brought it together

with our unemployment findings and bankruptcy findings. this prevents us from being able to do with -- . this date it together in a way so we can build real models. w3the systemic issues that we ae talking about between the major corporations, j.p. morgan, aig, are extensive. we understand that they are very complex and they are difficult to track. we have large amounts of information regarding derivative

data but it is only segments of the market. we cannot have all of that because it is all about available. part of the issue is the investment that needs to be done to build the database. >> ça i do not sense there is a mutually exclusive agenda. i think we are talking about the same thing which is building in the short term and information- gathering tool that will help us but for the longer term, get to the point where if this a housing bubble gives us insight

into the need for the nif. basically, five years ago, i started predicting a major credit dip in the housing sector that was going to push the economy and the worst recession -- in the worst recession since the second world war. what was happening to housing prices and household income and these delinquency default rates. it was easy to predict because of the widespread nature of home ownership. that was the easy piece of it.

what i did not say and could not understand or did not seek and cannot understand is how this was -- what i did not see was how this was going to affect the financial market. at the end of the day, you have to know were the concentrations of risks are and you have to know what the nature of the network obligations are. it is the exposure that can produce a domino effect of multiple failures that creates systemic risk. it is one thing to see a macroeconomics crisis tied to housing, it is different to see

the systemic risks that flow from those concentrations. >> i want to thank you all for your thought provoking testimony. i think we leave here with one main point, we need better analysis and if we do not achieve it, the bubbles that might be out there are percolating and will catch us again by surprise. we should not let that happen. thank you all very much. >> the hearing is adjourned. [captions copyright national cable satellite corp. 2010]ç [captioning performed by national captioning institute]

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