mahoney. >> we will now begin. >> thank you, mr. chairman. i'm really glad you're holding this hearing to focus on the question of systemic risk and how do we avoid getting into this situation again. as you pointed out, i don't think anybody wants more bailouts ever, if we can avoid it. i think that requires focusing on prevention, how do we fix the financial system, so that we don't have these perfect storms of a huge bubble that makes our system very prone to collapse, and then if this does happen, how do we make it less likely that we will have to resort to bailing out institutions. so i think the task before this committee is first to repair the regulatory gaps and change the incentives and reduce the chances that we will get another pervasive bubble, but however hard we try to do this, we have to recognize that there's no permanent fix, and i think one concept of systemic risk, what i call macro system stabilizer that we need is an institution charged with looking continuously at the regu

mahoney.ecause i was going to steal away your thunder because of i feel you made a good point in your remark. mr. mahoney is the dean of university for virginia law school, and in your remarks, which you will go into more detail but i just want to point this out. you say that one approach that is used i think which is a republican quoted said it was a mistake to bailout with bankruptcy proceedings. and this thought believes policymakers should make it clear to afford that these mistakes will not be repeated and take steps to limit treasuries and the federal reserve's ability to commit funds to failed institutions in the future. so as i say i think this approach is basically in a nutshell what the republican financial service reform plan is all about. the other approach is to concede that the government will not refuse to bailout certain large institutions and attempted to take steps to deal with risky behavior as the chairman just as. but if regulators fail to adequately limit their behavior,

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mahoney's testimony and my statements are fully consistent with the second page of his testimony. >> well, you have the reference? what is it that you think constitutes bailout authority? >> well, i think it is the -- there's a statement that in the special resolution procedure there are all these authorities given to spend money. now, the white paper doesn't say where the money comes from. i believe there -- >> the question wouldn't be where it came from, but where it went to. is the authorization to bail out creditors? >> the authorization is to recapitalize, to purchase assets from, to make loans to, and that would go directly from, from treasury into -- >> my understanding is but it was more analogous to the bankruptcy situation where you were not paying off old debts, but trying to get things moving forward. >> if that's all that is being talked about, then that's great. but i certainly didn't read it that way. >> in the white paper. >> that's right. >> yeah. of course, that's not our impression from treasury, but again, that will be our decision. the hearing is adjourned. oh, i