dr. troske. >> thank you.to start by thanking the witnesses for appearing before the panel today. i appreciate you coming here to help us with our oversight responsibility. in my opening comments today, i wanted to touch on a topic that while not the primary subject of today's hearing, it is certainly related. that's the roll of regulation and regulatory oversight in the recent financial crisis. one common theme in the aftermath of the recent crisis has been that the crisis would have been prevented by more regulation. of course, in our economic system, there are two sources of regulation. that imposed by the market, and that imposed by the government. both forms of regulation have their strengths and weaknesses. in my opinion, however, many of the calls for increased government regulation fail to recognize some of the inherent weaknesses in this type of regulation. it is important to start off by recognizes that regulators are human beings, not super heros, they respond just like all over human beings. govern

dr. troske. >> thank you, i want to continue this line of questioning that mr. silver's started because it's an important one. this is a fairly complicated problem knowing when you write property down in a dynamic economy where prices flux wait and that affects the value of the property. are there general rules that you can sort of provide us with when you think it's appropriate for a bank to write down a property, and when it's left on the books as is, and what's the cost of benefits from taking either action. starting with you. ms. thompson. >> well, i think that a borrower's ability to repay is a big factor in the conversation whether you modify a loan or not, and i think that certainly foreclosures need to take place and write downs need to take place. i think if banks -- and i think we could likely restructure and modify a loan to work for the borrower and the bank. i do think that most institutions, especially the smaller institutions, hold these loans and portfolios, and they are very much aware of the appraisals and values that are in their specific comm

dr. troske -- i thik cre is good in regulating -- looking back over bad practices over prior periods, assessing a bank's asset quality and its capital ratios. there's a growing consensus that in addition to that type of static assessment that there should be a four-looking approach to supervision. -- a forward-looking approach. you focused on stress testing by the regulator and also what you're expecting on the banks. when you look at the reforms, there are additional assessments going forward with a florid- looking approach, whether it be living wills. can you talk about your views on the lessons learned here, and how regulatory supervision has changed. and is a concept been grasping by regulators? >> yes. we do have a four-looking supervision program at the fdic -- we do have a forward-looking supervision program. we looked at institutions that have high concentrations of commercial real estate that had a volatile funding sources. we have put together a training program for all of our examiners that focuses on not just the financial condition of the institution but the practices of that insti