mr. hennessey said. do think one of the things we will have to consider is the relative performance of different institutions engaged in either similar or diverse practices. at the end of the day the csa program on an objective basis fail because all five institutions either were gobbled up, converted to bank holding companies or failed. i think i want to ask a specific question because it really does go to the nature of what it was constructed to be, whether was constructed to be an accommodation to the e.u. and the financial institutions or a true regulatory program. in when the program was adopted in the open session, mr. donaldson is that if anything goes wrong it is going to be a big mess. net nazareth who i think she was then director of trading and market assured the commission we have broad discretion and the ability to constrict activity we believe is problematic. i guess this is probably for you mr. sirri as head of that department and i had the opportunity to review what the other commissioner

mr. hennessey. >> thank you. we heard from the bear executives that bear stearns failed because of an act of god or nature. what brought the firm down was an unsubstantiated run, that was either a panic or other factors. mr. cox, what i thought i heard from new was that part of the reason that bailed -- that there failed was a program was not implemented and that there were problems at bear stearns. my question is not specifically about the program, but was iran on their unsubstantiated? was -- was a run on bear on substantiated? or, whether actual substantive problems that justified some of the people pulling out? do you by the executives' argument that there was no rational reason for their firm to experience runs? mr. cox, i will start with you. if you can keep your answers brief, i would appreciate it >> we did not look specifically at that issue. we looked at issues that the market could have seen. those would go against the theory that it was run by unsubstantiated runs. >> chairman talks? >> picking up whe

mr. hennessey. >> i'm a little concerned about one of the biggest challenges that we have here, two of theiggest challenges are the advantage of hindsight and the danger of selection of the bias. as we now know what happen when policymakers and supervisors did not know what was going to happen. and as you well know at any one point in time, you can find someone who is predicting him of sending outcome. and so we've had, you know, people point to specific predictors in the past and say why weren't those paid attention to. and with respect to senator graham, i want to use an analogy from his home state, i can tell you with certainty that devastating hurricanes will have florida. but that is different and suggesting that i should know when a specific hurricane is going to hit miami. and even if i know that houses are being built that are too big on the shores of florida, that different than saying i should have known about this hurricane or as some have been suggesting that i knew that a particular situation was going to occur and that someone did nothing about it. and since you were running

mr. hennessey. and thank you for coming together. i am a little concerned about one the biggest challenges that we have here. two the biggest challenges. they are the advantage of hindsight and the dangerous of selection bias. we know now what happened when policymakers and supervisor its did not know what was going to happen. you can find someone predicting any outcomes. we've had people points to the a in the past and say why weren't those paid attention to. with respect to senator graham, i can tell you with certainty that devastating hurricanes will hit florida. but that is different than suggesting that i should know when a specific hurricane is going to hit miami, and even if i know that houses are being built that are too big on the shoring of florida, that's different than saying i should have known about this hurricane or some have been suggesting that i knew that a particular situation was going to occur and that someone did nothing about it. since you were running the new york fed, that argument would apply to you. i don't

mr. hennessey. ms. murren? >> thank you. thank you, mr.y, for spinning so much time talking to us about these important issues that i'd like to talk to you actually about a fundamental assumption that people seem to have, and i would like to challenge and get your response to it. people often say financial innovation is a great thing, it's important, it's necessary and it serves an important purpose. but when i think about innovation i think about cancer research, technology. and it seems to me that when you look at financial innovation over the last, let's say, decade, cdos come all of these really seem to have led to a common lack of understanding about the instruments themselves, both on the selling side of it, on the buying side of it. it could extend all the way down to mortgage products that have become increasingly complex. and yet they don't seem to protect the people that would use these kinds of innovations to protect themselves against a natural business exposure. they do not seem to have strengthened the u.s. economy and help t

mr. hennessey. and thank you for coming togeer. i am a little concerned about one the biggest challenges that we have here. two the biggest challenges. they are the advantage of hindsight and theangerous of selection bias. we know now what happened when policymakers and supervisor its did not know what was going to happen. you can find someone predicting any outcomes. we've had people points to the a in the past and say why weren't those paid attention to. with respect to senator graham, i can tell you with certainty that devastating hurricanes will hit florida. but that is different than suggesting that i should know when a specific hurricane is going to hit miami, and even if i know that houses are being built that are too big on the shoring of florida that's different than saying i should have known about this hurricane or some have been suggesting that i knew that a particular situation was going to occur and that someone did nothing about it. since you were running the new york fed, that argument would apply to you. i don't bu