Sen. Christopher Dodd (D-CT) calls for hearings on the Federal Reserve's role in saving investment firm Bear Stearns.
Dodd, who is chairman of the Senate Banking Committee, says new regulations for financial institutions may be needed — especially since taxpayer dollars are part of the deal.
He invited representatives from the Treasury Department, Bear Stearns, the Fed, and JPMorgan to participate in the hearings.
Some of the questions Dodd says the hearings will address include whether there were any conflicts of interest involved, what alternatives there were and whether this is a one-off event or the model for future interventions.
Dodd says he is "generally supportive" of the Fed's decision to step in, but he also believes it is an "unprecedented action" that risks a large magnitude of taxpayers' money without guarantee of protection.
He cites as an example the lack of regulations against deceptive and fraudulent practices in the home-mortgage industry in the past.
"Nothing was ever done about it: nothing, zero, not even proposed regulations. And frankly, I'm convinced, at this juncture, that that, among other things, was the reason why we got into this mess," Dodd tells Robert Siegel.
"The epicenter of this [economic crisis] is housing. And the epicenter of the housing crisis is the foreclosure crisis. And so we need to get to the heart of that, and that's why I'm recommending a series of legislative efforts here to deal specifically with that," he says.
As investment banks begin behaving more like commercial banks — and receiving back-up from the government — Dodd says they should also be subjected to more regulations, just like commercial banks.
"If you're going to subject taxpayers' money to the kind of risk we're talking about here, there has to be some protection," Dodd says.