HIGHLIGHTS: Senate hearing on Bear Stearns rescue

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke, New York Federal Reserve Bank President Timothy Geithner, Securities and Exchange Commission Chairman Christopher Cox, Treasury Undersecretary Robert Steel, JPMorgan Chase chief executive Jamie Dimon, and Bear Stearns chief executive Alan Schwartz on Thursday testified to the Senate Banking Committee on financial market turmoil and JPMorgan's planned purchase of Bear Stearns.

Following are highlights from both their prepared remarks and questions and answer session:

SENATE BANKING COMMITTEE CHAIRMAN CHRISTOPHER DODD ON FED'S

ASSISTANCE:

It's what I call the socialization of risk and the privatization of reward.

In the absence of some real changes, we could be looking at other situations down the pike here, maybe with a far greater risk than the one we're talking about here. To the extent that you want to socialize risk, you're going to raise some very serious questions as well.

BEAR CEO SCHWARTZ ON LEGISLATIVE SUGGESTIONS (from Q&A):

I think longer term we have to look at the whole way that mortgages get underwritten, because there has to be some liability to the people who underwrite the mortgages to make sure that they are applying standards appropriately.

JPMORGAN CEO DIMON ON SPEED OF REGULATORS (from Q&A):

I do think the regulatory authorities need to move more quickly in this new world.

The Fed might have acted very differently that weekend if it had been given different statutory authorities.

ALAN SCHWARTZ ON TRADING PANIC (from Q&A):

I would just say as an observer of the markets, it looked like more than just fear. It looked like people wanted to induce a panic. A lot of the trading would point to that.

I always had a concern that the lack of a known liquidity facility for your collateral is something that can cause a problem with the lenders against that collateral. All of us as investment banks lend against high-quality collateral and we turn around and use that collateral.

I don't think the value of the collateral collapsed. The willingness of people to lend against it just dissipated because of fear.

BERNANKE ON LOSSES (from Q&A):