Congress demands answers from Fed, Bear Stearns

By John Poirier and Rachelle Younglai

WASHINGTON (Reuters) - Senior Democrats and at least one Republican on Wednesday demanded details on the role the Federal Reserve and the U.S. Treasury Department played in helping JPMorgan Chase & Co's buyout of Bear Stearns Cos Inc.

The Senate Banking Committee set an April 3 hearing to examine the Fed's role in the transaction brokered by U.S. Treasury Secretary Henry Paulson.

The Fed guaranteed some $29 billion of illiquid Bear Stearns' assets and allowed JPMorgan to offer $2 a share for what was the fifth-largest U.S. bank. Shareholder protests forced JPMorgan to raise the bid to $10 a share, 93 percent less than its 52-week high of $159.34.

Some lawmakers question why the U.S. government is prepared to help rescue a failing Wall Street bank while refusing to rescue millions of home owners facing foreclosure. Lawmakers return to work Monday from a two-week spring break where they heard from the voters.

"The unprecedented nature of some recent actions by the Federal Reserve, Department of Treasury and others merits a full and public examination by the committee," Christopher Dodd, chairman of the Senate Banking Committee, said in a statement.

The Connecticut Democrat also expressed concern that JPMorgan's chairman James Dimon held a Federal Reserve Bank of New York board seat while trying to acquire Bear Stearns.

Dodd invited Dimon and Bear Stearns Chief Executive Alan Schwartz to testify along with Fed Chairman Ben Bernanke and Secretary Paulson.

He also asked U.S. Securities and Exchange Commission Chairman Christopher Cox and Federal Reserve Bank of New York President Timothy Geithner to testify.