Bear Stearns Rescue Defended

"A Bear Stearns bankruptcy could well have touched off a chain reaction at other major financial institutions that would have shaken confidence in credit markets that already have been battered," Dimon told the committee.

Sen. Charles Schumer, D-N.Y., said entire episode pointed out the need to overhaul the government's regulatory system. On Monday, Treasury Secretary Henry Paulson put forward a plan that would scrap the current system of overlapping agencies for three super regulators, giving the Fed greater powers to monitor the safety of the entire financial system.

Dodd said his panel would examine the need for an overhaul of financial regulations but that this exercise, because of its complexity, would have to wait until next year when a new administration is in place.

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