Former Bear Stearns executives said the firm became the first major victim of the financial crisis due to unfounded rumors, not because of risky exposures to mortgage-related products with free-falling values.

Former Chief Executive James Cayne, who left that post in January 2008, just months before Bear was sold to JPMorgan for a fire-sale price, said the market's lack of confidence in the firm was unjustified and irrational.

Subsequent events show that Bear Stearns' collapse was not the result of any actions or decisions unique to Bear Stearns. Instead, it was due to overwhelming market forces that Bear Stearns, as the smallest of the independent investment banks, could not resist, Cayne said in testimony prepared for a hearing Wednesday of the Financial Crisis Inquiry Commission.

The commission is charged with chronicling the causes of the worst financial crisis since the 1930s and is holding a series of hearings with the major figures from the meltdown.

Bear Stearns in March 2008 experienced essentially a run on the bank as creditors and the markets lost confidence in the institution. Regulators scrambled to find a buyer for the collapsing firm, resulting in a sale to JPMorgan Chase & Co for $10 a share.

Alan Schwartz, who succeeded Cayne as CEO, acknowledged the firm did not foresee that housing prices had spiked to unsustainable levels, but characterized the firm as a victim of events beyond its control.

I have given much thought to the events that led up to that fateful week in March 2008, and believe that we took all the appropriate steps that we could to try to survive the storm that was breaking upon us, Schwartz said in his prepared remarks.

The chairman of the crisis commission, Phil Angelides, has taken Wall Street titans to task for the roles they played in the financial crisis, but has received limited admissions of blame at his hearings.

Angelides in January accused Goldman Sachs CEO Lloyd Blankfein of treating clients unfairly for creating -- and then betting against -- subprime mortgage-backed securities.

The Securities and Exchange Commission last month filed civil fraud charges against Goldman Sachs Group Inc, accusing it of misleading investors over certain subprime mortgage-linked securities.

Angelides told Reuters last week that he has generally been disappointed by the lack of self-examination and sense of responsibility as Wall Street looks back at crisis.

Other witness due to testify on Wednesday include former SEC chairmen Christopher Cox and William Donaldson, and the SEC's inspector general, who has criticized the agency's oversight of investment banks in the run-up to 2008.

On Thursday, the commission is due to hear from former Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner.

(Reporting by Rachelle Younglai and Karey Wutkowski; Editing by Tim Dobbyn)