"For the first time, a major investment bank that was well-capitalized and apparently fully liquid experienced a crisis of confidence that denied it not only unsecured financing, but short term-secured financing," Cox told members of the Senate Committee on Banking, Housing, and Urban Affairs.

Regulators, including Fed Chairman Ben Bernanke, and financiers, including Bear Stearns Chief Executive Alan Schwartz were called in to explain the Fed's move two weeks ago to rescue Bear Stearns from collapse, the Financial Times reported.

The Fed propped up the bank with a $30 billion loan before it was purchased in a fire-sale by J.P. Morgan and Chase.

"When $30 billion of taxpayer money is placed at risk, it is our paramount responsibility to ensure that these actions were necessary and judicious," Senate Banking Committee Chairman Chris Dodd said in a statement.

Bernanke explained Wednesday that a collapse of the bank would have lead to "chaotic unwinding" of financial markets.