Sept. 17 (Bloomberg) -- House Speaker Nancy Pelosi yesterday ordered hearings into the causes of the convulsions on Wall Street, and other Democratic leaders said a broad overhaul of U.S. financial regulations may be needed to restore order.

Lehman Brothers Holdings Inc.'s chief executive has been summoned to a Capitol Hill hearing next week, House Financial Services Committee Chairman Barney Frank will hold a separate session to explore the idea of setting up a federal entity to take on bad mortgage debt, and Senate Banking Committee Chairman Christopher Dodd plans to question administration officials about how they plan to end a cycle of government interventions in the economy.

More congressional oversight and attention in an election year may be the price the administration must pay for its bailout of Bear Stearns Cos. in March, the takeover of Fannie Mae and Freddie Mac earlier this month and the $85 billion government purchase of a majority stake in insurer American International Group Inc. last night.

``An $85 billion loan is a staggering sum and is just too enormous for the American people to bear the risk,'' Pelosi said in a statement last night. ``Congress will demand answers to prevent this from happening again.''

Last night Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke discussed with lawmakers broader, ``more systemic'' policy changes that may be needed to restore order in financial markets, Frank said.

`Whatever We Can'

``Whatever we do to alleviate current conditions has to be contingent on a commitment that we're going to do whatever we can to keep it from happening again,'' Frank said.

Frank didn't mention specifics of what policy changes they discussed. Lawmakers said the Bush administration's sweeping plans to help AIG are aimed at mitigating risks to the American economy.

``Actions that were inconceivable just days ago are now occurring in a manner and at a pace that is certainly cause for concern,'' Dodd, a Connecticut Democrat, said in a statement. ``The administration needs to become much more aggressive about addressing the root cause of this entire economic crisis.''

Frank said he will call witnesses next week to review the causes of the crisis, and will have his panel consider a solution he is considering to have the U.S. buy distressed mortgages, akin to the role the Resolution Trust Corp. played in disposing of bad debts of from savings and loan associations in the late 1980s and early 1990s.

`Break Even?'

``Have assets now been devalued, partly by psychology, to the point where if you could go in and buy and hold them three or four years you could expect to at least break even?'' Frank told reporters yesterday. ``The next step is to begin to consider that question'' because ``the private market won't even go to a fire sale.''

Frank said he didn't know who would testify at the hearing.

Senate Majority Leader Harry Reid, a Nevada Democrat, said he may support overhauling or repealing the 1999 law that allowed banks and securities firms to merge.

``It's time to take a hard look at it, repeal it or change it,'' Reid said yesterday in response to a question.

Henry Waxman, the chairman of the House Oversight and Government Reform Committee, summoned Lehman Chief Executive Officer Richard Fuld to appear at a hearing on Sept. 25.

``The committee will also explore the impacts of the Lehman bankruptcy on financial markets and the United States economy,'' Waxman, a California Democrat, said.

Lehman Bankruptcy

Lehman was forced into bankruptcy on Sept. 15 after Barclays Plc and Bank of America Corp. abandoned takeover talks and the company lost 94 percent of its market value this year. Fuld hasn't spoken publicly since the bankruptcy filing.

Pelosi, a California Democrat, blamed the administration of President George W. Bush for the crisis.

``The Bush Administration's eight long years of failed deregulation policies have resulted in our nation's largest bailout ever, leaving the American taxpayers on the hook potentially for billions of dollars,'' Pelosi said.

Dodd said the plan to lend as much as $85 billion to AIG to save the country's biggest insurer from collapse is a sign that the crisis ``is deepening'' while blaming the administration's ``neglect and wayward'' polices for the problem.

Representative Spencer Bachus, the top Republican on the House Financial Services Committee, urged Democrats not to seize on the issue for partisan advantage.

``It's going to be important for us not to politicize the process,'' Bachus, an Alabama Republican, said after the meeting with Paulson and Bernanke. ``We have an election coming up and there's absolutely no need for Republicans to try to take advantage of this against Democrats or Democrats against Republicans.''

``We're all in this mess together,'' Bachus said.

To contact the reporters on this story: Brian Faler in Washington at bfaler@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net.

Last Updated: September 17, 2008 00:29 EDT