WASHINGTON (AP) â€” Federal Reserve Chairman Ben Bernanke will testify this week about his role in the bank bailouts that sent billions of taxpayer dollars to banks deemed "too big to fail."
Bernanke will testify Thursday before the bipartisan Financial Crisis Inquiry Commission. The panel was created by Congress to investigate the roots of the financial panic that rocked Wall Street and the global economy starting in 2008.
Bernanke and other officials considered the banks "too big to fail" because they feared the banks' failures could spread panic and bring down the broader financial system. The government rescued insolvent companies such as Bear Stearns, Merrill Lynch and American International Group Inc. by brokering their sale to competitors or putting them under government control.
Bernanke was a key architect of the bailouts. He worked closely with former Treasury Secretary Henry Paulson and Treasury Secretary Timothy Geithner, who was president of the Federal Reserve Bank of New York at the time. Geithner and Paulson already have testified before the FCIC.
Bernanke and Geithner have argued that the problem of "too big to fail" was solved by a sweeping overhaul of financial rules that was signed into law this summer. The law includes a process for shuttering big, complex financial companies using a money from investors and loans from the Treasury Department.
Critics say the change will not prevent future bailouts. They point out that the biggest banks grew larger as the government pushed them to absorb smaller players.
The hearings also will include testimony from Federal Deposit Insurance Corp. Chairman Sheila Bair and Dick Fuld, who was CEO of Lehman Bros. when it filed for bankruptcy protection.