Congress wants to act on economy, but how?

However, replicating that cooperation on thornier issues, such as whether the government should do more to aid homeowners or tighten investment bank regulation will be tough, especially in a politically charged presidential election year.

Democrats are trying mightily to cast the Bush administration as more sensitive to the concerns of Wall Street bankers than Main Street homeowners, hoping to build momentum for their own proposals. Already under the microscope on Capitol Hill: the near-collapse of Bear Stearns Cos., whose market cap of some $14 billion nearly evaporated over a weekend and the questions it raises about the Fed's role in an 11th-hour rescue by JP Morgan.

In a Sunday scramble earlier this month, the central bank provided $30 billion in backing for a deal, raising concerns that the Fed, and ultimately U.S. taxpayers, could wind up on the hook.

Rep. Henry Waxman, D-Calif., who heads the House Oversight and Government Reform Committee, is collecting information for an inquiry, a committee aide said. A key question is whether the Fed set an inappropriate precedent with Bear. In the Senate, Max Baucus, D-Mont., has trained his finance committee's oversight on the transaction's impact on taxpayers.

JPMorgan on Monday boosted its offer for Bear Stearns to $10 per share from $2, aiming to soothe angry Bear Stearns shareholders who are convinced the company is being undersold.

The Bear Stearns meltdown has led for calls for tighter controls over investment banks — including stricter cushions against losses — and brings up issues not tackled since Congress and the Clinton administration tore down the walls separating banks, securities firms and insurers in 1999.

An ineffective and unwieldy patchwork is how critics see the current regulatory system, in which the Fed, divisions of the Treasury Department and the Securities and Exchange Commission each have jurisdiction, often overlapping, over different types of financial institutions.

Frank last week unveiled a proposal to give the Fed or a new regulator the power to supervise the operations of major financial players, whether they be banks, investment firms or hedge funds.

The Bush administration has its own ideas and is expected to put its "blueprint" for financial regulation reform into legislative form soon. It too, is expected to propose a broader role for the Fed as an "umbrella" regulator, but its thrust is toward easing what are considered onerous regulatory burdens.

Rep. Vito Fossella, R-N.Y., hopes the collapse of Bear Stearns provides an opportunity to examine the sometimes-overlapping powers of bank regulators, but cautions against overreaction. "We have to renovate the house and not just slap a coat of paint on it and say we've solved the problem," he said.

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