UPDATE 2-US FDIC willing to oversee failed investment banks

(Recasts; adds Bair comments, congressional hearings, background)

By John Poirier

WASHINGTON, June 18 (Reuters) - The Federal Deposit Insurance Corporation, which oversees the resolution of failed banks, said on Wednesday it would be willing to accept similar authority over investment banks, ahead of Congressional hearings on changing how financial institutions are regulated.

"We wouldn't turn it down," Federal Deposit Insurance Corporation Chairman Sheila Bair told reporters after renewing her call, in a speech, to set up a framework to wind down a failing investment bank, especially in light of the near-closures of U.S.-based Bear Stearns and Northern Rock in the UK.

Bair said those institutions raise new questions about how to strike a balance between stability and containing risk in the financial markets while addressing concerns about moral hazard and protecting taxpayers.

"The government cannot be put in the position of having to simply write a blank check when these institutions get into trouble," Bair told a group of financial professionals.

Bair was referring to the move taken earlier this year by the U.S. Federal Reserve to provide discount window liquidity and a credit guarantee of $29 billion to Bear Stearns, which is being acquired by JPMorgan Chase (JPM.N: Quote, Profile, Research).

Bair said the Fed was forced to intervene without having a "playbook" to deal with an investment bank failure. "The Fed had to invent one on the fly," she said.

The FDIC, which can tap into a $53 billion insurance fund to help depositors in case their bank fails, does not regulate investment banks, but Bair's views could help shape the debate in Congress on how to regulate them in the future.