Senate Banking panel hearing on financial crisis

WASHINGTON (Reuters) - The Senate Banking Committee on Thursday is holding a hearing on the regulatory response to the financial crisis. Federal Deposit Insurance Corp Chairman Sheila Bair, Treasury Interim Assistant Secretary Neel Kashkari, Housing and Urban Development Assistant Secretary Brian Montgomery, Federal Reserve Governor Elizabeth Duke and Federal Housing Finance Agency Director James Lockhart are testifying.

Following are highlights from their testimony and comments from lawmakers.

SEN. CHARLES SCHUMER ON USE OF TARP FUNDS:

"There should be guidelines on the use of this capital. I'd like to see the Treasury set out goals, perhaps based upon an institution's previous lending history, for the amount of lending that it should be doing. This will help prevent institutions from hoarding government capital against future losses.

"On the flip side of that coin, I think Treasury and the financial regulators should issue guidance to discourage institutions from using this funding to engage in the kinds of risky and exotic financial activities that got us into this mess. We aren't investing in these institutions just to see the financial wizards go back to playing their high-stakes game, this time with our money."

TREASURY'S KASHKARI ON PREVENTABLE FORECLOSURES:

"We're very, very focused on this issue of avoiding preventable foreclosures. We have a team of people working inter-agency on the homeownership preservation piece ... and when their work product is complete we're going to come out with just as much detail as we did on the capital program."

"We're working around the clock to get these programs up and running. I think it's weeks, it's not days, but it's also not several months."

KASHKARI ON HOME LOAN GUARANTEE PROGRAM