WASHINGTON -- James Cayne, who led Bear Stearns for 15 years, and his successor defended the conduct of the Wall Street firm against members of a special panel who were skeptical that uncontrollable outside forces were to blame for its demise two years ago.

The firm's stunning collapse in March 2008 "was due to overwhelming market forces that Bear Stearns ... could not resist," Cayne testified Wednesday before the congressionally chartered Financial Crisis Inquiry Commission. "Considering the severity and unprecedented nature of the turmoil in the market, I do not believe there were any reasonable steps we could have taken, short of selling the firm, to prevent the collapse that ultimately occurred."

Members of the panel said Bear Stearns' mounting debt and reliance on rival banks for tens of billions in loans on a daily basis must have played a role.

"It appears the financial crisis was an 'immaculate calamity'; no one was responsible," panel chairman Phil Angelides said.

The panel is investigating the roots of the crisis that plunged the country into the most severe recession since the 1930s and brought losses of jobs and homes for millions of Americans.

The role of federal regulators also came under scrutiny by the panel. Lawmakers and investor advocates have criticized the Securities and Exchange Commission's oversight of Wall Street firms during and after the crisis.

The "Big Five" investment banks -- including Bear Stearns -- were in a voluntary program of supervision by the SEC established in March 2004.

Former SEC Chairman Christopher Cox terminated the program in September 2008. He testified Wednesday that it was "fundamentally flawed from the beginning." Cox said the SEC lacked the legal authority to act as regulator of big investment-bank holding companies.

Cayne was Bear Stearns' chief executive officer until January 2008. Also appearing was Alan Schwartz, who succeeded Cayne for a few months.

"It does seem to me that there was an extraordinary level of risk taken" by Bear Stearns, Angelides told Cayne.

"That was the business. That was really industry practice," Cayne responded. He did acknowledge, though, that in hindsight the mounting debt levels taken on by the bank were excessively high.

Cayne said "we made a conscious decision" in 2006 to move to using special loans from other investment banks, known as repurchase agreements, in the belief that would provide a more stable source of borrowing than commercial paper if the credit markets were to come under stress. The temporary loan "repos" are used by banks, hedge funds and other investors to borrow against collateral.

Those loans grew to $50 billion to $60 billion overnight in the period before Bear Stearns failed.

Bear Stearns was the first Wall Street bank to blow up. It was caught in the credit crunch in early 2008 and foreshadowed the cascading financial meltdown in the fall of that year. The Federal Reserve orchestrated Bear Stearns' rescue buyout by JPMorgan Chase & Co. with a $29 billion federal backstop.

Bear Stearns was the smallest of the "Big Five" investment banks on Wall Street -- with about $400 billion in assets -- but was known for its go-against-the-grain scrappiness.

Cayne's management style has drawn criticism. As two of Bear Stearns hedge funds were melting down in June 2007, Cayne reportedly managed to spend 10 of 21 workdays out of the office, taking a helicopter from Manhattan to New Jersey on Thursday afternoons for regular golf games and skipping work to play in bridge tournaments.

It was Schwartz who negotiated with the Fed for the sale of the bank to JPMorgan for $10 a share; Cayne had become non-executive board chairman in January and was playing in a bridge tournament in Detroit.

Earlier, members of the bipartisan panel challenged other former Bear Stearns' executives on what caused Bear Stearns to collapse.

The executives testified that they did all they could to keep Bear Stearns afloat before it fell victim to an unstoppable run on the bank. Its business strategy of borrowing funds from rival firms was sound under the crimped credit market conditions at the time, they said.

"In retrospect I don't believe that there was anything that Bear Stearns could have done differently with respect to its funding model that would have prevent this run on the bank," said Paul Friedman, who was the firm's chief operating officer for fixed income.