The US Congress has begun an inquiry into last weekend’s bailout of Bear Stearns by the Federal Reserve and JPMorgan Chase as Washington grows increasingly concerned that American taxpayers are paying the price for Wall Street’s mistakes.

The inquiry will examine the impact of bailing out Bear Stearns on taxpayers’ money after the Federal Reserve Bank of New York effectively guaranteed $30 billion (£15 billion) of the bank’s bad investments and extended a credit line to JPMorgan Chase as a sweetener to take control of the bank. Congress is also seeking to ascertain whether the rescue deal is in breach of federal law.

JPMorgan is paying almost $240 million with its own shares to take control of Bear Stearns.

Henry Waxman, who heads the House Oversight and Government Reform Committee, is leading the inquiry.

At the same time, the Senate Finance Committee announced that it will hold its own inquiry into the bailout. Charles Grassley, a committee member, said: “I’ve instructed my staff to delve into the details of the deal; I want to understand what the downside risk for the taxpayer is and any upside potential.”

Both inquiries are expected to encourage some law firms to try to draw together class-action lawsuits and sue Bear Stearns’s management, led by Alan Schwartz, chief executive.

One such firm, Mark & Associates, based in New York, yesterday invited any Bear Stearns shareholder who had lost more than $10,000 to contact it for a “free consultation”.

Meanwhile Joe Lewis, the billionaire Tottenham Hotspur investor, is believed to be trying to elicit a counter offer for Bear Stearns after the bailout, valuing the bank at $2 a share, cost him more than $1 billion on his investment in Bear Stearns shares. Bear Stearns staff have resorted to auctioning off bank memorabilia on eBay to raise funds. “Be the first to get your paws on classic Bear Stearns memorabilia,” touts the description for one of several stuffed toy bears on sale at a bargain $5.50. “Do not delay – bail a Bear out today!” the ad urges, adding that the first bear purchased comes with a free New York skyscraper worth about $1 billion – depending on availability.

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