Wall Street regulators faced off against federal lawmakers looking for answers Wednesday in the wake of J-P Morgan's $2 billion trading loss last week. Washington DC Bureau reporter Erin Billups filed this report.

A House hearing exploring so-called "too big to fail" financial institutions quickly revealed the growing debate over JPMorgan Chase's $2 billion trading loss and what it means for the federal policing of Wall Street.

"There is no risk from this loss to depositors or to taxpayers," said Rep. Spencer Bachus, the House Financial Services chair."

Republicans are warning against rushing to create more regulations. They call a recent Justice Department probe into JPMorgan's bad bets an overreaction.

"They're going to be investigated criminally?" asked Rep. Michael Grimm (Staten Island/Brooklyn). "I think this is the administration using this for political gain and I think it's completely wrong."

Democrats, meanwhile, view JPMorgan's mistakes as confirmation that their reforms were the right move.

"Maybe this challenge of JPMorgan chase will put a spotlight on the fact that we really do need these reforms," said Rep. Carolyn Maloney (Manhattan/Queens).

At the hearing, federal regulators insisted Americans will eventually see stricter enforcement.

"The market does not seem to be fully convinced that the tools given under Dodd-Frank will be used," said Michael Gibson, a Federal Reserve regulator. "I think we the regulators still have a ways to go to prove to the market that we will use those tools."

Congresswoman Maloney warns that calling the reforms ineffective is premature.

"The rules have not been defined yet on many aspects of too big to fail," she said.

Wednesday's hearing was just the first of many.

Thursday, the head of the SEC's enforcement division, along with officials from the
Federal Reserve and FDIC, will testify before another panel of lawmakers.