WASHINGTON - CONGRESS heard on Monday that Lehman Brothers, days away from becoming the largest bankruptcy in US history, was pleading for a US rescue on one hand while steering millions in dollars to departing executives on the other.

The first hearing into what caused US financial markets to collapse last month, precipitating a US$700 billion (S$1 trillion) bailout, opened with finger-pointing and glimpses into internal company documents from Lehman's chaotic last hours.

Rep. Henry Waxman, a Democrat and chairman of the House Oversight and Government Reform Committee, said the giant investment bank was 'a company in which there was no accountability for failure'.

Lehman's collapse set off a panic that within days had President George W. Bush and Treasury Secretary Henry Paulson asking Congress to pass the rescue plan for the financial sector.

Richard S. Fuld Jr., chief financial officer of Lehman Brothers, was among witnesses called to testify.

Mr Waxman read excerpts from Lehman documents in which a recommendation that top management should forgo bonuses was apparently brushed aside. He also cited a Sept 11 request to Lehman's compensation board that three executives leaving the company be given US$20 million in 'special payments'.

'In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation,' Mr Waxman said.

The government let Lehman go under Sept 15, only to bail out insurance giant American International Group the next day, in a cascading series of financial shock and failure that put Washington on track for the multibillion-dollar rescue starting the end of that week.

Mr Waxman described that plan as a life-support measure. 'It may keep our economy from collapsing but it won't make it healthy again,' he said. -- AP