WASHINGTON — A top US bank regulator told lawmakers Wednesday that "inadequate" risk controls at JPMorgan Chase led to a $2 billion derivatives loss, as senators grilled him and others over a failure to prevent the debacle.

Democratic Senator Robert Menendez used the Senate Banking Committee hearing to unleash a fierce warning to regulators in the aftermath of the bank's derivative trade disaster reported last month that sent shudders through the still-frail financial system.

"The blood will be on all of your hands if the 'London Whale' ultimately goes belly up next time," Menendez told regulators, referring to the all-powerful London-based trader linked to the loss.

Menendez directed much of his frustration at Thomas Curry, who heads the Office of the Comptroller of the Currency (OCC), which is in the spotlight for its oversight of JPMorgan's Chief Investment Office unit responsible for the loss.

Curry said "the issue at JPMorgan Chase is one of inadequate risk management" within the CIO unit in the months leading up to the bank's announcement of the losses.

He said his agency is poring over audit reports and interviewing officials at JPMorgan and the OCC to establish "a detailed chronology of events" leading up to the fumbled trades.

"Our analysis will focus on where breakdowns or failures occurred," he said.

Curry told the packed hearing that while the massive loss affects the bank's earnings, it "does not present a solvency issue."

JPMorgan Chase has $1.8 trillion in assets, including $101 billion in Tier 1 common capital, he said.

But amid worries that so-called "too big to fail" banks like JPMorgan were taking excessive risks that could damage the entire financial system, senators expressed concern that regulators were too lax in monitoring huge trades.

"What did the comptrollers office know, and were you on top of things?" asked Richard Shelby, the committee's ranking Republican.

Curry responded that his concern about the bank intensified in April "as losses increased within the portfolio."

The OCC focused on "managing and monitoring the bank's efforts to mitigate or de-risk that particular portfolio with the objective of ensuring there is a soft landing," he said.

Curry acknowledged that the OCC was conducting "a critical self-review" to see whether there were shortcomings at the agency tasked with monitoring one of the biggest banks in the world.

The review should be completed "within the next several weeks, he said.

The series of hearings -- JPMorgan's chief executive Jamie Dimon has been invited to testify twice later this month -- comes amid fierce debate over the proposed Volcker Rule that would bar banks from trading for profits with their own funds in a bid to prevent them from taking dangerous risks while enjoying government guarantees.

Committee chairman Tim Johnson said he disagreed with complaints that new Wall Street reforms urge regulators "to micromanage" banks.

"To restore confidence in our financial system after the crisis, we need more, not less, scrutiny of Wall Street's activities," Johnson said.

Senator Patrick Toomey and other Republicans argued that the Volcker rule would merely limit banks' abilities to manage risk, and would impede their free-market trading.

"I'm very, very concerned that we have created a monster," Toomey told the regulators.

There were "over 100 examiners on the ground full time at JPMorgan alone," he noted, and they still failed to spot and interdict the bank's alarming losses.

He said capital was the essential tool to reduce systemic risk and provide a buffer against banks that get in trouble.

But Menendez offered an impassioned counterpoint, insisting that while capitalism is essential to US economic vitality, he did not want to return to the fiscal calamity of 2008.

That period showed the glaring consequences "of a 'free-for-all' market, where the decisions of large financial institutions became the collective risk of an entire country... and all of us had to pay," he said.

"I don't think the American people... are willing to go down that road again."