Two more months of mortgage payments and retiree Allan Goldstein says he'll be broke, just another victim in what may be the biggest Ponzi scheme in history.

Goldstein, 76, was among the thousands of investors who trusted Wall Street figure Bernard Madoff with their money while counting on federal regulators to protect the investing public from fraud.

"Somewhere inside of me was the thought that this was a regulated industry. It wasn't. The warning flags were just pushed aside," Goldstein told a House panel Monday.

Red flags were raised to the Securities and Exchange Commission over a decade but weren't pursued, and Republican and Democratic House members said that reflected deep, systemic problems at the market watchdog agency.

Goldstein, a retired New York fabrics distributor, was among the witnesses as the House Financial Services Committee looked into why the SEC failed to uncover what may be a swindle amounting to $50 billion.

Goldstein testified that "everything I worked for over a 50-year career is gone." He held an IRA retirement account with Madoff's firm for 21 years.

Now, he says, he's been forced to cash in life insurance policies to cover his mortgage, but "just can't make it" past April. The only choice he says he has is to sell his home — which he fears he won't be able to do in a housing market that has collapsed.

Thousands of individuals, including ordinary people and Hollywood celebrities as well as big hedge funds, international banks and charities around the globe, lost money investing with Madoff. A prominent French financier who had entrusted his fortune and his clients' money to Madoff was found dead at his office in New York on Dec. 23, an apparent suicide.

The SEC's internal watchdog, Inspector General H. David Kotz, said he is so concerned about the agency's failure to uncover Madoff's alleged Ponzi scheme that he is expanding the inquiry called for last month by SEC Chairman Christopher Cox. Cox had pushed the blame squarely onto the SEC's career staff for the failure to detect what Madoff was doing.

Kotz told the House hearing he will examine the operations of the SEC's enforcement and inspection divisions and will make recommendations, steps beyond what Cox had called for.

It appears that the complaints against Madoff's operations by securities industry executive Harry Markopolos and others were "brought to the right place" within the SEC, Kotz said, and to enough people that action could have been taken.

Among other facets, Kotz's review will delve, as Cox had asked, into all SEC staff contacts and relationships with the Madoff family and the firm — and the possible impact on staff decisions.

Kotz is examining the relationship between a former SEC attorney, Eric Swanson, and Madoff's niece, Shana, who are now married. As an SEC attorney, Swanson was part of a team that examined Madoff's securities brokerage operation in 1999 and 2004. Neither review resulted in any action against Madoff, a former chairman of the Nasdaq Stock Market who was a member of SEC advisory committees.

If he were to find evidence of collaboration between SEC staff and Madoff's firm, Kotz told the hearing, he would call for the strictest measures against those involved, including dismissal and possible referral to the Justice Department for criminal prosecution.

To Rep. David Scott, D-Ga., such collaboration was self-evident. Madoff "could not have done it without some complicity," he insisted, and for SEC staff involved, "Their heads have got to roll."

"Clearly, our regulatory system ... failed miserably and we must rebuild it now," said Rep. Paul Kanjorski, D-Pa., who presided over the first congressional airing of the Madoff scandal.

In the Senate, Banking Committee Chairman Chris Dodd, D-Conn., and Sen. Richard Shelby of Alabama, the panel's senior Republican, announced that they have opened an investigation of the Madoff affair.

In a New York City courtroom, meanwhile, a federal prosecutor asked that Madoff be jailed pending trial, saying the disgraced financier violated an agreement with the court by mailing watches, jewelry, cufflinks and mittens worth more than $1 million to relatives and friends.

The Securities Investor Protection Corp. and the trustee handling the liquidation of Madoff's firm announced that they mailed more than 8,000 claim forms to customers on Friday.

SIPC's president, Stephen Harbeck, faced pointed questioning at the hearing as lawmakers spelled out the math: an estimated $50 billion in losses from Madoff, but just $1.6 billion available to SIPC. The industry-funded organization, created by Congress to protect investors when a brokerage firm fails, can provide funds up to a maximum of $500,000 for each customer.

Lawmakers, many of whom had received calls from constituents and charities in their districts that lost money, jumped on the opportunity to show concern. The hearing was held on the final day of the current Congress.

Republicans warned against rushing to new regulation as a response to the SEC breakdown.

"What we may have in the Madoff case is not necessarily a lack of enforcement and oversight tools, but a failure to use them," said Rep. Spencer Bachus of Alabama, the panel's senior Republican.