Senators Schumer and Manchin are upset about Silk Road, a hidden website that is an "Ebay for illegal narcotics." They accept only bitcoin as payment, because bitcoin is the closest thing to cash on the Internet. Watching the press conference, I get the impression they're also upset at bitcoin; Sen. Schumer says bitcoin is "an online form of money laundering."
First, that's just not true! The biggest bitcoin exchanger (Mt Gox) is careful to comply with all anti-money-laundering laws and regulations. If the operators of Silk Road make lots of bitcoins then if or when they try to exchange them for dollars or euros they're going to have to tell Mt Gox who they are, Mt Gox will be required to report the transaction to the government, and the Silk Road folks might find themselves explaining to an IRS agent how they managed to earn so many bitcoins. It is no different from any other financial institution.
Second, nobody can control what is purchased with bitcoins, just like my local bank cannot control what I do with the cash I withdraw from their ATM machine. I wonder if Senators Schumer and Manchin would like to replace all cash with a government-issued smart card; after all, that would make it much harder for criminals to get away with buying illegal goods anonymously, and if we are all law-abiding citizens then we shouldn't worry about the government knowing about all of our purchases... right?
Finally, I hope that the Senators realize that trying to ban an innovative new technology like bitcoin will put the United States at a competitive disadvantage versus the rest of the world. The US government tried to control strong encryption in the 90's, and only succeeded in driving a lot of cryptographic product development overseas. This is supposed to be the Land of the Free; I think we should learn the lessons of the past and be brave about taking advantage of new technologies like bitcoin, instead of fearing them.