Released: September 23, 2008

Fed chief urges rapid bailout

Source: Sue Kirchhoff, USA Today

Federal Reserve Chairman Ben Bernanke warned Congress Tuesday that global financial markets are under “extraordinary stress” and lawmakers must act urgently to stabilize conditions and “avert what otherwise could be very serious consequences for our financial markets and for our economy.”

In testimony prepared for the Senate Banking Committee, where he will appear with Treasury Secretary Henry Paulson, Bernanke said Treasury’s plan to have the government buy up to $700 billion in distressed mortgage-backed bonds and other assets from financial firms will create liquidity in the markets and help stabilize prices, while reducing investor uncertainty.

In his testimony, Bernanke said the U.S. economy faces “substantial challenges,” including the weak labor market and elevated inflation, in addition to financial market turmoil. “If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse,” Bernanke said.

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