Bernanke says global markets under "extraordinary stress"

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke told the U.S. Congress Tuesday that financial markets are under severe stress and urged immediate action to buy up hundreds of billions of dollars worth of tainted mortgage assets.

"Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress," Bernanke said in remarks prepared for delivery to the Senate Banking Committee that were obtained by Reuters.

"Action by Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy," he said.

Bernanke was testifying days after Treasury Secretary Henry Paulson proposed a $700 billion rescue fund to absorb impaired credits that have clogged financial markets and brought to the brink of insolvency one major financial institution after another.

Market stress has accelerated recently and could be seriously damaging if it is not reversed, Bernanke said.

"If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse," he said.

The Fed chairman said regulatory overhaul was necessary but would take longer to accomplish.

"At this juncture, in light of the fast-moving developments, it is essential to deal with the crisis at hand," he said. "Development of a comprehensive proposal for reform would require careful and extensive analysis that would be difficult to compress," he added.

(Writing by Mark Felsenthal; Editing by Theodore d'Afflisio)