Bernanke implores rescue action

By Patrick M. Fitzgibbons

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke implored Congress to move quickly as the U.S. Congress launched another marathon day of hearings into the Bush Administration's $700 billion financial bailout plan and the state of the U.S. economy.

Bernanke warned on Wednesday that downside risks to the U.S. economy remain "a significant concern" and the Fed was monitoring developments carefully and would act as needed to promote growth.

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

Bernanke and U.S. Treasury Secretary Henry Paulson will both be on Capitol Hill for most of the day Wednesday after more than five hours of testimony on Tuesday.

"Despite the efforts of the Federal Reserve, the Treasury and other agencies, global financial markets remain under extraordinary stress," Bernanke said.

The most severe U.S. housing slump since the Great Depression has sent foreclosures soaring, saddling the global financial system with a mountain of bad debt that has threatened to choke off the supply of credit.

The Bush administration, supported by the Fed, want to use $700 billion of taxpayer money to purchase bad mortgage debt and other securities from financial institutions.

Bernanke listed areas of the economy hit by financial turmoil that were areas of concern.

"More recently, economic activity appears to have decelerated broadly," he said. Labor markets are weak and unemployment is high. Despite an easing of oil and gas prices since the summer, consumer spending is likely to be sluggish in the near term, he added.

BAILOUT CRITICISM

While it is still anticipated that the bailout will be approved, some lawmakers have strong concerns.

"I think there are a lot of unanswered questions here. We've got to look at this closely and possibly reconfigure it," said Alabama Senator Richard Shelby on CNN. "There's stress and strain in our financial markets. But do we want to reward some of the same people who caused this problem and bail them out and let our children pay for it over years, I say no."

Shelby, the top Republican on the Senate Banking Committee, said the plan "merely codifies (the Treasury Department's) ad hoc approach" taken so far to tackling the worst U.S. financial crisis since the Great Depression.

Lawmakers' aides said Bernanke and Paulson attended a closed-door meeting of House Republicans this morning, many of whom have expressed misgivings about the plan.

On the Democratic side, Sen. Charles Schumer affirmed the commitment of Congressional Democrats to pass some sort of emergency measure to address the credit crisis before lawmakers adjourn in the next few days.