HIGHLIGHTS: Bernanke's testimony from Q&A on Fed policy

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke presented the central bank's semiannual report on monetary and economic policy to the Senate Banking Committee on Tuesday.

Following are highlights from the question and answer portion of his testimony:

ON CONFIDENCE IN RECOVERY IN HOUSING MARKET:

"I anticipate that we will have a healthy recovery in the housing market once we have gone through this necessary process. But it will probably be one that is, you know, I think desirably less exuberant than we saw earlier, with somewhat tougher underwriting standards, more investor due diligence, probably less use of securitization or complicated securitized products... I'm confident that the housing market will recover and it will be part of the economy's return to growth."

ON HELPING WALL STREET OVER MAIN STREET:

"Our actions with respect to Bear Stearns, with respect to Fannie and Freddie and with respect to the financial system in general are based on our view that financial stability is critical to economic stability. I just don't accept the distinction between helping Wall Street and helping Main Street. The actions we've take are aimed at helping the overall economy."

ON SPECULATION IN OIL MARKETS:

"There is speculation, but speculation under most circumstances is a positive thing. It provides liquidity and allows people to hedge their risks. It (speculation) provides price discovery. It can help allocate oil availability over time, depending on the pattern of futures prices and so on."

ON PROSPECTS FOR HOUSING MARKET AND ECONOMIC RECOVERY:

"(The home building sector) has already declined quite substantially. It's very likely going to begin to level out somewhere around the end of the year. That leveling out will also provide a position of strength at least in the sense of not subtracting from the GDP growth. As the situation begins to stabilize, the credit markets begin to stabilize, and I think confidence will return to consumers and we'll see the beginnings of a recovery."

ON INVESTMENT BANK SUPERVISION AND THE FED:

"I do think the investment banks need a consolidated supervisor. I have not proposed a particular agency to do that. The key issue is that they have strong consolidated supervision. The only area in which I have raised the possibility of additional powers of the Federal Reserve in my testimony and speeches last week I talked about payment systems, which are systemically important and where, in most countries, central banks have considerable oversight and responsibility. I think it would be useful for the Congress to review how payment and settlement systems are overseen and to ask whether, from a systemic point of view, they are adequately regulated."

ON WHETHER THE UNITED STATES IS IN TECHNICAL RECESSION:

"There's a technical definition of recession, which has to do with behavior of employment, industrial production and other things, and that's a determination that's made by some economists after the fact."

"I don't know whether they will determine we've been in a recession or not according to these technical definitions."

"But I agree with you entirely, whether it's a technical recession or not, the combination of declining wealth, weak job market, rising food and energy prices, foreclosures, tight credit ... all those things are putting tremendous pressures on families and it explains why consumer sentiment is very low."