Bernanke repeats economy in difficult period

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke on Thursday repeated remarks justifying the government’s financial market rescue and acknowledging tough economic conditions, but did not mention economic recession or contraction in prepared testimony.

“Clearly, the U.S. economy is going through a very difficult period,” he said in the text of remarks to the Senate Banking Committee. “Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year.”

In a shorter version of remarks delivered on Capitol Hill on Wednesday, Bernanke used identical language to describe reasons behind the Fed’s decision to prevent an abrupt failure at investment bank Bear Stearns by offering to back $29 billion of the firm’s assets.

“The adverse impact of a default would not have been confined to the financial system but would have been felt broadly in the real economy,” he said.

But Bernanke did not repeat that the economy could contract slightly in the first half of the year, as he told the congressional Joint Economic Committee a day earlier. He also said on Wednesday under questioning that “recession is possible.”

Bernanke was due to appear with New York Fed President Timothy Geithner and the chief executives of Bear Stearns and JPMorgan Chase.

Reporting by Mark Felsenthal; Editing by Neil Stempleman