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US Fed chief asks urgent bail-out action or risk 'very serious consequences' - Naveed Yaseen - 09-25-2008 12:32 AM
Ben Bernanke delivers stark economy warning
The chairman of the US Federal Reserve has urged politicians to "act quickly" to support the proposed $700bn (£378bn) bail-out of the financial markets.
The US economy risked "very serious consequences" if measures were not taken, Ben Bernanke added.
Mr Bernanke said Congress must "address the grave threats to financial stability" which were being faced.
President Bush is to hold a prime time televised address to convince US citizens of the need for the bail-out.
On Tuesday politicians expressed strong scepticism about the bail-out following a five-hour Senate hearing on the plan.
'Work together' 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
Ben Bernanke
Chairman, Federal Reserve
Q&A: The $700bn bail-out
Treasury Secretary Henry Paulson had told already the banking panel that delaying the bail-out would put the entire US economy at risk.
The White House has called on Republicans and Democrats to work together to approve the plan, under which a federal fund could buy bad debt from financial institutions with "significant operations in the US".
The fund would aim to sell off these mortgage-related debts in the future when, the Treasury says, their value might have risen.
But congressmen from both sides said they wanted assurances that the plan would benefit ordinary American home-owners as well as Wall Street.
Some have gone further, calling the plan a potential waste of public money.
'Stresses intensified'
For the economy to pick up required a "return to more normal functioning" of the financial system - allowing credit to flow and giving a boost to the housing sector, Mr Bernanke said.
"Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress.
"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."
He added that the US economy continued to face substantial challenges, including a weakening labour market and elevated inflation.
"Notably, stresses in financial markets have been high and have recently intensified significantly," he said.
"If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse."
http://news.bbc.co.uk/2/hi/business/7634017.stm