"The Fed has been doing a good job for the past three years or so," he told the House Financial Services Committee.
One sign of improvements he cited was the recent rise in the markets. The Dow is up 35 percent from its lows in early March.
"The public has been responding to some signs, some glimmers, if you will, of improvement," he told lawmakers. "So, consumer sentiment, for example, has improved somewhat as the stock market has gone up, and as the outlook has looked better, and as the job situation has, at least, stopped deteriorating quite as quickly as it was.
"But," he added, "I want to be clear that we have a very long haul here, because even if the economy begins to turn up in terms of production, unemployment is going to stay high for quite a while. And so it's not going to feel like a really strong economy."
While most Democrats seemed supportive of the Fed's efforts, Republicans across the aisle did not.
"I think we're in far worse shape than people want to recognize right now," said Rep. Gary Miller, R-Calif.
He added to Bernanke, "I wouldn't want your job for anything in the world right now."
Rep. Spencer Bachus of Alabama, the panel's ranking Republican, was also far from impressed by the government's efforts to end the financial crisis.
"The American people can be forgiven for increasingly asking tough questions about these enormous government outlays and interventions, because so far, Mr. Chairman, there has been very little bang for the taxpayer's buck," Bachus said.
Another GOP member, Rep. Ron Paul, accused the Fed of helping to create the current crisis.
"The Federal Reserve, in collaboration with the giant banks, has created the greatest financial crisis the world has ever seen," the Texan said. "The foolish notion that unlimited amounts of money and credit, created out of thin air, can provide sustained economic growth has delivered this crisis to us."
Obama Pushes for Increased Federal Reserve Powers
The stinging criticism came as the Obama administration continues its push for the Fed's powers to be increased as part of its financial regulatory reform efforts. Judging by the responses of Republicans at today's hearing, getting those measures passed will be a tough sell.
"The Fed has made some big mistakes," Bachus said. "And historically, the board has done a poor job of identifying and addressing systemic risk before they become crises.
"Asking the Fed to serve as a systemic regulator is just inviting a false sense of security that inevitably will be shattered at the expense of the taxpayer," he added.
But the Fed chief defended the work of the central bank, saying that they were up to the task.
"There's, I think, a misapprehension that somehow this plan makes the Federal Reserve a super-regulator with, sort of, untrammeled powers to go wherever it -- it likes," Bernanke said.
"It would be a challenging thing for us to do," he acknowledged, "But it does not radically reorient our set of powers."
Despite the recent progress in forging the country's economic recovery that Bernanke cited, he warned that joblessness will continue to take its toll, especially on the housing crisis. The nation's unemployment rate currently sits at a 26-year high of 9.5 percent.
"The combination of unemployment and falling house prices, the double trigger, does create a very high rate of foreclosures," he said. "Our assessment of the foreclosures is that it's likely to be -- it's likely to peak in the second half of 2009, corresponding with the peak in the unemployment rate and, perhaps, be somewhat less in 2010.
"But clearly, we are going to have very high levels of foreclosures," he said. "And unemployment rate's a big reason for that."
However, he said unemployment could be even worse had it not been for the $787 billion stimulus package,.
"If the fiscal stimulus package didn't exist, for example, we would anticipate there would be higher unemployment," he said.
The stimulus package is just one of a myriad of federal efforts to stem the recession. In recent months, the Fed's role has grown ever larger as the central bank launches programs to beat back the crisis.
Bernanke Says Fed Ready to Prevent Inflation
Bernanke also attempted to ease concerns in Congress about the Fed's ability to unwind its extensive efforts to stimulate the economy before inflationary pressures take hold.
"It is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation," he told the House Financial Services Committee.
The Fed, he said, "has been devoting considerable attention to issues relating to its exit strategy, and we are confident that we have the necessary tools to implement that strategy when appropriate."
For now, even though "the pace of decline appears to have slowed significantly", Bernanke told lawmakers that the Fed expects to keep its bank lending rate at a record low "for an extended period."
"Economic conditions are likely to warrant maintaining the federal funds rate at exceptionally low levels for an extended period," said Bernanke.
In delivering his semi-annual monetary policy report to Congress, Bernanke described his current financial outlook.
"Today financial conditions remain stressed and many households and businesses are finding credit difficult to obtain," he noted. "Nevertheless, on net, the past few months have seen some notable improvements. For example, interest rate spreads in short-term money markets, such as the interbank market and the commercial paper market, have continued to narrow. The extreme risk aversion of last fall has eased somewhat, and investors are returning to credit markets."
Despite these improvements, Bernanke observed, "the rate of job loss remains high, and the unemployment rate has continued its steep rise. Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending. The possibility that the recent stabilization in household spending will prove transient is an important downside risk to the outlook."
Unemployment Could Rise Through End of Year, Bernanke Says
Overall, he said, "the recovery is expected to be gradual in 2010, with some acceleration in activity in 2011. Although the unemployment rate is projected to peak at the end of this year, the projected declines in 2010 and 2011 would still leave unemployment well above FOMC [Federal Open Market Committee] participants' views of the longer-run sustainable rate. All participants expect that inflation will be somewhat lower this year than in recent years, and most expect it to remain subdued over the next two years."
Committee chairman Barney Frank said he was reassured by Bernanke's efforts to fend off inflation.
"I am persuaded by the chairman and others that we are able in an orderly way to undo what we had to do so there will not be that inflationary impact," said the Mass. Democrat.
Some Republicans, however, were far from convinced. With the administration proposing to increase the power of the Fed by naming it the nation's systemic risk regulator, the panel's ranking GOP member Spencer Bachus of Alabama warned that such a move would be "inviting a false sense of security."
Today's session is Bernanke's first of two hearings that he will have on the Hill about the state of the country's economy. On Wednesday, he heads to the Senate side.
Republicans like Bachus, however, were far from convinced. More back-and-forth with lawmakers awaits Bernanke on Wednesday, when he heads to the Senate side for the second of his two hearings on Capitol Hill about the state of the country's economy.