WASHINGTON -- Federal Reserve Chairman Ben Bernanke warned Tuesday that the economy could plunge into a prolonged downturn if Congress doesn't pass a $700 billion plan to rescue the financial sector.
"If the credit markets are not functioning … jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, (growth) will contract, the economy will just not be able to recover in a normal, healthy way," a wan-looking Bernanke, an expert on the Great Depression, told the Senate Banking Committee during a packed, sometimes tense hearing.
Bernanke and Treasury Secretary Henry Paulson were among the government leaders urging action by a skeptical Congress at the hearing on the Bush administration's bailout plan. Meanwhile, the Dow Jones industrials fell 162 points, on top of a 373-point drop Monday.
But shares of Wall Street giant Goldman Sachs rose 8% after regular trading hours on the news that legendary investor Warren Buffett's Berkshire Hathaway has invested $5 billion.
Tuesday evening, the Associated Press reported that the FBI is investigating four more companies at the heart of the financial collapse, bringing to 26 the number of firms under investigation in the past year. Mortgage giants Fannie Mae and Freddie Mac, insurer American International Group and Lehman Bros. and those who ran them are being investigated, according to law enforcement officials who spoke to the AP on condition of anonymity because the investigations are ongoing. USA TODAY couldn't confirm the report.
In possibly the darkest economic assessment from him since he became chairman 2½ years ago, Bernanke told lawmakers Tuesday that failure to approve the legislation would have "significant adverse consequences for the average person." He said the crisis is unlike what the USA has seen at any time in history.
Paulson warned of "a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses … and the very health of our economy."