Bernanke: Bailout plan is key to keeping economy afloat

WASHINGTON -- The U.S. economy is slowing significantly, marked by a softness in consumer and business spending and exports that are at least in part a result of financial market turmoil, Federal Reserve Chairman Ben Bernanke told Congress Wednesday.

In testimony delivered the Joint Economic Committee, Bernanke said both inflation and a soft economy are considerable risks, suggesting the Fed is not poised to change interest rates any time soon.

The Fed chief repeated that Congress should act quickly to pass a financial bailout plan, arguing that not acting will have dire consequences for an already weak economy.

"Stabilization of our financial system is an essential precondition for economic recovery," Bernanke said. "I urge the Congress to act quickly to address the grave threats to financial stability that we currently face."

Bernanke's testimony — his second in two days — comes as lawmakers debate a $700 billion rescue plan for financial firms. The administation plan, which would allow the Treasury Department to buy bad assets from banks, has met considerable resistance from lawmakers of both parties.

That continued Wednesday — but there were clear signs that lawmakers understood the need for action.

"We will not Christmas-tree this bill, and we will work in a bipartisan way to act, and act soon," Sen. Charles Schumer, D-N.Y. and the panel's chairman, told Bernanke. He said Congress was poised to act "with the exception of a few outliers in either party."

Sen. Lindsey Graham, R-S.C., said Wednesday that "it's not my job to just echo people being mad. I'm going to choose the bad choice over the catastrophic choice."

"We don't have the luxury of kicking this can down the road like we did with immigration or Social Security and dealing with it another day, hoping somebody braver than us will come along and have courage that we can't muster," he said.

The White House, meanwhile, said President Bush may give a speech directly to Americans about the credit crisis. Wednesday morning, White House press secretary Dana Perino told reporters the nation "could be facing financial calamity" without action.