Fed chief Bernanke vows more transparency in battling crisis

WASHINGTON -- Federal Reserve Chairman Ben Bernanke told Congress Tuesday that a flurry of radical programs aimed at busting through debilitating credit clogs are showing promise and pledged to keep Americans better informed about efforts to battle the worst financial crisis since the 1930s.

While acknowledging that measuring the impact of the Fed's programs is complicated because many factors affect market conditions, Bernanke said the central bank was encouraged by feedback from Wall Street and others.

"Our lending to financial institutions, together with action taken by other agencies, has helped to relax the severe liquidity strains experienced by many firms and has been associated with considerable improvements" in bank-to-bank lending, Bernanke said in testimony to the House Financial Services Committee.

Specifically, a Fed program to buy mounds of "commercial paper" has helped to relieve strains for many companies that rely on this crucial short-term financing to bankroll everyday expenses like payrolls and supplies, Bernanke said.

Another program, he said, has bolstered the money market mutual fund industry as sharp withdrawals seen in September have since waned. And a program to buy mortgage debt has helped to drive down mortgage rates, he said.

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"All of these improvements have occurred over a period in which the economic news has generally been worse than expected and conditions in many financial markets, including equity markets, have worsened," Bernanke said.

The Fed chief appeared just hours after Treasury Secretary Timothy Geithner unveiled a multi-pronged attack to get credit flowing freely again and to restore stability to financial markets by using the second, $350 billion installment of the $700 billion bailout fund.

But investors appeared wary of the government's latest plans. The Dow Jones industrial average plunged about 350 points in afternoon trading, reflecting Wall Street's growing concerns about the government's ability to revive the banking industry.