Federal Reserve Chairman Ben Bernanke told Congress today the economy is suffering through a “severe contraction” and pledged to use all available tools to lift the country out of the recession that already has cost millions of Americans their jobs. In testimony prepared for the Senate Banking Committee, Bernanke says the economy is likely to keep shrinking in the first six months of this year. Housing, credit and financial crises — the worst since the 1930s — plunged the economy into its worst downhill slide in a quarter-century at the end of last year.
Bernanke hopes the current recession, now in its second year, will end this year. But he says there were significant risks to that forecast and any economic turnaround would hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally again. “Only if that is the case, in my view there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,” Bernanke says.