The Fed chief spent the early morning testifying alone, as part of his twice-a-year appearances before Congress, then joined Treasury Secretary Henry M. Paulson Jr. and SEC Chairman Christopher Cox. Sitting with them, he endorsed Paulson's plan, unveiled Sunday, to seek legislation to give the federal government temporary power to help Fannie and Freddie.
Before Bernanke delivered his economic assessment to Congress, the Labor Department reported that wholesale prices jumped 1.8 percent in June. That left inflation rising over the past year at the fastest pace in more than a quarter-century.
Bernanke offered no timetable for improved economic performance, saying that although the risks to the overall economy are still "skewed to the downside," inflation "seems likely to move temporarily higher in the near term." The Fed, he said, needs to guard against higher prices spreading through the economy.
That mixed warning about rising costs and a downturn reinforced the message of last month's meeting of the Federal Open Markets Committee, the central bank's policymaking body, that it would not cut interest rates further and that higher rates might be necessary to combat inflation later in the year.
Despite lines snaking around branches of failed IndyMac Bank and a report from the chairwoman of the Federal Deposit Insurance Corp. that more banks are expected to run into trouble, Bernanke said he does not think there is a significant danger to the consumer and commercial banking sector, most of which he said remains profitable.
But concerns about the consumer banking system succumbing to the ills of the credit crisis rattled official Washington, as Bush's citation of the federal government's insurance of bank deposits made clear.
"The bottom line is this: We're going through a tough time," Bush said. "But our economy's continued growing, consumers are spending, businesses are investing, exports continue increasing, and American productivity remains strong."
