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A transcript of Federal Reserve Chairman Ben Bernanke's testimony given to the U.S. Congress today reads like a financial horror story. "I urge the Congress to act quickly to address the grave threats to financial stability that we currently face," Bernanke told the Joint Economic Committee. "If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse." The downward spiral of the housing market has greatly factored into the instability of the financial markets and the slowdown of the economy, he said, adding that stressed financial markets have restricted the availability of credit to consumers. "When worried lenders tighten credit, then spending, production and job creation slow," he said. "Economic activity in the second quarter appears to have been surprisingly resilient, but, more recently, economic activity appears to have decelerated broadly." Though rapid increases in energy and food prices caused inflation to rise sharply from May to July, more recent news on inflation appears more favorable, he reported. "The prices of oil and other commodities, while remaining quite volatile, have fallen, on net, from their recent peaks, and the dollar is up from its mid-summer lows," he said.
