A video of Ben Bernanke's testimony on the economic outlook before the Joint Economic Committee [text of speech], and a summary of the speech from the WSJ are on the continuation page:
Here's a summary from the WSJ:
Bernanke Says Contraction Possible, But Most Adjustment Is Complete, by Brian Blackstone, WSJ: Federal Reserve Chairman Ben Bernanke publicly raised the prospect of a U.S. recession for the first time... But he also signaled that "much" of the needed economic and financial market adjustment has already taken place and that conditions should improve later this year, suggesting there may not be much need for additional monetary stimulus, especially with inflation still a concern. ...
Mr. Bernanke added during questioning by lawmakers that a recession is "possible" but that he still thinks the economy is expanding slightly now. The economy should improve later this year, Mr. Bernanke said, assuming a stabilization in housing and credit markets and a boost in spending from the recently enacted fiscal stimulus package. However, "the uncertainty attending this forecast is quite high and the risks remain to the downside," Mr. Bernanke told lawmakers. ...
Mr. Bernanke said now is a good time to evaluate the U.S. financial regulatory structure, but he cautioned that if the Fed were to acquire new responsibilities, it must also "have the adequate tools to discharge that responsibility effectively."
Mr. Bernanke defended the Fed's role in the Bear Stearns rescue, though he conceded that it "raised difficult questions of public policy." ... Normally, markets should sort out which firms survive and which fail, he said, but the damage from a Bear Stearns failure "could have been severe and extremely difficult to contain," Mr. Bernanke said.
He said other steps the Fed has taken to boost liquidity -- including repurchase agreements and new credit auction facilities for primary dealers -- "seem to have been helpful in addressing some of the strains in financial markets."
Those programs "will be kept in place as long as conditions warrant," Mr. Bernanke said... [M]arkets "remain under considerable stress," and short-term funding pressures have risen again, he said, as strains have spread to markets for municipal bonds, student loans and agency-backed securities. "The capacity and willingness of some large institutions to extend new credit remains limited," he said.