Bernanke Sees 2010 Recovery ‘Only If’ Banks Stabilize (Craig Torres and Scott Lanman)

  Feb. 24 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is in a “severe” contraction, and warned the recession may last into 2010 unless policy makers can stabilize the financial system.

  “If actions taken by the administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability -- and 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 said in remarks to the Senate Banking Committee in Washington.

  Bernanke’s call for “strong” action by policy makers comes as the Obama administration works on fleshing out the details of its bank-rescue plan. Financial stocks have slumped further since Treasury Secretary Timothy Geithner unveiled his outline Feb. 10, with officials opening talks with Citigroup Inc. about providing further help to the lender.

  “Downside risks probably outweigh those on the upside,” Bernanke said today in his semiannual testimony on the economy, adding that the Fed’s own forecast was clouded by “considerable uncertainty.”

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