US economy on cusp of recovery

The upbeat assessment was consistent with the Feds observations earlier this month. The central bank has taken small steps toward pulling back some emergency programs to revive the economy. Still,Bernanke stressed Friday that despite much progress in stabilising financial markets and trying to bust through credit clogs,consumers and businesses are still having trouble getting loans. The situation is not back to normal,he said.

Restoring the free flow of credit is a critical component to a lasting recovery.

Although we have avoided the worst,difficult challenges still lie ahead, Bernanke told the gathering. We must work together to build on the gains already made to secure a sustained economic recovery.

Strains in financial markets worldwide persist. Financial institutions face significant additional losses on soured investments and many businesses and households are experiencing considerable difficulty in getting loans,he said.

The Fed chiefs remarks come two years after the financial crisis broke out and nearly one year after it had deepened to the point of sending the nation into a near meltdown.

The bulk of Bernankes speech was a chronicle of the extraordinary events of the past year. Financial markets took a turn for the worst starting last September and into October,nearly shutting down the flow of credit. The crisis felled storied Wall Street firms and forced the government to take over mortgage giants Fannie Mae and Freddie Mac,as well as insurance titan American International Group Inc.

Despite efforts to save it,Lehman Brothers failed. It filed for bankruptcy on September 15,the largest in corporate history,which roiled markets worldwide.

To prop up shaky banks,the government created a 700 billion bailout fund,a program that proved wildly unpopular with an American public suffering fallout from the recession.

The Fed swooped in with unprecedented emergency lending programs to fight the crisis. It eventually slashed a key bank lending rate to a record low near zero. And Congress enacted programs to stimulate the economy,the most recent coming in February with President Barack Obama8217;s 787 billion package of tax cuts and increased government spending.

Without these speedy and forceful actions,last Octobers panic would likely have continued to intensify,more major firms would have failed and the entire global financial system would have been at serious risk, Bernanke said.