In back-to-back appearances before Congress, Bernanke sought to soothe nerves frazzled by rising prices for food and oil, slumping home values and faltering banks.
"We will work our way through these financial storms," Bernanke said.
Bernanke focused on one of those maelstroms Wednesday, when he said troubled mortgage giants Fannie Mae and Freddie Mac are in "no danger of failing."
Trying to stem eroding investor confidence in the two companies, the Treasury Department and the Fed on Sunday offered to throw them a financial lifeline if they needed it to stay afloat. The two companies hold or guarantee more than $5 trillion in mortgages - almost half of the nation's total - and are major sources of financing for the mortgage market.
The Bush administration is asking Congress to temporarily increase lines of credit to Fannie and Freddie and to let the government buy their stock. The Fed has offered to let the companies draw emergency loans. Those pledges of aid have raised concerns on Capitol Hill and elsewhere about the government's role in intervening to ease such financial troubles and the risk posed to taxpayers.
The Fannie and Freddie troubles came on the heels of the failure of IndyMac Bank, which was taken over last Friday by the Federal Deposit Insurance Corporation.
Earlier this year, a run on investment bank Bear Stearns pushed the company to the edge of bankruptcy and into a takeover by JPMorgan Chase, backed financially by the Fed.
Seeking to strike a note of confidence, Bernanke said Fannie and Freddie are "adequately capitalized. They are in no danger of failing."
However, "the weakness in market confidence is having real effects as their stock prices fall, and it's difficult for them to raise capital. If their debt spreads widen, it'll increase the borrowing costs," he said.
The companies' shares have plunged as losses from their mortgage holdings threatened their financial survival. They clawed back some ground on Wednesday, however, when Wall Street got a lift from a dip in oil prices. Fannie shares gained 30.8 percent to close at $9.25. Freddie shares rose 29.9 percent to $6.83.
Treasury Secretary Henry Paulson told Congress on Tuesday that he hoped the proposed lifeline won't need to be used. He said the pledge was aimed at restoring confidence in the companies.
Bernanke said the "best solution" is to keep Fannie and Freddie "in their current form" as opposed to having the government take them over. It is also vital for Congress to boost regulatory oversight on the two companies. Such powers are contained in a sweeping housing-rescue package. Congressional leaders plan to add to the bill the provisions Paulson is seeking to aid Fannie and Freddie.
Spencer Bachus of Alabama, the panel's most senior Republican, said of the housing boom-to-bust situation: "Fortunes were made on the way up and pain will be felt on the way down."
With the bust, banks and other financial companies have racked up huge losses due to soured mortgage investments. Foreclosures have risen to record highs.
The Fed chief was upfront about the economy's problems, including a housing slump, financial turmoil, credit troubles and high energy and food prices. And, employers have cut jobs for sixth straight months.
"Families are facing hardships ... this is clearly a rough time," Bernanke said. "It is clear (economic) growth has been slow and the labor market is weak. So conditions are tough on average families."
Rep. Barney Frank, D-Mass., chairman of the Financial Services panel, said: "I think conditions clearly call for a second stimulus." He's among the Democrats in Congress exploring more economic stimulus efforts to follow up on the $168 billion package, including tax rebates, enacted earlier this year.
Bernanke said it was a too soon to go that route, but he didn't rule out such a course of action.
"On the fiscal stimulus, I believe the one that was done is having some effects, but it is somewhat early to make that judgment, and so, you know, I certainly think that we should consider all options. At the moment, I think it's a bit premature," Bernanke said.
He repeated his call for Congress to take action to shore up the housing market.
When asked about what the government can do to lift the sagging dollar, which has contributed to the rise in both oil prices and inflation, Bernanke replied that getting the economy back to good health would help the currency.
"Market intervention is a policy that's been undertaken a few times. I think it's something that should be done only rarely. But there may be conditions where markets are disorderly, where some temporary action might be justified," Bernanke said. "But I think the dollar in the long term depends really on the fundamentals, and it's up to us to get fundamentals right."
