(RTTNews) - Federal Reserve Chairman Ben Bernanke warned Wednesday that it will take “some time” to unfreeze the credit markets. In a speech before the Economic Club of New York, Bernanke attempted to soothe fears, explaining that despite the “large and complex” problems in the economy, the U.S. is well positioned to move forward.

As a Great Depression scholar, Bernanke said he recognized the need to move quickly to stem the financial crisis and take extraordinary steps to unfreeze the credit markets.

“Generally, during past crises, broad-based government engagement came late, usually at a point at which most financial institutions were insolvent or nearly so,” he said in prepared remarks. “Waiting too long to respond has usually led to much greater direct costs of the intervention itself and, more importantly, magnified the painful effects of financial turmoil on households and businesses.”

However, the swift action today has made an important difference, the Fed Chairman said, moves that will allow the restoration of more normal market functioning and reduce the severity of the impact that the credit crisis could have on the economy.

Bernanke noted steps taken by the Federal Reserve prior to the passage of the $700 billion financial rescue plan were important, although the severity of the crisis required a broader, more far-reaching effort in order to salvage the financial system.

The Troubled Asset Relief Program formed by the financial rescue measure provides broad opportunities to unfreeze credit Under the program, the Treasury will purchase $250 billion worth of non-voting equity in financial institutions. Buying up toxic mortgage-backed securities is another important part of the bailout, Bernanke said.

“Although much work remains and more difficulties surely lie ahead, I remain confident that the American economy, with its great intrinsic vitality and aided by the measures now available, will emerge from this period with renewed vigor,” the Fed Chairman concluded.

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Posted in Categories: Economy, Releases, USA.

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