AP reported that Mr Ben Bernanke chairman of US Federal Reserve told Congress that any hope for an economic recovery will hinge on the government's ability to prop up shaky financial markets.

He added that "The effectiveness of a string of radical actions taken by the Federation, the Treasury Department and other agencies to stabilize markets will be critical determinants of the timing and strength of the recovery."

Mr Bernanke said that "I share your anger. The government didn't really have a choice but to take the action because a collapse of AIG would have grave implications for the country's already fragile economic and financial health. President Mr Barack Obama's recently enacted USD 787 billion stimulus package of increased federal spending and tax cuts should help revive moribund consumer demand, boost factory production over the next two years and mitigate the overall loss of employment and income that would otherwise occur."

Mr Bernanke said that the government has made some progress on the financial front since last fall, but he told lawmakers that more needs to be done. He added that "Whether further funds will be needed depends on the results of the current stress tests of banks, the evolution of the economy and other factors."

He said that the price of such bold action will push the nation's federal budget deficit to nearly USD 1.8 trillion this year and above USD 1 trillion in 2010 and 2011. He added that "Of the deficits, I'm afraid they are unavoidable to get the economy on a recovery path."

Both Democratic and Republican lawmakers expressed skepticism over whether the action would work, said they were worried that more taxpayer money will be needed to rescue the company and demanded more accountability.

(Sourced from www.ap.org)