Bernanke Tries To Reassure Market

Federal Chairman Ben Bernanke said Wednesday in front of Congress that the European debt crisis will likely have a "modest impact" on the economic recovery in the U.S. as long as the big banks on Wall Street stay on solid footing.

The comments from Bernanke gave the markets a boost as the Dow Jones industrial average back above 10,000 in intraday trade, but those gains have since vanished.

"The economy ... appears to be on track to continue to expand through this year and next," Bernanke said.

Bernanke said that the economy’s finances are not going to be repaired simply by economic expansion, alluding to future plans by the government designed to stabilize the economic situation in the U.S.

"To avoid sharp, disruptive shifts in spending programs and tax policies in the future, and to retain the confidence of the public and the markets, we should be planning now how we will meet these looming budgetary challenges," Bernanke said. "We will take the actions necessary to ensure stability and continued economic recovery."

The Fed Chairman added that he is expecting the economy in the U.S. to grow between 3 percent and 4 percent for the rest of this year and that the risk of double-dip recession is unlikely at the current time, but he did not that it "can never be ruled out."

The recent sell off on Wall Street has been spurred by concerns that the European debt situation may turn into a broader contagion that could hamper lending in the U.S., and this concern has cause several dips in the stock market in recent weeks.

"The actions taken by European leaders represent a firm commitment to resolve the prevailing stresses and restore market confidence and stability," he added. "The Federal Reserve will remain highly attentive to developments abroad and to their potential effects on the U.S. economy."

Another worry that has continued to hold back the recovery from gaining strength is the jobs market, as the government reported last week that the private sector is not creating enough jobs to sustain the consumer spending that the has driven the turnaround.

"As the economy and financial markets continue to recover, and as the actions taken to provide economic stimulus and promote financial stability are phased out, the budget deficit should narrow over the next few years. Achieving long-term fiscal sustainability will be difficult. But unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth."