Bernanke, Bush Boost Stocks

While the president's plan took some of the heat off the central bank's chairman, Bernanke's testimony drove home the point that the Fed is still ready and willing to act if needed.

The speech didn't provide any indication of an interest rate cut at the bank's Sept. 18 meeting, but Bernanke reiterated that the Fed stands ready to "take additional actions as needed to provide liquidity and promote the orderly functioning of markets."

Bernanke also warned that "if current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the broader economy."

Additionally, he said that because of the recent developments in the financial markets, the Fed considers economic data from the past few months to be less useful in gauging economic activity and inflation.

"Consequently, we will pay particularly close attention to the timeliest indicators, as well as information gleaned from our business and banking contacts around the country," he said. "Inevitably, the uncertainty surrounding the outlook will be greater than normal, presenting a challenge to policymakers to manage the risks to their growth and price stability objectives."

Like President Bush, Bernanke also stressed that a widespread bailout won't be coming. "It is not the responsibility of the Federal Reserve -- nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions," he said.

Paul Mendelsohn, chief investment strategist with Windham Financial, said that traders didn't get exactly what they wanted from Bernanke's speech in terms of policy.

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