Updated from 2:42 p.m. EST

Financial stocks were on the rise Tuesday afternoon, buoyed by

Federal Reserve

Chairman Ben Bernanke's testimony on Capitol Hill.

Bernanke

told the Senate Banking Committee that the economy was suffering a "severe contraction," but expressed hope the recession would end this year if the federal government could restore order to the financial markets and get banks lending normally again.

The NYSE Financial Sector Index recently was rising 8.4% to 2,623.21, as several financial components of the

Dow Jones Industrial Average

were on the rise.

Bank of America

(BAC) - Get Bank of America Corp Report

shares rose 21% to $4.73.

American Express

(AXP) - Get American Express Company Report

added 12.1% to $13.62. Citigroup added 21.5% to $2.60.

One outlier, however, was troubled insurer

American International Group

TheStreet Recommends

(AIG) - Get American International Group, Inc. Report

. Late on Monday,

AIG

said that it is discussing "alternative options" with regulators to keep the firm afloat as it navigates through the financial crisis.

CNBC

reported the bank could report a $60 billion loss next week. Shares fell 22.6% to 41 cents.

Shares of financial guarantor

MBIA

(MBI) - Get MBIA Inc. Report

rose 0.3%, as the company announced its board had adopted a "say on pay" policy allowing shareholders to vote on certain executive compensation positions. The three elements shareholders will vote on include CEO and senior executive compensation and "extraordinary" compensation awards. MBIA shares were up a penny to $3.44.

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

shares jumped 7.7% after the company said it was cutting its dividend 86% to 5 cents to preserve capital as a "precautionary measure." Shares traded to $21.02.

Commercial lender CIT Group

(CIT) - Get CIT Group Inc. Report

also rose 18.4% to $2.06.

This article was written by a staff member of TheStreet.com.