Action was "urgently required" to stabilize the situation and avert what otherwise could be "very serious consequences for our financial markets and for our economy," Bernanke told the Senate Banking Committee.

He told lawmakers that despite unprecedented steps already taken by the administration to confront the crisis, global financial markets remain under "extraordinary stress."

"The financial markets are in quite fragile condition and I think absent a plan they will get worse," the Fed chief said.

Inaction could leave ordinary businesses unable to borrow the money they need to expand and hire additional employees, while consumers could find themselves unable to finance big-ticket purchases such as cars and homes, he noted.

The plan Bernanke urged Congress to approve would allow the government to buy bad mortgages and other troubled assets held by endangered banks and financial institutions.

Getting those debts off their books should bolster their balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis.

The plan also would raise the statutory limit on the national debt from 10.6 trillion dollars to 11.3 trillion dollars in order to make room for the massive rescue.

Also yesterday, US Treasury Secretary Henry M. Paulson urged Congress to approve the debt bailout plan to end the financial crisis.

"We must do so in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses both small and large, and the very health of our economy," Paulson said when testifying before the Senate Banking Committee.