WASHINGTON — After months of relentlessly dismal financial news, the nation's chief economic policymakers delivered an unexpected message Tuesday: All is not lost.
President Obama, in an address to a joint session of Congress, sounded notes of optimism for the future while still offering an unvarnished portrait of an economy in crisis.
"The impact of this recession is real, and it is everywhere," Obama said. "But . . . we will rebuild, we will recover, and the United States of America will emerge stronger than before."
Earlier in the day, Federal Reserve Chairman Ben S. Bernanke also offered reassurance, telling a Senate panel that -- with careful management -- the economy could stop shrinking by the end of this year and return to expansion mode next year.
The stock market responded to Bernanke's remarks by staging a powerful rally, nearly erasing a sharp decline the day before that sent major stock indexes to levels not seen since the late 1990s.
Bernanke also sought to allay a particular fear that has haunted investors in recent days -- that the government would nationalize major banks and wipe out shareholders' investments in the process.
The Fed chief said he saw no need for nationalization.
"We don't need majority ownership to work with the banks," Bernanke said. "We have very strong supervisory oversight. We can work with them now to get them to do whatever is necessary to restructure. . . . We don't have to take them over to do that."
Obama vowed Tuesday that his administration would "act with the full force of the federal government" to ensure that big banks had money to lend even if economic conditions worsened.
But he warned that the banking plan "will require significant resources from the federal government -- and yes, probably more than we've already set aside."
The Obama administration and banking regulators had tried Monday to reassure the markets that they did not intend to nationalize banks. But their joint statement was taken as a mixed message: While reiterating support for a private banking system, the administration said it was adopting a new policy allowing for the conversion of the preferred stock the government receives from future capital injections into voting stock.
A voting stake could give federal officials a greater say over how banks are run, and the policy shift was seen by some as a possible step toward full-scale nationalization of certain banks.
