Earlier today, Federal Reserve Chairman commented that the next step in the battle against the financial market crisis is to get toxic assets off the balance sheets of financial institutions. This may require additional government outlays, presumably above and beyond the $700 billion fund set up by Congress last fall.

In a speech in London, Bernanke said that there are several ways to remove troubled assets. One way would be to set up a "bad bank" that would purchase the toxic debt. The government could also purchase the assets or provide guarantees under which the taxpayers would absorb some of the losses.

Even though the Fed has undertaken several unconventional methods to battle the financial crisis, no end is in sight, Bernanke said. "With the worsening of the economy's growth prospects, continued credit losses and asset markdowns may maintain for a time the pressure on the capital and balance sheet capacities of financial institutions," he said.

In addition, the Fed went on to comment that the timing and strength of the global economic recovery "are highly uncertain." Coordinated government policy responses will be critical to turning the economy around, he said. Bernanke stressed the Fed still have power to fight the financial crisis and economic downturn even though its federal funds target rate canned be reduced "meaningfully further." Bernanke said that he expects inflation to moderate further. He stressed that the Fed would make sure that its "exit strategy" from its unconventional easing would be accomplished in a smooth manner.