Federal Reserve chairman Ben Bernanke told Congress an economic recovery depends on the government's ability to stabilise weak financial markets. He said the efforts were needed to avoid 'a prolonged episode of economic stagnation'.

Bernanke's remarks came as the central bank announced it would begin lending up to $200 billion in an initial move to spur consumer and small business borrowing for autos, education, credit cards and other expenses. The Fed first announced the plan late last year.

On Monday, the government injected $30 billion to troubled insurer American International Group Inc, its fourth attempt to stabilise the company since September See: US government injects additional $30 billion in AIG and last Friday, 27 February 2008, Citigroup Inc got more help from the government (See: US government to hike Citi stake; Pandit likely to stay as CEO: reports)

Analysts are wondering whether there is going to be an end to this bailout tunnel.

Billionaire investor Warren Buffett has already warned investors in his annual Berkshire Hathaway report about the recession continuing longer than expected. He disclosed that Berkshire Hathaway's holdings had decreased in value by $11.5 billion in 2008.

Investors are also wary about Buffett's prediction that the economy will be in 'shambles' throughout 2009 and 'probably well beyond'. Analysts have generally predicted an economic recovery will start late this year.

Treasury secretary Timothy Geithner stood firmly behind his forecast of a recovery in 2011, at which time the US government will need to reduce budget deficits once the stimulative spending spree does its job.

Buffet himself reinforced this sentiment in his newsletter: ''Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome after effects.''

Buffet also warned that for industries and others who have become dependent on federal bailout funding, ''weaning these industries from the public teat will be a political challenge.''

Investors showed little reaction to testimony from Geithner, who told the House Ways and Means Committee the added spending in the Obama administration's budget is necessary because the previous administration was unwilling to make long-term investments in health care, energy and education.

Despite housing stimulus provisions, pending home sales in January declined 7.7 per cent. The consensus estimate called for a 3.5 per cent decline. The data reflect the effects of ongoing job losses, lost wealth, and weak consumer confidence.

Investors are also beginning to look toward the Labor Department's February employment report, which is due for release on Friday, 6 Mach. The monthly employment figures are one of the most important economic barometers because rising unemployment cuts into how much consumers are able to spend. Consumer spending accounts for more than two-thirds of US economic activity.

The latest US auto sales data showed the 15th consecutive monthly drop, with sales off more than 40 per cent in February to the lowest level in almost three decades.