WASHINGTON - January 13, 2009 - There will be no lasting recovery without more government action and additional money to strengthen the financial system, Federal Reserve Chairman Ben Bernanke said Tuesday.

The timing and strength of economic recovery "are highly uncertain," Bernanke told an audience in London.

In what's likely to be a sobering message to Congress, Bernanke did not say the end was near. He said that the stimulus package championed by President-elect Barack Obama would likely help the economy but wouldn't be enough on its own.

"In my view... fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system," said Bernanke.

The next step is to get toxic assets off bank balance sheets, he said. He outlined several ways to do this, including setting up "bad banks" to hold the troubled assets, mostly mortgage debt.

As yet, the financial crisis has no end in sight, given the weak economy, Bernanke said.

Banks have stopped lending out of a fear that they won't be repaid. Investors have essentially shunned all financial assets, worried that they will lose all their money.

The weak U.S. economy isn't helping matters either, with analysts hoping the situation is now at its worst stretch. Growth cratered in the fourth quarter - estimates now center at an annual drop of 5% or more, which would be the sharpest such decline in 26 years.

And this quarter isn't shaping up to be much better, as the Big Three U.S. auto companies have halted production. Lack of credit is strangling businesses and consumers are reeling from a combination of high gas prices and the housing-market recession.

"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 a speech to the London School of Economics.

As a result, the first order of business must be further stabilizing the financial system, he said.