Washington • Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday that the Fed is poised to take action if the economy gets weaker. He warned them that allowing the nation to default on its debt would send "shock waves through the entire financial system."

Underscoring how fragile the economy remains two years after the Great Recession, Bernanke laid out three new steps the Fed could take, including a fresh round of government bond purchases designed to stimulate economic growth.

"We have to keep all the options on the table. We don't know where the economy is going to go," Bernanke told the House Financial Services Committee.

The Fed chairman stopped short of promising anything, but Wall Street appeared to take comfort that the central bank was poised to act. The Dow Jones industrial average was up more than 150 points during his testimony to Congress9 and closed up 45.

While Bernanke made his biannual appearance before Congress, lawmakers and the White House were trying to salvage talks on how to reduce the federal deficit and whether to raise the limit on what the government can borrow.

If they fail to strike a deal on the debt limit by Aug. 2, the White House has said, the nation will default. President Barack Obama has said he can't even guarantee that Social Security checks would go out the next day.

Moody's Investors Service threatened Wednesday to lower the United States' credit rating, saying there is a small but rising risk of default. Economists have warned that the credit system would tighten, not unlike the worst days of the 2008 financial crisis. Speaking to congressional members, Bernanke added his own dire predictions.

"If we went so far as to default on the debt, it would be a major crisis because the Treasury security is viewed as the safest and most liquid security in the world," he said. "And the notion that it would become suddenly unreliable and illiquid would throw shock waves through the entire global financial system."

Asked whether interest rates would go up for average Americans, Bernanke said, "Absolutely."

The Fed bought $600 billion in government bonds late last year and early this year, a program designed to keep interest rates low and support the prices of assets such as stocks. It was the second time the Fed had taken that step since the recession began. Besides a third round, Bernanke laid out two additional options if the economy gets weaker:

• The Fed could offer financial markets more clarity about how long it tends to leave interest rates at record lows, where they have stood since December 2008. For now, the Fed says only that rates will remain "exceptionally low" for an "extended period."

• It could start paying banks less interest on the excess money they park with the Fed. It doesn't pay much now — 0.25 percent. But paying even less would encourage the banks to loan the money out rather than sending it to the central bank.