Federal Reserve Chairman Ben Bernanke reported a gloomy presentation about the economic outlook to the Senate Banking Committee early Tuesday. He mentioned that the finance crisis and spiraling energy cost continue to pull down the US economy for the rest of the year.

"The economy continues to face numerous difficulties, including ongoing strains in financial markets, declining house prices, a softening labor market, and rising prices of oil, food, and some other commodities," Bernanke told the Senate panel.

The Senate committee was meeting to hear from Bernanke about the economy, bank failures and the status of the mortgage finance giants Fannie Mae and Freddie Mac.

Shares of Fannie and Freddie on Tuesday slid again from a sudden rise last Monday after the announced proposal of the Treasury Department to help both institutions. Both have lost more than 80% of their value since the start of the year.

Shares of Fannie (FNM, Fortune 500) dipped 27% on Tuesday, leaving them down 64% lower this month. Freddie (FRE, Fortune 500) shares plunged 26%, leaving them 68% in July. Both have lost more than 80% of their value since the start of the year.

Mortgage finance giants Fannie and Freddie are major source of funding for banks and other home lenders. The funding they grant to lenders is a key to a recovery in housing in particular and the economy in general.

The companies were set up by Congress, but they are owned by shareholders, who have sold their shares lately on doubts about the financial health of the companies. That continued problems in housing and rising mortgage defaults might compel the companies to require more capital that would dilute the value of existing shares.

Sunday evening Paulson announced a proposal by Treasury to have Congress raise the $2.25 billion it is allowed to loan the two firms, and even open the door for the federal government to buy shares in the two companies if needed. The Fed announced it stood ready to loan money to the firms if they needed access to funds ahead of congressional actions.

Bernanke believed that home building was likely to finally end its slide later this year or early next year, but the decline in home prices could continue longer than that, although he said he couldn't predict when, or at what level, they will find a bottom.