Federal Reserve Chairman Ben Bernanke told Congress that creating a full-fledged alternative to Fannie Mae and Freddie Mac would be difficult in the near-term, but he urged lawmakers to lay a “clear path to a new housing financial system.” Bernanke said a finalized blueprint for the next housing system could spark confidence in the private sector, kick-starting private-label securitization activity. The Fed chair suggested a housing recovery is impossible without a plan. “I would urge Congress to look carefully as to what might be done,” Bernanke said. “One (consideration) is the treatment of REO. There is such a big overhang of distressed properties. Would they be converted to rentals or into rent-to-own? The second issue is the barriers to refinancing, the fact that people underwater have barriers to refinancing.” Testifying before the Joint Congressional Committee at a hearing on the economy, Bernanke said economic growth was slower than expected in 2011. “The pattern of sluggish growth was particularly evident in the first half of this year, with real gross domestic product estimated to have increased at an average annual rate of less than one percent,” the Fed chair reported. Bernanke said job growth remains an issue with private payrolls averaging only 100,000 new jobs each month of late, roughly half the rate posted in the earlier part of 2011. In addition, local and state governments continue to cut jobs, holding the unemployment rate steady at 9%. He urged lawmakers to focus on setting tax and spending policies for the short-term and long-term by focusing on key initiatives, including long-term fiscal sustainability. The Fed chief also addressed concerns over Chinese monetary policy and the European debt situation. As far as the Chinese yuan, Bernanke said it is undervalued and Chinese monetary policy is blocking what might be a more normal growth trajectory. The Fed chair blamed the slower pace of the recovery on concerns over the European debt crisis, saying the central bank’s “exposure to the most troubled sovereigns of Ireland, Greece and Portugal is minimal.” Bernanke said Dodd-Frank has made it illegal for the Fed to bail out individual firms like it did in the 2008 crisis, although “we could provide broad-based reforms to prevent a run on our financial system.” He said the central bank is always prepared to provide backstop liquidity to the economy, if needed.