President: No quick fix

President Bush warned Tuesday that the financial crisis cannot be solved overnight, but he said the U.S. economy is resilient and expressed confidence it will rebound in the long run.

Despite that confidence, bad news came from Capitol Hill, the president’s own Federal Reserve chairman and Wall Street, where the Dow closed down more than 500 points.

{mosads}Bush, addressing a group of small-business owners and employees in Chantilly, Va., tried to sound an optimistic chord while acknowledging that the crisis and the resulting credit squeeze were causing “tough times” for American families and businesses.

Bush noted that while his administration is “aggressively” implementing the rescue package Congress passed last week, the “frozen” credit will “take awhile to get it unstuck.”

“Thawing the freeze in the financial system is not going to happen overnight, but it will be a process that unfolds over several stages,” Bush said.

The current economic crisis has already caused some $2 trillion to vanish from the pension and private retirement system, according to Dr. Peter Orszag, the director of the Congressional Budget Office.

That’s a drop of 20 percent in the non-Social Security retirement savings available to every American with either a pension plan or a 401(k) retirement account, Orszag told the House Education and Labor Committee. The committee held a hearing Tuesday on the impact of the economic slump on the retirement security of Americans.

And most people won’t see just how much their retirement accounts have actually dropped for a few months, Orszag said.

“The numbers are staggering,” said Dr. Christian Weller, a senior fellow at the liberal Center for American Progress, who also testified.

“Where do they turn to make this recovery?” Education and Labor panel Chairman George Miller (D-Calif.) asked. “To spend less? We already know that they’re taking out huge amounts of debt just to stay even.”

Orszag said the only options available for those close to retiring are either to spend less now — which he said would only add to an almost certain recession — spend less upon retirement or retire later, which he predicted millions of Americans may be forced to do.

Before the president tried to bolster “faith” in the economy, the White House avoided using the word “recession” and Fed Chairman Ben Bernanke warned the financial crisis is likely to get worse before it gets better.

Bernanke, speaking to the National Association for Business Economics, said that the increasing credit squeeze and its trickle-down effect on small businesses and families could “pose a significant threat to economic growth.”

{mospagebreak}He also announced a new fund that will lend money directly to businesses, a move White House press secretary Dana Perino said is “part of a pattern we’ve seen, that the Fed continues to find innovative ways to get the markets going again.” Bernanke said the fund “will help provide liquidity to term funding markets.”

Despite that step, Bernanke did not paint a rosy picture for the economy in the near term, warning that “all told, economic activity is likely to be subdued during the remainder of this year and into next year.”

“The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance and further increase the risks to growth,” he said.

{mosads}Elsewhere on Capitol Hill on Tuesday, lawmakers continued in their efforts to figure out how the crisis came to be.

House Oversight and Government Reform Committee Chairman Henry Waxman (D-Calif.) announced he will hold hearings into the failure of mortgage giants Fannie Mae and Freddie Mac.

House Republicans had launched a campaign to discredit Waxman’s investigation into corporate misdeeds by saying he wasn’t looking into the two mortgage giants, suggesting Democrats wouldn’t investigate executives who contributed heavily to their campaigns. Waxman said he was “taken aback” by the GOP accusations.

“I don’t know if there’s a Democratic or Republican response to abuses of shareholders,” Waxman said.

Republicans applauded the move, but pressed Waxman to set a date and said the investigation should have started with the companies they’ve nicknamed “the toxic twins.”

 “I’m disappointed we didn’t start with the culprits,” said Rep. John Mica (R-Fla.). “We’re sort of splashing around in the wading pool when we should be looking in the cesspool.”

Also at the hearing, Republicans pushed for Attorney General Michael Mukasey to name a special prosecutor to look into Fannie Mae and Freddie Mac, while Democrats continued their push to expose corporate misdeeds amid the financial meltdown, grilling executives of the failed insurer AIG, which was taken over by taxpayers last month in an $85 billion bailout.

Waxman hammered AIG for a $440,000 retreat the company held at the St. Regis Resort in Monarch Beach, Calif. — where rooms can cost more than $1,000 a night — one week after the bailout.

Company spokesman Peter Tulupman said the event was not an executive retreat, but a reward for top-performing insurance agents.

Mike Soraghan and Jared Allen contributed to this article.