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WASHINGTON -- Federal Reserve Chairman Ben Bernanke, in a Senate hearing that could sway a clamorous debate over the power of the central bank, admitted mistakes in managing the economy but declared that his actions helped save America from another Great Depression.

The hearing was to consider whether Mr. Bernanke should get a second four-year term as chairman of the Fed, but it was as much about the future of the institution as his role at the helm. The central bank steers the economy by setting short-term interest rates and providing emergency loans to banks.

The Fed's standing has been wounded by the crisis in the financial system that it helped regulate and by the popular uproar against the bailouts it orchestrated. Mr. Bernanke argued Thursday, as he has for months, that his actions averted a far-worse crisis.

Senators countered the Fed shouldn't have let the U.S. economy reach such a perilous point.

"For many years I held the Federal Reserve in very high regard," said Sen. Richard Shelby of Alabama, senior Republican on the Senate Banking Committee. "I fear now, however, that our trust and confidence were misplaced."

"There were mistakes made all around," Mr. Bernanke said. "I did not anticipate a crisis of this magnitude and this severity."

"We should have required [banks to hold] more capital, more liquidity," Mr. Bernanke added. "We should have required more risk-management controls." He also said the Fed was "slow on some aspects of consumer protection."

Mr. Bernanke is expected to win confirmation. But a vote might not come quickly. Sen. Christopher Dodd (D., Conn.), chairman of the banking committee, said he wasn't sure whether Mr. Bernanke could be confirmed before Christmas.

Mr. Bernanke's term expires Jan. 31, though he would remain Fed chairman even if the Senate hasn't voted by then.

Sen. Jim Bunning, a Kentucky Republican and longtime Fed critic, said Thursday that he would "do everything I can to stop your nomination and drag out the process as long as possible." Sen. Bernie Sanders, a Vermont independent, has promised to use parliamentary tactics to delay a Senate floor vote.

The resistance could require Mr. Bernanke to get 60 votes in the Senate to win confirmation -- likely but not guaranteed in today's volatile political climate. Four years ago, Mr. Bernanke was confirmed by voice vote.

The last Fed chairman to meet substantial opposition was Paul Volcker, who drew 16 "no" votes in 1983 -- after he raised interest rates to fight inflation.

The challenges to the Fed go well beyond Mr. Bernanke's confirmation, as Thursday's hearing showed. Mr. Dodd, who supports Mr. Bernanke's confirmation, used the Senate hearing to promote his plan to strip the Fed of its power to regulate banks.

"My concern here is about the institutional issues rather than the individual involved in decision-making," said Mr. Dodd, who faces a tough re-election fight next year. He called the Fed's record as a bank regulator "an abysmal failure" and a distraction from its main mission of keeping inflation and unemployment low.

Mr. Shelby told Mr. Bernanke the price of preserving the Fed's independence to set interest rates could be the surrender of its bank supervisory role.

Mr. Bernanke said the Fed can't manage the economy and preserve financial stability without bank oversight. He said he wouldn't have been able to stabilize the financial system in the past year without "our ability to see what was going on in the banking system" from its role as a bank regulator.

The Fed needs to be able to examine the collateral and solvency of banks, he said, if it is to be expected to make emergency loans when banks face a funding crisis -- the central bank's role of "lender of last resort" since its creation in 1913.

Senators asked about a House provision by Ron Paul, a Texas Republican, that would require congressional audits of the Fed's monetary-policy decisions. Despite Mr. Bernanke's strenuous objections, the provision has been endorsed by the House Financial Services Committee.

Congress could take months to decide on Fed changes. Mr. Dodd wants to strip the Fed of its regulatory power; his House counterpart, Barney Frank (D., Mass.), doesn't.

"I'm on the fence," about the Fed's regulatory role, Sen. Bob Corker (R., Tenn.) said at the end of the daylong hearing.

While Congress debates its future shape, the Fed faces tough decisions in the months ahead -- about interest rates and when to wind down its emergency rescue programs.

If a new bubble emerges in financial markets, or if signs of inflation develop, the Fed could be forced to make the politically unpopular decision to raise interest rates. Mr. Bernanke said his first line of defense against another bubble would be to use the Fed's regulatory muscle.

But, he said, "I do not rule out using monetary policy as necessary," if a bubble threatens "our dual mandate, which is growth and inflation."

Mr. Bernanke was grilled by lawmakers about small businesses having difficulty getting bank loans. While Mr. Bernanke has argued that banks should seek to make loans to credit-worthy borrowers, Fed examiners in the field are pushing bankers to be cautious about loans, according to one complaint. "We want banks to lend," Mr. Bernanke said, "but we certainly don't want them to make bad loans."

The Fed has said it expects to keep interest rates near zero for an "extended period," in part because high unemployment has idled so many workers. That, together with unused factories and empty building, means that inflation is not a short-term worry.

Financial markets are pricing in rate hikes in the second half of 2010, as growth resumes. Mr. Bernanke offered few new clues Thursday to his views on the economy.

The Fed chairman refused to issue a judgment on the Obama administration's $787 billion fiscal stimulus package. When it passed earlier this year, Mr. Bernanke was a supporter.

On Thursday, he said, "It's a little bit early to make a strong judgment" about whether the stimulus plan was effective or if more fiscal action is needed.