By Mark Felsenthal

WASHINGTON (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke told a House of Representatives panel on Wednesday that fighting inflation is a top priority and acknowledged that most Americans feel the economy is in recession-like conditions.

"This is clearly a rough time," he said in response to questions from lawmakers. "Conditions are tough on average families," he added.

The Fed chairman also emphasized the importance of sending a strong signal to financial markets that the U.S. government stands behind embattled mortgage finance companies Fannie Mae and Freddie Mac.

On the second day of two days of congressional testimony, Bernanke faced renewed congressional scepticism about a plan to backstop the companies, which own or guarantee almost half of all U.S. mortgages and are considered vital to any recovery of the beleaguered housing market.

PUBLIC PAIN, PRIVATE GAIN

Rep. Spencer Bachus, the highest ranking Republican on the House Financial Services Committee, told Bernanke that U.S. taxpayers should not be on the hook for losses incurred by publicly-traded companies.

Bachus said he was concerned about an approach "where investors reap market gains and taxpayers are stuck with the losses."

"Government and ultimately taxpayers should not assume responsibility for losses or indemnify private investors," Bachus said at the panel hearing.