WASHINGTON — Treasury Secretary Timothy Geithner told Congress today that the administration will extend the government’s financial bailout program until next fall, saying it’s needed to protect against fresh economic shocks.

In a letter to House and Senate leaders, Geithner said the extension is “necessary to assist American families and stabilize financial markets.”

Money from the $700 billion taxpayer-funded bailout program has helped rescue big Wall Street firms, auto companies and others. That’s angered many Americans, who feel the government hasn’t provided them with relief from high unemployment and rising home foreclosures.

The Troubled Asset Relief Program that Congress passed during the height of the financial crisis in October 2008 was scheduled to expire at the end of the year. Geithner said it will be extended until Oct. 3, 2010. He has the authority to extend the TARP simply by notifying lawmakers.

“The recovery of our financial system remains incomplete,” Geithner told lawmakers. “And, near-term shocks to that system could undermine the economic recovery we have seen to date.”

Geithner said he doesn’t expect to use more than $550 billion of the funds.

The Treasury secretary said new commitments bankrolled by the bailout fund will be limited to three areas next year.

One focus is stepping up efforts to curb record-high home foreclosures, a move necessary to stabilize the housing market and support a lasting economic recovery.

Another will be providing capital to small banks, which play a crucial role in providing credit to small businesses — normally a leading engine of job creation. Small banks have been weighed down by problem commercial real estate loans, which has made them reluctant to lend and hurt the ability of small businesses to expand and hire.

In a third area, Geithner said the government may boost its commitment to a program aimed at sparking lending to consumers and small businesses. Run by Treasury and the Federal Reserve, the Term Asset-Backed Securities Loan Facility started in March.

Geithner said he didn’t expect any new commitments to the TALF would result in additional costs to taxpayers.

In a report today, a TARP watchdog panel said the fund helped ease last fall’s financial panic, but was less successful in meeting other goals Congress set — including reducing foreclosures and unfreezing credit for consumers and businesses.

“Congress set goals for the TARP that went well beyond short-term financial stability, and by that measure problems remain,” said panel chair and Harvard Law school professor Elizabeth Warren.

The report found the program’s effects have been uneven. A $75 billion initiative to stem the wave of foreclosures has “failed,” and Treasury’s actions had granted big banks an “implicit guarantee” that the government would bail them out, Warren said.

The government still is guaranteeing billions of dollars in bank assets, which along with debt guarantees from the Federal Deposit Insurance Corp., amount to ongoing subsidies that may mask the condition of the financial markets, the report said.

Treasury responded that the TARP has “by every measure … succeeded in achieving its primary goal of economic stabilization.” In a statement, department spokeswoman Meg Reilly credited the program with improving market confidence, access to credit and economic growth.

But the TARP panel, established by Congress to provide independent oversight, noted that bank failures continue and access to credit remains tight. It said the program’s progress toward goals necessary for financial stability and economic growth “is less clear.”

Republicans have criticized Treasury for using the TARP as a slush fund to support programs that Congress never intended — including bailouts of automakers and failing insurance giant American International Group Inc.

“American taxpayers have had enough of open-ended bailouts that have left them stuck with trillions of dollars in new debt,” House Republican Leader John Boehner, R-Ohio, said today. “TARP should be shut down by the end of the year. It’s time to get the government out of the bailout business.”

Jeb Hensarling of Texas, the top Republican on the House Financial Services Committee, said ending the TARP and using the money for deficit reduction “would have been a strong signal that the administration does not plan to raise taxes or cause the debt to be monetized through inflation.”

“What was supposed to be an emergency capital injection to thaw frozen credit markets has morphed into a revolving bailout fund to advance the Democrats’ political, social and economic agenda,” Hensarling said in a statement Tuesday.

Geithner contends that the bailout program helped avert a worse financial outcome. Financial conditions have improved, and the economy has finally pulled out of a deep tailspin and is starting to grow again.

“But significant challenges remain,” Geithner said. “Too many American families, homeowners, and small businesses still face severe financial pressure. Although the economy is recovering, foreclosures are increasing and unemployment is unacceptably high.”

With the unemployment rate at 10 percent, there’s fear that consumers will stay cautious, hobbling the recovery.

Geithner said the government can’t remove its supports too soon — a mistake countries have made in the past when dealing with similar economic and financial debacles.

“History suggests that exiting prematurely from policies designed to contain a financial crisis can significantly prolong an economic downturn,” he said.

The government expects up to $175 billion in repayments from rescued companies by the end of next year, Geithner said.