Saying the recovery of the financial system remains incomplete, Treasury Secretary Timothy Geithner extended the government’s $700 billion Troubled Asset Relief Program (TARP) to October 2010, but promised to pledge no more than $550 billion.

Under the Emergency Economic Stabilization Act of 2008, the TARP program was expected to end on Dec. 31 unless the administration formally requested an extension. Saying foreclosures and unemployment are still unacceptably high and that businesses still remained cautious, Geithner said the extension would allow the Obama administration to battle home foreclosures and to spur job creation by easing credit for small businesses.

“To many families, homeowners and small businesses still face severe financial pressure,” Geithner said. “Although bank lending standards are starting to ease, many categories of bank lending continue to contract. This contraction has hit small businesses very hard because they rely heavily on such lending, and do not have the ability to substitute credit from securities.”

The extension could bode well for the National Automobile Dealers Association. It is currently working to get the Small Business Administration to expand its floor-planning program, which has received a low response from lenders.

Earlier this month, President Barack Obama said he would consider using an additional $50 million in TARP funds to help small businesses get credit, a move the administration hopes will spur job creation. The announcement came after new projections showed that there will be $200 billion less in losses from the fund than expected back in August.

Aside from easing credit standards for business loans, Geithner said TARP funds would be used to ease home foreclosures, improve the securitization market for consumer and small business loans, and to provide additional capital to small and community banks.

“History suggests that existing prematurely from policies designed to contain a financial crisis can significantly prolong an economic downturn,” Geithner said in a letter sent Wednesday to House Speak Nancy Pelosi and Senate Leader Harry Reid. “We must not waiver in our resolve to ensure the stability of the financial system and to support the nascent recovery that the administration and the Congress have worked so hard to achieve.”