Treasury Secretary Timothy Geithner on Tuesday said the Obama administration's strategy to halt recession and contain the financial crisis has been effective, but vowed to continue stabilization efforts.

Geithner, in prepared testimony to a U.S. House of Representatives Appropriations subcommittee, said the economy and financial system still faced challenges, but the stake of taxpayers in the banking system was dramatically smaller than a year ago.

Treasury will continue its efforts in these areas until recovery is firmly established and the financial system is repaired and reformed, Geithner said.

The Treasury chief in his testimony urged lawmakers to support the Treasury's request for a $474 million increase in its departmental budget, excluding proposed expenditures for international programs such as the U.S. contribution to a new food security fund.

The $13.9 billion budget for the Treasury's 10 appropriated bureaus would represent a 3.5 percent increase over fiscal 2009, which ended September 30.

The budget request would increase the Treasury's community development financial institutions fund by $32 million, or 30 percent, a proposal aimed at boosting lending and financial services to underserved low-income communities.

The budget request also includes an increase of more than $21 million to add staff to the Treasury's offices of domestic finance, tax policy and economic policy. Geithner said the Treasury entered the financial crisis in 2008 with its professional ranks seriously depleted.

Responding to the crisis has put a severe strain on these units and made clear the need to rebuild our professional ranks to assure that Treasury can deal effectively with the issues it must tackle, he said.

For example, in 2008 the Treasury had only 25 economists, a third fewer than in 2000, and its domestic finance and tax policy offices each only had 20 people, down a fourth since 2000.

The budget would increase the domestic finance office by 24 to deal with the aftermath of the financial crisis and add expertise in securities market structure and housing finance.

Geithner has said that next year the Treasury intends to submit to Congress legislative proposals to reform state-controlled mortgage finance enterprises Fannie Mae and Freddie Mac.

We must reverse the erosion of Treasury's basic intellectual capital or we will be unable to meet the nation's economic challenges, Geithner said.

(Reporting by David Lawder; Editing by Andrew Hay)

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