The Obama administration plans to announce on Wednesday that it intends to extend the life of the $700 billion financial bailout fund until next October, administration officials said on Tuesday.

One official said the administration was expected to pledge to use no more than $560 billion from the fund. Another said the plan would be to tap the program to help homeowners secure mortgages through the government's housing program and to free up credit for small businesses to spur job growth.

Both officials requested anonymity.

The financial rescue program, which has been used to pump money into banks, insurer American International Group and troubled automakers, was approved by Congress in October 2008 at the height of the credit crisis.

It would expire on December 31 absent a decision to extend it.

The law that established the fund, known as the Troubled Asset Relief Program (TARP), gives the administration the discretion to decide whether it should be extended, but it limits any extension to October of next year.

U.S. Treasury Secretary Timothy Geithner told Congress last week that much of the $700 billion lawmakers had authorized to salvage the banking system would not be needed, but that it would be a mistake to shut down the program entirely.

If you look at the U.S. financial system today, there are parts that are still very damaged, he said, citing the housing sector and problems small businesses are having in accessing credit.

Opposition Republicans have accused the administration of wanting to use the bailout program as a job-creating slush fund.

There has rarely been a less loved or more necessary emergency program than TARP, which as galling as the assistance to banks may have been indisputably helped prevent a collapse of the entire financial system, President Barack Obama said on Tuesday.

Soaring unemployment threatens to eat into the majority Obama's fellow Democrats hold in Congress when voters go to the polls in mid-term elections next November.

To reduce the nation's 10 percent jobless rate, Obama on Tuesday proposed small business tax cuts and energy efficiency rebates, among other steps. This comes on top of a plan outlined in November to provide capital to community banks that lend to small businesses.

Obama is set to meet with Democratic and Republican leaders of Congress at the White House on Wednesday to promote his jobs proposals.

At the end of November, $560 billion had been allocated from the TARP program, the same amount the administration is now expected to declare as a cap.

(Additional reporting by Steve Holland; writing by Tim Ahmann; Editing by Kim Coghill)

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