The $700 billion bailout of the U.S. financial system authorized by Congress in October of 2008 will be extended until October 2010, President Obama’s top economic cabinet official wrote in a letter to the leaders of the U.S. Congress today.

Treasury Secretary Timothy Geithner said the extension was necessary to implement programs that address housing markets and the needs of small businesses and to respond to “an immediate and substantial threat to the economy stemming from financial instability.”

One of the bailout programs, known as the Troubled Asset Relief Program ,is expected to cost about $200 billion less than expected just several months ago, Geithner wrote.

The funds in the program had been used to purchase shares of banks to boost their available capital for loans and other operating expenses. Several major banks have already paid back the government, with more expected to do so in the coming year.

The law passed at the height of the financial crisis last year allowing for the bailout and extension invoked today is called the Emergency Economic Stabilization Act of 2008.

Timothy geithner