WASHINGTON (Bloomberg) — Treasury Secretary Timothy Geithner said yesterday the government is unlikely to recoup its investments in insurer American International Group Inc. or the automakers General Motors Co. and Chrysler Group LLC.

Geithner also said he chose to extend the $700 billion Troubled Asset Relief Programme to give the Obama administration more time to unwind its bank-rescue efforts. The economy still faces "significant headwinds," and housing markets remain dependent on government support even as they are stabilising, he said.

US financial and economic conditions have improved, Geithner said in prepared testimony for the Congressional Oversight Panel. The Treasury now expects to make money on its banking investments, if not on its efforts to stabilise the automobile and insurance industries.

"There is a significant likelihood we will not be repaid from our investments in AIG, GM and Chrysler," Geithner said.

The Government Accountability Office yesterday said that US taxpayers will lose $30.4 billion from the auto-industry bailout, down from a prior estimate of $43.7 billion. The GAO report predicted a similar loss of $30.4 billion in AIG, down from a previous estimate of $31.5 billion.

The world's largest economy expanded at a 2.8 percent annual rate in the fourth quarter after shrinking for a year. The economy will expand 2.6 percent in 2010, according to the median forecast of 58 economists surveyed by Bloomberg News this month. The jobless rate will average 10 percent next year.

"The economy would not be growing again without TARP," Geithner told the panel in response to a question.

The Treasury predicts a $19 billion profit on its banking investments, Geithner said. Long-term TARP costs will be no higher than $140 billion, Treasury forecasts. Geithner said the ultimate return will depend on how the economy fares.

The Treasury expects "substantial income" from sales of TARP warrants, received as part of the government's investment in banks, in coming weeks, Geithner said. He said that auctions will often bring the highest returns for the government.

Banks that pay back their capital injections must also dispose of the warrants that the Treasury received, either by repurchasing them or allowing the department to sell them. Goldman Sachs Group Inc. redeemed its warrants for $1.1 billion, while JPMorgan Chase & Co. opted to allow the government to auction its warrants after the Treasury rejected an appraisal as too low.

Geithner appears before the panel, led by Harvard law professor Elizabeth Warren, as it prepares for a personnel shift. Representative Jeb Hensarling, a Texas Republican, yesterday resigned, Warren said in an interview with Bloomberg Television.

"He said he wanted to concentrate his efforts elsewhere here in Congress," Warren said. Hensarling has been a vocal critic of TARP.

Geithner told the panel that the Treasury can't force small banks to participate in initiatives aimed at stimulating small- business lending. He said these programs have been less successful than hoped because banks have been wary of submitting to the extra regulation that comes with taking TARP aid.