WASHINGTON — Mounting losses from commercial real estate loans will continue to be a problem for the U.S. and especially smaller banks, but it can be managed, Treasury Secretary Timothy Geithner said today.

“Commercial real estate’s still going to be a problem for the country,” Geithner said in an interview with CNBC. “But we can manage through this process.”

Geithner also said the Treasury Department’s announcement that it will begin selling the stake it owns in Citigroup Inc., which could net about $7.5 billion to the government, shows “how far we’ve come” in exiting from the financial bailout program.

The government received 7.7 billion shares of Citigroup in exchange for $25 billion of the total $45 billion it gave the financial behemoth during the 2008 credit crisis. The Treasury Department said Monday it will sell the shares over the course of this year, depending on market conditions.

Like any investor, the government will likely hold on to its shares if prices fall steeply. However, Citi shares have steadily been rising with the broader market in recent months, which means the government is likely to pocket a hefty profit as it sells its shares over several months.

The government has been trying to unravel the investments it made in banks under the $700 billion Troubled Asset Relief Program, or TARP, that came in at the height of the financial crisis.

Geithner said in the interview the government doesn’t want to keep an ownership stake in the financial companies “a day longer than necessary.”

The government will use a “careful process” to balance two objectives, he said: ensuring maximum return on the taxpayers’ investment while also getting the U.S. out of the business of owning private companies.

While losses on mortgage loans socked banks at the beginning of the 2008 financial crisis, it is commercial and development loans that have brought dramatic losses for banks in recent months.

Losses have mounted on loans for commercial projects like stores and office complexes, as buildings sit vacant and builders default. Many midsize and regional banks hold large concentrations of those loans.

FDIC Chairman Sheila Bair has said losses on commercial real estate loans are expected to be the primary cause behind bank failures this year, which are likely to exceed the 140 collapses in 2009.

One way to help manage the commercial loan distress, Geithner said, is through the $30 billion fund proposed by President Barack Obama to provide money to midsize and community banks if they boost lending to small businesses. The program, which must be approved by Congress, would use money repaid by banks to the TARP program.

Many lawmakers, however, want the $30 billion sent directly to the federal Small Business Administration. It would then decide which businesses should get loans.

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