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U.S. Treasury Secretary Timothy Geithner said the U.S. economy is "only at the earliest stage of recovery, one year after the near-meltdown of credit markets.

"The biggest challenge we face is the imperative of growth,'' Geithner told members of the Securities Industry and Financial Markets Association at their annual meeting, held at the Marriott Marquis in New York.

He said the soundness of financial institutions at this stage of the recovery is a "mixed picture,'' with large banks managing to sock away substantial amounts of capital as a cushion against future downturns in their businesses.

But small and regional banks still face a "much more challenging environment,'' he told interviewer Charlie Rose.

Unemployment remains a drag on the economy, but broad measures of economic activity are up. Americans are saving more. The current account deficit in the nation's trade with other nations is half what it was. And interest rates are down, making it easier to borrow, he said.

Now, the Obama Administration must strike a "very difficult balance" in trying to instill a "spark of confidence" among U.S. companies to take risks and grow again -- while also trying to whittle down the national deficit.

With its two-year Recovery Act still having another year to run, he said the right levers to push at the moment are providing incentives for companies to invest in expansion and getting credit to flow more freely.

"It's not like flipping a switch,'' he said.

It'll probably make sense to extend unemployment benefits, Geithner said, but a decision on whether to come up with and execute a second stimulus plan "does not need to be made now,'' he said.

Key long-term to getting the deficit, now at $1.4 trillion, down is getting control of health care costs. The Senate Finance Committee two weeks ago approve an $829 billion health care reform bill.

This article can also be found at SecuritiesIndustry.com.

Tom Steinert-Threlkeld is the editor-in-chief of Securities Technology Monitor.