Treasury says must remove stimulus carefully

WASHINGTON (Reuters) - The U.S. Treasury Department said on Monday the financial system remains fragile and the withdrawal of special stimulus measures must be done carefully to avoid disrupting a budding recovery.

"The process of exit will be prudent, not hasty," the Treasury said in a 51-page document summarizing many of the actions taken over the past year to stabilize the crisis-stricken economy.

Treasury Secretary Timothy Geithner, in an accompanying statement, said it remains vital for Congress to approve an overhaul of the regulatory system by year-end.

"The critical imperative we face as a country is making sure that the same vulnerabilities in our system which gave rise to this recession are not allowed to trigger another," Geithner said.

President Barack Obama was scheduled to speak in New York in a bid to revive a stalled effort to apply stricter oversight to Wall Street, one year to the day that Lehman Brothers collapsed and helped create near-panic in financial markets.

The Treasury Department claimed credit for the Obama administration in acting decisively to implement key commitments to both fiscal stimulus and financial stability.

"We are now in a position to adjust our strategy as we move from crisis response to recovery, from rescuing the economy to repairing and rebuilding the foundation for future growth," Geithner said.

But the administration will not withdraw stimulus abruptly for fear that might derail a recovery that still needs help.

"The financial system is still fragile, and some of the improvements that we have seen in many financial markets are still largely dependent on the support of extraordinary policies," the Treasury statement said.

(Reporting by Glenn Somerville, Editing by Neil Stempleman)