WASHINGTON -- Treasury Department officials and the banking industry are mulling ways to expand the government's financial rescue plan to include non-publicly-traded banks, potentially opening up the program to thousands of new institutions.

Department officials met with representatives from the banking industry Tuesday to discuss expanding the Troubled Asset Relief Program to make mutually held, family-owned and other private banks eligible for federal funds.

Such a move could serve as a peace offering to the politically powerful community-banking industry, which has been outspoken in its criticism of Treasury's execution of TARP. The decision to provide billions of dollars to some of the nation's largest banks has stoked fears among smaller rivals that the government is encouraging consolidation of the industry at their expense.