Pressure Is Building for Industry Action

With the Bush administration's preferred industry-led solution to the housing crisis proceeding at a Department of Motor Vehicles-like pace, Treasury Secretary Henry Paulson met with key lenders this week to prod them for new ways to resolve the mess, the American Banker reports.

From the American Banker:

During the 90-minute meeting, Mr. Paulson urged lenders to come up with a plan to help so-called "underwater" borrowers, who owe more on their mortgages than the value of their home.

"His goal was to prod us and figure out what was coming next and whether there was anything Treasury could do to help the situation," said one participant, who spoke on condition of anonymity.

According to the story, participants included executives at Citigroup, Bank of America, JPMorgan Chase, and others.

Democratic lawmakers have been working on a plan to use taxpayer funds to refinance hundreds of billions of dollars' worth of troubled mortgages. But at the meeting, Paulson reportedly said the legislative process was too sluggish.

Still, the meeting indicates the administration may now believe that the industry-led solutions it had been advocating are insufficient. And as congressional momentum builds for a large-scale government housing rescue, don't expect lenders to start jumping in with new suggestions—especially those that would put additional risk on their plates.

Advantage: bailout.