One Step Too Far

A RECENT consent decree between the United States Justice Department and Chevy Chase Federal Savings Bank of Maryland can't help but benefit minority neighborhoods in Washington, D.C. At issue was the bank's allegedly discriminatory mortgage patterns.

But the decree also contains a precedent-setting provision that we hope will be used sparingly in similar probes: The government has put itself in the position of dictating to a business - in this case a bank - that it will market its goods or services and set up shop in a given area. The $11 million settlement includes establishing a low-interest loan program for the minority neighborhoods in question, as well as establishing new branches in minority areas.

The Justice Department, noting the bank's lack of branches or marketing in minority areas, accused Chevy Chase of ``redlining,'' or systematically refusing to grant mortgages in particular neighborhoods. Investigators found that from 1976 to 1992, 97 percent of the bank's mortgages went to white areas. The bank counters that between 1988 and '93, it approved more than 1,600 mortgages in Washington, with 71 percent going to the minority neighborhoods in question. Yet the issue is not one merely of the number of loans to such neighborhoods, but of lending frequency when compared with loans made in predominantly white neighborhoods by applicants with similar financial profiles buying similar homes.

Chevy Chase also says that until 1987 it was prevented by law from moving into Washington. And in 1989 and '90, the Office of Thrift Supervision rejected its applications to set up a branch in a predominantly black section of the capital. This suggests that Chevy Chase's lending practices, while open to challenge, aren't sufficiently villainous to warrant the government telling it where to build branches.

Bankers can be a conservative lot; but when dealing with minority neighborhoods, conservative business decisions often reflect impressions based on inaccurate assumptions, if not outright prejudice. The notion, for example, that demand for mortgages is too small to warrant establishing a branch is belied by the large number of mortgages in minority neighborhoods written by mortgage companies. They do the business because they actively seek it.

Redlining, as well as steering, where real estate brokers point clients to specific neighborhoods based on race, is an odious practice. Yet approaches other than mandatory branch openings exist for encouraging offending banks to serve minority neighborhoods. Officials of such banks could be required to serve for a period with grassroots housing or real estate groups in minority areas. They also could be required to assist in gathering on-the-ground data for local real-estate tax assessments in such neighborhoods.

The federal government has an obligation to aggressively enforce equal housing and lending laws. Decisions about where to locate a plant or office, however, are best left to business owners. For the government, mandating location should be a last resort.

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