While chairing a recent two-day conference on the Community Reinvestment Act and fair lending, I was struck by how much bankers do care about complying with both laws. They believe it's the morally correct thing to do, and it's good for business.

However, the laws and regulations in this area are extraordinarily complex and are bogged down in minutiae.

I was taken aback by how much the actions of unelected government officials can affect behavior in the marketplace. Bureaucrats wield far more power, for good or ill, than they probably realize.

CRA and the fair-lending laws have been on the books for roughly two decades. Their purposes are both clear and laudable. They declare that banks should identify and serve the needs of their communities and may not discriminate on the basis of age, gender, race, or marital status.

So far, so good. The regulators put implementing regulations in place that made relatively simple laws more complex. Still, despite some grousing, bankers were able to adjust to the new requirements.

Then, in 1988, the Atlanta Constitution ran a Pulitzer Prize-winning piece titled "The Color of Money." It purported to show that financial institutions in the Atlanta area were not serving the financial needs of minorities.

That piece led to similar pieces in The Washington Post and other publications. The publicity, in turn, prompted bureaucrats at the Department of Justice to begin lengthy investigations at Decatur Federal in Atlanta and Chevy Chase Federal Savings Bank in the Washington area.

Both institutions were subjected to costly and intensive investigations in an attempt to uncover discrimination in lending. The Justice Department struck out in both cases.

Rather than accepting that neither Decatur Federal nor Chevy Chase employed discriminatory lending practices, the Justice Department decided it needed something to show for its years of effort.

It declared that neither institution was trying hard enough. Neither had sufficient minorities on its staff, or advertised sufficiently in publications targeted at minority communities, or had enough branches in minority areas of town.

Each institution was aggrieved by the charges and believed it could win in court. Neither had the stomach or the financial wherewithal to wage battle. They agreed to pay fines and change their practices.

Congress could not have mustered the votes to pass a law directing financial institutions to market their services in minority newspapers, open a certain percentage of their branches in minority communities, or abide by quotas in hiring and lending programs. Yet, that is now the de facto law of the land, and it is being taken seriously by the banks, thanks to the Justice Department.

While this hardly represents the way democracy is supposed to work, the results are in many respects positive. Banks are reaching out to potential customers even more than they did in the past. They will undoubtedly find ways to serve new market segments profitably, and hopefully more people will be brought into the economic mainstream.

But it's difficult to ignore the manner in which the change was brought about. Congress passed a law requiring that financial institutions be blind as to color, gender, and other factors.

A few bureaucrats have taken it upon themselves to interpret the law as requiring that financial institutions have an obligation to favor certain groups. Because they have virtually unlimited resources at their disposal, these bureaucrats have been able to bludgeon their targets into submission.

The burden is supposed to be on the government to demonstrate that banks are discriminating in some prohibited way. Instead, the burden has been shifted to the banks to prove that they are not discriminating against, or even perhaps that they are discriminating in favor of, the enumerated groups.

So, without a Congressional debate and vote, bankers are being forced to spend untold dollars and energy trying to establish that they are law- abiding citizens of high moral character. I'd prefer that we give bankers the same benefit of the doubt the Constitution requires we give bank robbers: that they are innocent until proven guilty. Mr. Isaac, a former chairman of the Federal Deposit Insurance Corp., is chairman and chief executive officer of Secura Group, a financial services consulting firm based in Washington.

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