WASHINGTON -- The settlement last month of a redlining case against Chevy Chase Federal Savings Bank has left banking observers and lawyers sure of one point: The Justice Department is determined to use fair-lending laws to enforce the Community Reinvestment Act.

"This inserts them specifically in the CRA process," said David W. Roderer, Washingtonbased fair-lending expert at the Winston & Strawn law firm.

Lawyers at the banking industry groups concurred. Karen M. Thomas, regulatory counsel at the Independent Bankers Association of America, said the government had failed to realize the difference between the two laws.

"Justice is not the enforcer of CRA," she said. "But it seems like Justice is using this as a back door."

C. Dawn Causey, regulatory counsel at the Savings and Community Bankers of America, agreed that the Justice Department is exploring new territory.

"They are really going into CRA," Ms. Causey said. "It is really beyond what they have done before.

Karen D. Shaw, president of the Institute for Strategic Development, said that the Chevy Chase settlement changes the CRA game because banks now have more to fear than bad publicity if they improperly draw their CRA maps.

But she said banks can avoid the issue entirely if they comply with the CRA laws, including drawing their maps in a manner that doesn't exclude mostly lowincome neighborhoods.

Ms. Causey said Justice may be trying to reduce the enormous cost of the statistical studies the department has used in previous fair-lending investigations.

"They are trying to simplify their investigation... so it is much easier and cheaper," she said.

A person familiar with the case said, however, that the Justice Department conducts statistical analyses in these cases anyway, so it isn't saving any money.

Ms. Causey said she also believes the Justice Department has adopted a strict market test for community reinvestment.

"That comes out of CRA reform proposals that haven't even been adopted yet," she said.

Wdtiam Traiger, a New York lawyer who follows CRA issues, said the Justice Department prosecution contradicts efforts by the agencies to limit CRA to the communities the banks have defined. The reform proposals also reduce the emphasis on bricks and mortar at the same time Justice is increasing the emphasis.

"In some sense, the different federal agencies are at odds," Mr. Traiger said.

The Justice Department takes exception to the comments. Paul Hancock, chief of the housing and civil enforcement section of the Justice Department's civil rights division, said the government is using fair-lending. laws to combat banks that limit their activities to wealthy areas while ignoring the rest of their community.

"We are attempting to remedy illegal discrimination," he said. "We are not using it to enforce CRA." IBAA executive vice president Kenneth A. Guenther said he sees an ulterior motive in the Chevy Chase actions.

He said Justice, the Department of Housing and Urban Development, and the Office of the Comptroller of the Currency are trying to force banks to build the low-income housing that Congress will not fund.

The name of the game is that we don't have money in the budget, and we're not going to ask for the money," Mr. Guenther said. "The money is in the banks."

Mr. Guenther said this CRA-enforcement may force banks to apply to open unprofitable branches in low-income neighborhoods as a hedge against a Justice Department probe. He said the regulators also may feel pressured to approve these branches, regardless of what they do to the bank's balance sheet; "We are getting into safety and soundness be damned,' "Mr. Guenther said.

He said the next administration will be saddled with cleaning up another banking disaster.

Mr. Hancock disagrees with that assessment, saying the department is "very conscious" of safety and soundness issues. He said the most obvious proof of this concern is that the consent decree requires regulators to approve the branch Chevy Chase agreed to create as part of the settlement before the thrift can open it.

Ms. Thomas said she sees an even greater problem with the CRA enforcement focus. Ms. Thomas said the government had failed to include a warning that marketing and branching could constitute fair-lending violations when it issued a joint policy statement on the subject earlier this year. "No one was on notice," she said.

Mn Hancock said Attorney General Janet Reno has been telling bankers for a year that they must market their services to minority communities to avoid fair-lending charges.

Ms. Thomas also said the terms of the agreement would be illegal if a judge hadn't approved them in advance.

She said the Equal Credit Opportunity Act allows institutions to establish special loan funds for minorities and other protected groups. But, the law doesn't allow banks to limit the program's geographic scope, as the Chevy Chase settlement does. If a bank wanted to do this own its own, it could be sued, she said.

Mr. Hancock said that argument doesn't wash. He said the loan program was part of a court-approved settlement: As such, it can go beyond what the regulators can order the bank to do, he said.

He said this is true for all types of civil rights cases, regardless of whether it is forced busing or court-mandated lending programs.

Kenneth H. Thomas, an author on CRA, said he also believes people are overplaying the government's use of CRA in the Chevy Chase case.

"They mainly used CRA to prove their point," he said. "They weren't enforcing it."

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