WASHINGTON -- Two leading Democrats fired off a three-page letter to the Federal Reserve Board last week demanding to know why it allowed a Florida bank to expand despite a fair-lending probe.

"The public, as well as the banking industry, needs to know whether the board will stand with other agencies in enforcing the law and eliminating lending discrimination," wrote House Banking Committee Chairman Henry B. Gonzalez and Joseph P. Kennedy 2d, D-Mass.

The two lawmakers are angry that the Fed approved two separate Barnett Bank applications in September after receiving letters from the Justice Department stating that the bank violated the Fair Housing Act and Equal Credit Opportunity Act.

The Justice Department, which is investigating Barnett, said a statistical test showed the bank treated home mortgage applicants differently, depending on their race.

The department told the Fed that it planned to sue Barnett by the end of October unless the bank settled.

The central bank, however, wrote in its orders that it reviewed the evidence Barnett provided and determined that no discrimination had occurred.

"In light of the Justice Department findings, these orders resemble an apology for, rather than an impartial review of, Barnett's fair-lending record," the lawmakers wrote.

The two legislators demanded that the board explain in writing by Nov. 18 its refusal to take the Justice Department finding seriously, and it asked for a statement explaining the board's formal policy for cases such as this.

"In our view, public confidence in the board's ability to enforce the law is severely undermined when it chooses to ignore or nullify findings of discrimination, particularly when, as in the Barnett case, those findings are provided by an executive branch agency such as the Department of Justice," the congressmen wrote.

Rep. Kennedy chairs the House Banking subcommittee on consumer credit and insurance.

Fed spokesman Bob Moore declined to comment on the letters.

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