Fed's point man on loan bias insists its reputation for laxity is bum rap.

Griffith L. Garwood thinks the Federal Reserve's commitment to end lending discrimination is misunderstood.

Critics who claim the Fed isn't doing enough are focusing only on the handful of high-profile denials the board has made of applications by banks with troubled Community Reinvestment Act records, he said.

"We are always judged on our denials as a measure of how aggressive we are," he complained. "It's not a very good measure."

Training Effort

The Fed's director of consumer and community affairs said the central bank has trained thousands of bankers on ways to rid bias from their lending and to make more loans to their communities.

But clearly, Comptroller of the Currency Eugene A. Ludwig has stolen the limelight on CRA and fair lending. Mr. Garwood and Fed Governor Lawrence B. Lindsey are the central bank's point men on consumer compliance issues.

"We've kind of developed a reputation for being behind the curve," he admitted. "I think we have a record that is far better than is popularly perceived."

Frustrated by this perception, the central bank is out to reform its image.

Today the Fed is releasing a fair-lending Video, complete with an introduction by Fed Chairman Alan Greenspan.

School Is Open

More substantively, the Fed launched the first examiners' school for fair lending, which started classes on Monday. Mr. Garwood kicked off the school with a speech to 35 students.

The agency already provides education on consumer rules for examiners. It also has a CRA school, which is about three years old.

Examiners will be taught how to use a new computer system that can identify matched pairs of loan applicants who may have been treated differently. They also will be trained on another system that breaks down Home Mortgage Disclosure Act data by individual person, rather than just by census tract.

"If we're ever going to root out discrimination, it's going to depend on examiners looking file by file to see whether people were fairly treated," Mr. Garwood said.

The new school will cross-train safety and soundness examiners so they will be able to judge not only the riskiness of a bank's lending but its fair-lending record as well.

Bankers have complained of being whipsawed by two different examiners. One testing lending bias may approve a particular loan, while another will criticize the loans from a safety and soundness angle.

"We're working with the safety and soundness people in particular to make sure the banks aren't getting mixed messages," Mr. Garwood said.

Mr. Garwood, 54, has spent nearly his entire career at the Fed, joining the agency in 1968 to develop the regulations behind the first consumer law, Truth-in-Lending. He had been a lawyer at a New York firm.

He landed in consumer and community affairs in 1980, after working in several Fed divisions, including legal and the office of the secretary.

His division has 50 staffers in Washington and another 50 who do community outreach from the 12 Federal Reserve banks.

"We have had a very extensive community affairs program for many years, and [it's] far more extensive than the other agencies," Mr. Garwood said. "The other agencies are only beginning to put community affairs people in the districts."

Mr. Garwood is proud of his agency - and extremely careful about what he says. During the interview, he refused to give his opinion of CRA reform, the project that has dominated his time for more than a year.

Surrounded by Art

It doesn't fit his public persona, but his office is decorated by an he created.

Artistic photographs of China hang on his walls and a large geometric sculpture he welded from 50 or 60 pieces of rusted metal stands on a pedestal near the window.

Mr. Garwood's favorite photograph hangs alone behind his desk. It is a black and white portrait of an old man sitting on a porch.

"He's been battered around a bit, but he's all right, he's made it," Mr. Garwood said about the man in the photo.

When asked if he felt the same way after going through the whole CRA proposal process, he laughed.

Mr. Garwood said the time it's taking to complete the CRA project matches its magnitude.

Profound Impact Seen

"The outcome will affect not only financial institutions but communities very profoundly," he said.

When he's not working on such issues as CRA or fair lending, Mr. Garwood plays around with options to banking rules. For the past three years, he's been investigating the way the European Community issues guidelines rather than steadfast rules.

Interestingiy, regulators' initial approach for policing mutual fund disclosure by banks has been to use guidelines and codes of conduct.

Mr. Garwood said there is pressure to move beyond guidelines to tougher regulations.

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