To bankers, the Department of Justice is more frightening than Mary Shelley's Frankenstein.

In settling a loan discrimination case with Chevy Chase Federal Savings Bank, Justice established a new theory of fair lending that has the entire industry quaking.

Justice shows no sign of backing down from its quest to make credit more readily available to minorities. But there is some evidence the department is seeking an accommodation with the banking industry that will result in a scaling back of some of its more aggressive tactics.

If so, the industry probably will have its regulators -- and the Department of the treasury -- to thank.

No one in the industry is seriously suggesting that Justice should turn a blind eye to lending discrimination. Instead, what gives bankers the shakes is the way Justice is defining discrimination.

Under Chevy Chase, an institution that has failed to locate branches in low-income communities can find itself in deep trouble, no matter how it treats individual loan applicants.

Especially troubling to some was the way the Chevy Chase doctrine was introduced into their lives without warning.

"It was like you've been playing pool for the past 12 years, and one evening you go down to the basement and the table all of a sudden has eight pockets instead of six, and it's shaped differently," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association.

The first sign that Justice might be ready to adopt a more accommodating posture came ins meeting two weeks ago between Justice's civil fights officials and bank industry leaders. Although both sides swore an oath of silence about the meeting, several participants said the Justice officials went a long way toward calming their fears. "It was clear from the fact that they asked for the meeting and from the way it was handled, that they are concerned that the rhetoric was getting out of hand," said one participant who, like others, asked not to be named. "They clearly said they want to hear our concerns and they were surprised at how strong the reaction was to Chevy Chase,"' this source said.

Justice also may have been surprised by the reaction from other administration agencies. In fact, a major fight is shaping up within the administration over the Justice Department prosecutions, one that resembles the "new Democrat, old Democrat" battle that is raging within the president's party.

The "old Democrats" in the Department of Justice's civil rights division speak to the pany's traditional constituencies, the poor and minorities, in this case. Among their leaders is Deval Patrick, a respected civil rights figure who has won quiet, grudging praise from bank lobbyists here. The new Democrats can be found in the economic policy-making posts of the administration. Most prominent is deputy Treasury Secretary Frank Newman and Comptroller of the Currency Eugene Ludwig. Although not partisan, thrift regulator Jonathan Fiechter fits in with this group, too.

Mr. Newman and Mr. Fiechter have taken the lead so far in opposing Justice, although industry sources say Mr. Ludwig shares their feelings. Mr. Fiechter has been most outspoken, telling a thrift audience in Orlando, Fla., that the Chevy Chase prosecution represents an "untested" legal notion, and warming that it could raise safety and soundness questions for the industry.

Mr. Newman has said only that he plans to discuss the issue with Justice. But administration sources said he reviewed Mr. Fiechter's speech before it was given -- the OTS director is a Treasury employee - and it would be unusual if he approved a speech on so sensitive a subject if it did not reflect Treasury's views.

Mr. Ludwig's agency is expected to decide within the next several weeks whether to approve an application from Barnett Banks Inc., a Florida institution that is also the subject of a Justice Department investigation. If he permits Barnett to go forward, as now appears likely, Justice may be forced to back off yet another step.

And the looming midterm election could provide yet another boost for banks. President Clinton won election two years ago as a "new Democrat," and many within his party believe they are about to take a shellacking at the polls because he has begun to look too much like an old Democrat,

If Treasury wants to make a case for a less aggressive Justice Department, it will likely find plenty of support among those in the administration who have already begun to worry about 1996.

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