Matthew Lee, the Bronx-based crusader, is crafting a comeback.

Despite a string of embarrassing legal and regulatory defeats, Mr. Lee said he remains convinced that he can force banks to serve low-income New Yorkers.

He has lost nearly a dozen Community Reinvestment Act challenges, including a fierce attempt to bar Chase Manhattan Corp. from merging with Chemical Banking Corp.

Instead of relying solely on CRA, Mr. Lee, 31, said he plans to start using fair-lending complaints filed with the Department of Housing and Urban Development. He also plans to supplement traditional CRA protests with anecdotal evidence of discrimination.

That Mr. Lee, executive director of Inner City Press/Community on the Move, needs a new strategy shows how far he has fallen since he persuaded five banks in 1994 to make $65 million of loan commitments and open four new facilities in the Bronx.

His early victories won the group respect and attention. Mr. Lee appeared on ABC's "Nightline" and was featured prominently in several New York newspapers.

"He has had a tremendous impact in the South Bronx," said Donna Wilson Castor, senior vice president and CRA officer at Dime Savings Bank. "He is a valuable resource in assessing the community's needs. I respect him for that."

Even regulators have regard for him.

"We have a lot of respect for Matthew," said James K. Hodgetts, vice president of community affairs at the Federal Reserve Bank of New York. "You can argue he takes fine points to the extreme, but that is not inappropriate given what his role is."

But have Mr. Lee's protests really helped the Bronx?

Although on the rebound, the Bronx is still dirt poor. According to 1990 census data, median income hovers at $16,381, compared with $49,197 for Manhattan, home to New York's biggest banks.

Small stores and restaurants are springing up throughout the 42 square- mile borough, but many are squatters in unsound buildings. Inner City Press, though located just 10 subway stops north of midtown Manhattan, is still a world away economically.

At Inner City Press' office, one of four storefronts in a single-story building, the floor is a mixture of concrete and tile, and the walls are unpainted plasterboard. Mr. Lee's office has four chairs; none match.

Driving with him through the Bronx is eye-opening. Check cashing outlets are everywhere-even competing on opposite sides of the same street. With the exception of the area near Yankee Stadium, banks are invisible.

But several bankers insisted in recent interviews that branching decisions are based on economics, not Mr. Lee's advocacy. Also, they assert, his use of CRA protests has scared some banks from entering the Bronx.

"His intent may be to do good, but I haven't seen any evidence that he is doing good," said Agnes Bundy Scalan, senior vice president at Fleet Financial Group, which has been the subject of several Inner City Press protests.

His protests, which often run 100 pages or more, contain frivolous points, she said. For instance, Ms. Scalan said, Mr. Lee once spent several pages discussing how Fleet sent a response to his protest to the wrong address.

"He uses the law to prolong technicalities, but I have not seen any substance to his protests," she said. "He doesn't scare any banks."

Chase executive vice president Carol J. Parry said Mr. Lee ignores the economics behind branch openings. People bank where they work, and more than two million people work in Manhattan compared to 300,000 in the Bronx, she said.

"Banks put branches where they think they have a profit opportunity," she said. "We are not a public utility."

It was this no-nonsense business approach that ultimately helped Chase defeat Mr. Lee. His group protested three successive deals involving Chase, raising scores of issues ranging from mortgage denial rates, to redlining, to the competence of senior management.

Chase didn't buckle and Mr. Lee lost big.

The Federal Reserve Board approved all three deals, including the Chemical merger, and the U.S. Court of Appeals for the Second Circuit recently rejected his subsequent lawsuit, saying he lacked a legal right to challenge the approval and even if he could sue, the Fed did nothing wrong in approving the deals.

Ms. Parry alleges Mr. Lee refused to negotiate. "I asked him repeatedly to put on the table what he wanted the bank to do, and instead he filed a CRA protest," she said.

Chase has proceeded with an $18.1 billion CRA commitment, which included expanding its presence in the Bronx to 35 facilities, three times more than any other bank. It has opened two branches in the borough since 1994, including a full-service office in University Heights that began accepting customers last week. University Heights had been without a bank for 25 years.

"The decision to open those branches came out of our own analysis and discussion with the community," Ms. Parry said. "It didn't have anything to do with him."

Mr. Lee dismisses the Chase commitments as inadequate, noting that it is the biggest bank in New York and should have a dominating presence in the Bronx.

Inner City Press had no choice but to protest Chase, he said. "We consider Chase the linchpin of the Bronx's problems," Mr. Lee said. "It was the challenge we'd go to the mat for. We said they do nothing in mortgages, they close their branches and, by anecdotal evidence, we said they don't do consumer and small-business loans."

Undeterred by his setback, Mr. Lee said he plans to continue his crusade against Chase. "We intend to see Chase's problems addressed," he said. "To say not to do it because it is difficult is the wrong path to take."

Mr. Lee, who just received his law degree from Fordham University, is planning a resurgence. "We have gotten our second wind," Mr. Lee declared during an interview in his dilapidated office. If the data aren't enough, he said, "we will give them individual instances of people getting screwed."

In July, he signed a deal with Astoria Federal Savings and Loan, a $7.7 billion-asset thrift in Brooklyn buying Greater New York Savings Bank. Although the Bronx was not specifically targeted, Astoria agreed to open two ATMs in low-income parts of Brooklyn and make $25 million in community development lending, with each borough receiving at least $3 million.

"This indicates that he is still a force, and banks still need to factor in the possibility of a protest when entering into a merger," said Warren Traiger, a Manhattan lawyer who represented U.S. Trust Company of New York in one of Mr. Lee's protests.

Mr. Lee also has decided that CRA protests alone no longer scare banks. So he is branching into fair-lending, vowing to supplement his traditional CRA protests with bias complaints filed with the Department of Housing & Urban Development.

"The only way to shake up the process is to ask for redress by putting all of this stuff in the protest," he said. "This will make regulators take a position on whether this type of action is acceptable."

Mr. Traiger questioned the strategy, saying HUD can order banks to compensate victims of discrimination but it cannot force them to expand services into low-income areas. "It won't mean branches are opened in the Bronx," he said.

Inner City Press also is expanding its focus beyond banks. It expects to fight Travelers Group, which Mr. Lee said targets minorities for high-rate loans and turns in shoddy Home Mortgage Disclosure Act data. Inner City Press also is investigating State Farm Mutual Automobile Insurance Co. for possible CRA violations.

Mr. Lee also has broader plans. He pointed recently to an abandoned multi-story office building across from his office and predicted it one day would be home to Inner City's public interest law group.

"This is not a game," Mr. Lee said recently. "There is blatant unfairness out there."

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