WASHINGTON - In a stinging rebuke to a Bronx-based community group, the Office of the Comptroller of the Currency has given Chase Manhattan Bank permission to merge its Connecticut and New York operations.

The agency last week said it found no support for Inner City Press/Community on the Move's charges that Chase had violated the Community Reinvestment Act. Chase has a satisfactory rating under the reinvestment law.

"We are very pleased with the OCC's response," Chase spokeswoman Charlotte Gilbert said. "We believe it is an appropriate reflection of Chase's CRA record."

Matthew Lee, executive director of the Bronx group, said in a written statement that he plans to appeal the decision within the agency. If that doesn't work, he said, his group will sue the OCC.

"We think we're right," Mr. Lee said. "Chase's record must improve. They cannot be above the law."

The OCC, however, specifically rebutted each of Inner City Press' claims. First, the agency said it does not require banks to open branches under a "geographic quota system." So Chase's branching patterns are immaterial, Troy L. Dixon, director for corporate activity at the OCC, wrote in a Feb. 10 letter to the community group.

Mr. Dixon also noted that the number of minority loan applicants at Chase is growing, and he dismissed claims that Chase's loan portfolio had to reflect the ethnic makeup of each community.

Mr. Dixon also disputed Mr. Lee's charge that Chase artificially inflates its bank's CRA record by "steering" low-income customers to the bank, rather than to its mortgage unit. Mr. Dixon wrote that this practice is "helpful rather than discriminatory" because the bank has more flexible underwriting standards than the mortgage company.

Finally, Mr. Dixon wrote that there was no evidence to support Mr. Lee's charge that the OCC should have given two Chase subsidiaries lower CRA grades.

In the past nine months, Inner City Press has forced concessions from several New York-area banks after challenging applications on CRA grounds. The group's latest victory was in late November, when Dime Savings Bank agreed to open a full-service branch in the Bronx and to lend $20 million during the next three years in the Bronx and upper Manhattan.

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