WASHINGTON -- The Justice Department sided with the nation's banking industry yesterday against the Clinton administration's banking regulators, blocking plans to step up enforcement of laws aimed at increasing lending in poor neighborhoods.
The official statement of the administration's legal policy does not affect separate laws against racial discrimination that the Justice Department has vigorously enforced this year. But the legal opinion represents another blow to President Clinton's 1992 campaign pledge to make it easier for poor people to borrow money and revive their neighborhoods.
Yesterday's ruling strikes down the regulators' proposal this year to impose fines and issue cease-and-desist orders to banks and savings institutions that ignore poor communities.
As a result, the ruling greatly reduces the regulators' ability to put pressure on small- and medium-sized institutions, which seldom come to regulators for permission to open new branches and make acquisitions, activities for which community lending records will still be considered.
The Office of the Comptroller of the Currency, a semi-independent arm of the Treasury Department that asked the Justice Department to rule on its powers, said that it would not challenge the outcome.
Banking industry officials, delighted with the decision, said it went even further than they had requested in curbing regulatory action. "It's amazingly strong," said Diane M. Casey, the executive director of the Independent Bankers Association of America.
But civil rights activists complained that the Clinton administration may be neglecting a traditional Democratic base as it moves to the right politically in the wake of the Republican triumph in congressional elections.
"This interpretation I think clearly could have gone the other way," said Allen J. Fishbein, the general counsel of the Center for Community Change, a Washington-based advocacy and research group.
Yesterday's decision came from the Justice Department's Office of Legal Counsel, which has publicly taken issue over the last two years with the aggressiveness of the Justice Department's Civil Rights Division.