When officials in the Clinton administration read a Washington Post series on alleged lending bias by Washington D.C.-area banks, they responded by launching an investigation. Federal investigators went through thousands of loan files of the Chevy Chase Federal Savings Bank and did not find a single case in which the Montgomery County, Maryland, Savings & Loan had discriminated against a black loan applicant. The Justice Department responded that the bank was still guilty because it did not pursue and bankroll potential black borrowers in neighboring Washington, D.C., and Prince George's County, Maryland—rules that had not been promulgated at the time the loans were made.

The Justice Department also condemned Chevy Chase for not opening any branches in census tracts with a majority of black residents. Ironically, federal agencies had repeatedly denied the Chevy Chase permission to expand into black areas. Chevy Chase had requested permission to open a branch in a black area of neighboring Prince George's County, and twice permission had been denied. The federal oversight banking agency had been concerned that Chevy Chase might have a higher loan default rate in those black areas, and that the losses from loans to minorities could undermine the bank's financial health.

The Justice Department's settlement required Chevy Chase to open four branches in black areas and to make loans to blacks with interest rates at 1 percent less than the prevailing mortgage rate. The bank was also obliged to give black borrowers a cash handout to help them with their down payments.

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