IT WASN'T just Christmas the Grinch stole those many years ago. He also took away the really fresh bread, the stuff that smelled good and had enough texture to require chewing. He covered all the bread that was left in plastic wrappers, which quickly softened crusts and smothered specialty bakeries in all but the most determindly ethnic cities.

But lately a growing number of smiling people have been observed near the corner of Connecticut Avenue and L Street knoshing on fresh bakery items such as danish, bagels and muffins. You can follow your nose to their source, a miniature subterranean bakery in the Connecticut Connection called What's In the Oven. Many of the offerings are baked right there, but the raw dough and the management come from Washington's most distinctive bakery, the New Yorker.

The first thing one should know about the New Yorker is that it has nothing to do with New York. It is a family operation located on Blair Road NW, only a bagel toss from the Takoma Park metro stop."That was the name of the bakery when my dad bought it, in 1949 or '50," said Steve Raab, an extremely aimiable man in his mid-30's who now directs the bakery.

"We were at 4809 Georgia Ave. We moved here in 1968 and the name came with us."

The second thing one should know is that it is a bakery going through odd contortions, growing larger and more modern while trying to think and act small.

"We still know how to scale ingredients, we still use scales," Raab announced to an equipment salesman, over the telephone one morning last week. He talks proudly of the freshness of his bread, of the 130 variations he can produce, how much handwork his 15 bakers still do, about the "real" instead of artificial sours that flavor his breads. But it isn't a hobby or a neighborhood bakery.

"I do this for pleasure," Raab said, "but it gets to a point where it has to be a business too." So the New Yorker plant has been expanded despite a series of setbacks highlighted by a gas explosion in March, 1977. About 45,000 pounds of bulk flour is delivered every ten days. Someone works in the plant "seven days a week, 24 hours a day." An old oven stands in what is now a utility room. "We baked it to death," Raab says in the respectful tone usually reserved for tributes to a lost relative.

There's a hungry new oven, one of several. It is a giant model by Werner & Pfleiderer, the General Moters of bakery equipment, and provides capacity for the New Yorkers to more than double it current output.

"We don't want to be just a production line," Raab said. "We don't make hamburger or hot dog rolls. I know it is getting more impractical to do hand work, but we still bake in order. We will make just about anything if we get a request for it." His hand swung in an arc, narrowly missing a pile of "product" that shows the amazing elasticity of bread dough. There are twist rolls and knot rolls and salt sticks and french bread and large round loaves of rye and small balls of pumpernickle. There are arc-shaped croissants and deceptive logs of puff pastry, seeminly empty but filled with smooth chocolate or fragrant almond paste.

"My wife wants to put in doughnuts downtown" (at What's In the Oven), Raab said with a frown. "But I don't want them. You'd have to fry them and when you fry you get a grease smell." Raab isn't a snob. He's a purist. He wants people to smell, see and taste a freshly made product. He worries about how little bread Americans eat and how little impact it has on their lives. "When it comes from the oven it's beautiful," he said. "But with time it loses something. It takes a day or two to reach the public through a supermarket. The plastic wrappers we have to use destroy the crust. This shop is a shot in the dark, an attempt to get closer to people, to let them discover what a really fresh loaf of bread is like."

According to Raab, bagels and English muffins are the big movers in the baking business these days. He does bagels at What's In The Oven, but not English muffins. Instead a customer will find wonderfully fresh and light danish with a choice of fruit toppings and American muffins -- bran, bran with raisins, blueberry, corn and others. There are pastries, too, but Raab isn't a pastry man. His heart belongs to bread.

While European equipment is ahead of American, we have "the best flours in the world." Bakers from "the old country" have good formal training, but "we've had good success with people off the streets we train in our ways.

"We do a granola loaf," he said, "and Russian pumpernickel, and German pumpernickel." He cut into a round loaf, smelled deeply and passed to over. It smelled yeasty and friendly. "If we knew about marketing," he continued, "if people knew they could get bread like this . . ." He broke off in mid-stride and took a giant verbal step backward. ". . . I still don't understand why so little bread is eaten here compared to Europe."

There's hope, of course. It is the season of hope. The month old retail outlet is doing well, better than initial projections. The New Yorker's specialty breads have been introduced at the Bolling Air Force commissary, where many of the customers remember similar breads from tours of duty in Europe and have responded enthusiastically. The Victoria Station restaurant chain is buying a specially contructed 8-ounce mini-loaf of rye bread.

"Restaurants," said Raab with a sigh. "The first food a customer sees generally is a bread basket. It may be full of brown-and-serve rools or stale bread. It's shameful. Maybe everyone is happy with what they have. But I don't think so, It's just that they go along with what's available.

"I'd like to put another man downtown to bake hot rolls each afternoon and have someone deliver them fresh to restaurants in the area. Would they take a chance on having something delivered at the last minute?"

It's the season of hope.