It is said that Washington is a one-industry town, and that Uncle Sam is the chief industrialist. But private business in Washington is also a force to be reckoned with. While neither retail nor wholesale business in the District is without problems, both are experiencing a boomlet. The following is the second in a series of seven portraits of people who are in private business in Washington.

A savings and loan association with a cause? Sure, you sneer - to make money. A Washington S&L that makes inner-city loans? In the inner city of Bethesda, maybe. An S&L with a biracial board of directors? Sure - probably half white and half Caucasian. Try again, cynic. You have not reckoned with Indepence Federal Savings and Loan.

Independence is not of a size to make Wall Street quiver, and it offers only the standard range of banking services. It is the second youngest and second smallest of Washington's 15 S&L's, with assets of just under $36 million.

Nor are its president and board of directors classic. The president, William B. Fitzgerald, 44, spend most of his business career as a real estate broker, and the board includes an insurance salesman and two dentists.

Nor is Independence primarily interested in endless expansion. "We've never seen our role as one to trying to be the biggest," said Fitzgerald. "We hope to set an example of how a financial institution can be economically stable and socially responsible at the same time."

Or, to get right down to it, Independence Federal puts its money where its mouth is.And both are right in Washington, D.C.

Independence held $25 million worth of inner-city real estate mortgages as of June. Fitzgerald resisted an exact definition of "inner city," but he said that 70 per cent of that $25 million has been invested east of 16th Street NW.

Independence's mouth is not just the seven mouths of its board of directors, five black and two white, but those of a 56-member advisory council. Even though close to half live in the suburbs, these 63 people are united in feeling that real estate money invested in Washington stabilizes the entire community.

Independence was born to serve that purpose just after one of the most destabilized times in recent Washington history - the 1968 riots. Independence opened at 624 E St. NW. in July of that year, a time when many Washington merchants and homeowners were leaving the city in fear.

"We were going to take discrimination out of lending," said Bill Fitzgerald. "We wanted to humanize lending and banking. The difference is, we're color blind. We do not red-line. We do not automatically exclude anyone. We're willing to listen and be convinced.

"We sort of wanted to show the world that it was very wise to put forth mortgage money here."

The point has been proven a remarkable number of times.

Only four real estate loans have boomeranged in Independence's 8 1/2 years - one of the lowest such rates in the country.

All four foreclosures according to Fitzgerald, were the result of domestic difficulties in the families of the homeowners, not "deadbeatism." And Independence did not lose money on any of them. "It's so very difficult to make a bad loan in Washington, D.C.," Fitzgerald said.

In the case of Independence, that is true not only because Washington is traditionally a high-employment, high-income city, but also, according to Fitzgerald, because his S&L knows the town.

"Most of the people who work at the big savings and loans do not live in the city, play in the city or understand the city. Their offices are islands. They're isolated, insulated environments. They don't comprehend the place."

Independence routinely makes loans, Fitzgerald said, to people who have been rejected elsewhere and "look horrible on paper." What makes the less horrible after a closer look is "realities," Fitzgerald said.

"A guy that's making $8,000 a year as a messenger may also be a cab driver who may not be reporting all his income," he said.

There is also the element of pride Independence often notices that many of its mortgage holders come downtown to pay up in person. With branches at 1229 Connecticut Ave. NW. and on E Street, that may not always be convenient, but "it doesn't surprise me in the least," Fitzgerald said.

Fitzgerald said he, board chairman Rudolph Arkin and a small group of Washington investors recognized both the need for and the profit potential of an approach like Independence's.

They applied to the Federal Home Loan Bank Board for a charter in 1965. It took "three years of knocking at the door," Fitzgerald said. The government argued that Independence's potential customers, mostly Washington blacks, were already being served by existing institutions.

Fitzgerald agrees that that was true, but he says it should not have been.

"The population wasn't getting good treatment," he said, "and if the population doesn't demand better treatment, it won't get it.

"If a banker sees that you're lazy or complacent, and you continue to deposit your dollars whether he lends to you or not, it's your fault. That was what was going on."

Executives of other major Washington savings and laons refused to be quoted by name when asked to discuss Independence Federal.

One called its record "remarkable," but another said it owed its "strength but existence to money invested by guilty white liberals."

A third said its growth potential will "always be hampered" by the reluctance of some whites to invest at "a place where the decisions are made by blacks."

But Fitzgerald believes that Independence Federal's success has sparked changes at places where the decisions are made by whites.

"They are more concious of their social responsibility in hiring and lending practics," he said of his competition. But he warned that "you don't have to be socially oriented or community-oriented to be economically successful." In fact, Fitzgerald admitted, Washington's racial markeup is still a deterrent to investment by "the major money centers of the world."

In 1976, Independence Federal became the country's second largest minority-controlled financial institution. It will open a new branch at Georgia and Eastern avenues NW this spring. Its assets have grown each year since it was born.

"We're a business, but not a business per se," Fitzgerald said. "If our employees (60 per cent black) need to work Saturday or Sunday, they do it. And 90 per cent of our people went out of their way to open accounts here. We promoted our philosophy, and the people of this community rallied around it.

"We've destroyed a lot of myths," Fitzgerald said. "It's turned out to be a beautiful thing."