Beyond the traditional image of most Washington banks -- closely regulated, largely impersonal entities insured by the federal government -- lie some lending institutions whose existence rests solely on trust between the people who use them.

The participants call them "banks" but there are no passbooks, no withdrawals, no Christmas clubs and no drive-in windows. There are only deposits, periodic loans and a final payoff of principal plus interest to all members.

It is a system created long ago in this country by enterprising Chinese immigrants unable to obtain conventional financing for business ventures or personal needs from established American banks. Instead they created their own institutions, informal, unregulated, relying on handshakes in place of written contracts. It is a matter of pride among Chinese Americans that over the years such arrangements have rarely failed.

Shattering that tradition, four chinese banks here have quietly gone broke, leaving their 100 or so depositors more than $130,000 in the whole and with uncertain prosprcts of ever seeing their savings again.

"The Chinese community, usually help each other," said Bob Lee, a Boston restaurateur and national president of the Chinese Free Masons, whose D.C. branch sponsored the failed banks. "If everyone was doing the job right, the money should be there."

But everyone, it is apparent, didn't do his job right. For reasons that are still only alleged and unproved, the honor system failed. The pivotal figure, by all accounts is a longtime Washington restauranteur, Sam F. Wong.

Within the closely knit Chinese-American community, numbering about 600 downtown and 15,000 in the entire Washington area, such scandals normally are handled dicretely and seldom emerged into public view. This time, however, a civil lawsuit filed in D.C. Superior Court by the depositors offers a rare glimpse at a side of Washington life foreign to most residents.

The Chinese "banks" operate for a limited time, usually about three years, and have only deposits and no ordinary withdrawals. Members deposit $10 per share weekly. Once a week, on Sundays in this case, those wanting to borrow money bid an amount they are willing to pay for the loan, in effect how much "interest" they will pay above principal.

The borrower then pays that amount weekly until his loan is paid off, while the other depositors reduce their weekly payments by the amount of interest. However, their share value remains.

If the bidding occurs at a meeting to which all depositors are invited. If no one bids, the banker finds a single borrower from the list of depositors and the funds are thus dispersed. Borrowers must have another person vouch for their integrity and be considered solvent themselves, but no loans are secured by property or recorded in courthouse files as liens.

After the loan is made, regular deposits resume until a new round of bidding occurs. After a period of time agreed to by the group, the "bank" stops making loans. After all loans are paid back, the depositors receive their money, and the bank is closed. Then a new one is formed and the process begins again.

In this system there is no policing as such. The operation is run by a "banker" chosen by the organizers. The banker accepts deposits, keeps the books (usually handwritten in Chinese characters), keeps the money in a safe place (invariably cash, never in a regular bank account), dispenses the loans and ultimately pays the depositors.

When it came time to close the four banks in late 1976, the money was not there to pay the depositors. The lack of that money, according to those involved, is related to the financial difficulties of Sam Wong, one of the bankers and head of the local Chinese Free Masons.

Allegations about that are made by other bankers who, along with Wong and the D.C. Chinese Free Masons, are defendants in the pending lawsuit. In court papers, the depositors allege that the bankers failed to manage and "control properly" the funds in their custody, to distribute the money "they agreed to distribute" and to account for the funds.

Numerous public records, however, paint a picture of Wong as a man plagued by numerous creditors as he struggled in 1975 and 1976 to operate Washington's Ambassador Hotel and a ground-floor restaurant, Moongate, at 14th and K streets N.W. It was shortly after he lost his lease with the Cafritz-owned hotel that the Chinese banks failed.

Before opening the Moongate in the Ambassador Hotel in January 1975 Wong ran the Am-Chi Restaurant at 421 11th St. NW. He rented the upstars to the Show Place, a champagne and dancing girl operation.

Wong ended his Am-Chi venture faced with a $1,000 lawsuit from a liquor wholesaler who allegedly had not been paid and charges from the D.C. government that he neglected to pay sales and use taxes and to file the appropriate returns for 1975. The wholesaler won his case, and the tax case is scheduled for trial shortly.

An informal accounting later was given to the depositors in a letter from Claire O. Ducker, the defendants' attorney, who said Wong got "involved over his head." Over the years, Ducker has represented many Chinese, including on several occasions, Sam Wong.

Born in Baltimore in 1920, Wong has been associated with a string of Washington restaurants. According to Ducker, Wong begin as an employe of the Old Casino Royal restaurant and the Lotus on 14th Street, and Later owned and operated the Quonset Hut in Silver Hill and the China Clipper, Gung Ho and Am-Chi downtown.

Along the way, Wong was convicted, of running a large Chinese gambling operation. Wong has also served as president of On Leong, Washington's dominant tong, a fraternal protective association that traces its roots back to the Chinese mainland.

Wong, said to be an unimposinglooking man of medium build with slightly receding black hair, could not be reached, either through his lawyer or through his Capitol Heights telephone, which has been disconnected.

The Moongate venture, with its location at 14th and K streets, seemed to offer the likelihood of greater financial success. Wong's restaurant begain as tenant of another corporation that rented the entire 40-year old hotel building from the Cafritz Co.

Eventually, the other corporation defaulted on the rent, and Wong's Moongate, Inc. took over a new 10year lease for the entire building an Sept. 1,1975, according to R. Edward Hart, Cafritz's director of special projects. By the time Moongate in turn lost its lease on Aug. 1,1976, Hart said, Wong's corporation owed Cafritz $181,000 in back rent.

In a letter to the lawyer representing the Chinese banks' depositors, Ducker said Wong "got himself involved over his head" when he took over the hotel operation.

"While Mr. Wong was an experienced restaurateur," Ducker wrote, "he had no experience whatever in the hotel business, nor was he able to hire anyone to run it who had ability and experience.Therefore, the hotel operation moved from one financial crisis to another. . ."

D.C. court records reveal the road to financial ruin traveled by Wong. In 1975 and 1976, there were bank loans totaling more than $72,000 from Riggs, Union First, National Bank of Washington, Madison National Bank and Diplomat National Bank -- all in default, according to court papers.

There were lawsuits by other creditors, debt claims of $36,166 from Pepco, $2,000 for boiler and related repairs, $13,512 for food and produce, and more, totaling nearly $60,000.

According to yet another lawsuit, Wong failed to make pension fund contributions for Moongate employes and, on one occasion when he did, the check for $1,756 bounced. Then, D.C. and federal tax liens totaling more than $100,000 were filed against Wong's corporation.

On top of all that, Wong was fined $300 by a D.C. judge because of air pollution violations at the hotel. The fine followed an unusual -- but not illegal -- plea bargain in which Wong's wife, who operated the hotel while her husband ran the restaurant, testified against him in return for the dropping of similar charges against her.

The District of Columbia went to court to claim $4,815 seized from Wong's Ambassador Hotel suite in an October 1975 police gambling raid. This suit eventually was settled with the District getting $2,626 and Wong keeping the rest.

From February 1975 until the time of the raid, according to police affidavits filed in court, Wong was "the central organizer" of a $2,000-a-night Chinatown gambling operation for which he was later convicted. Inside 606 H St. NW, the On Leong building, police said, gamblers played such games as fan-tan, trying to guess a number of buttons from one to four, and mahjong, a game played with domino-like pieces.

From the four-story red brick building at 606 H St., police said, a briefcase "containing the records and monetary proceeds of the illegal gambling organization" to Wong's Moongate restaurant "where the money and work is sometimes tabulated and placed back into the briefcase.

"It is then hand-carried to the 12th floor (hotel) apartment of Mr. and Mrs. Sam F. Wong," the affidavit said, "by either Sam F. Wong or his wife Louise Wong, always in the company of a security guard."

On April 9, 1976, Wong pleaded guilty to one felony count of operating an illegal gambling business and, two months later, was placed on five years probation. His troubles did not end there.

Prosecutors sought to revoke his probation when Wong's wife alleged in court papers that he had threatened and assaulted her and "had been damaging their hotel business by emptying various checking accounts of large amounts of money, 'bouncing' checks, and failing to timely pay business debts.

"Mrs. Wong," said the motion filed by Assistant U.S. Attorney Joesph McSorley, "doesn't know to what use Mr. Wong is putting the money he has been withdrawing from various accounts. Moreover, she stated that Mr. Wong has been looking for his passport, and this raises the inference that possibly he may be planning to go abroad."

Wong neither left the country nor had his probation revoked. About the same time, however, the four banks sponsored by the Chinese Free Masons of which he was president went broke.Depositors who sought to enter the Free Masons building found it closed.

According to the lawsuit subsequently filed, the Free Masons guaranteed the banks' solvency and the distribution of funds "that should have been paid by the bankers to members."

The local Free Masons' only asset, however is their building at 817 Sixth St. NW, valued at $65,000, according to attorney Ducker. Its sale, however, is opposed by the national officers who journeyed to Washington last year in a futile effort to resolve the dispute. CAPTION: Picture 1, This building at 817 Sixth St. NW. is valued at $65,000 and is the only asset of the Washington Chinese Free Masons, it is reported. By Margaret Thomas -- The Washington Post; Picture 2, Sam Wong had considerable difficulty in trying to operate the Ambassador Hotel at K and 14th Streets, Legal difficulties followed. By James K.W. Atherton -- The Washington Post