TO HEAR IT from certain members of the D.C. Council or from Mayor Barry, the latest city hall action on a banking bill -- enactment, veto, override and self-congratulation all around -- actually was a fiendishly clever plan to extract all sorts of development dollars from local bankers who otherwise might not be nearly so generous. Believe that and you win an adjustable-rate mortgage on an orchard of money trees; unless some thinkers on the council start picking up the pieces of this mess, an opportunity to generate big loan money for the city's shortchanged neighborhoods will have been squandered.

You might wonder where everything stands at this point -- and maybe even how it got there. It all began with legislation from Mr. Barry which would allow banks in the District and 11 southeastern states to merge or acquire each other. Local bankers thought that was a wonderful idea because it would systematically exclude competition from the largest banks in the country, which are known as money centers. Then the money centers started pledging development loans, gifts and jobs on a scale never even approached by local bankers over the years. Mr. Barry saw this green light and proposed that, under certain conditions of generosity, the big banks might be included.

The council then passed the limited bill and Mayor Barry vetoed it. Meanwhile, local bankers began an all-out offensive to win over certain council members for an override of the veto. Suddenly there were new pledges of local money for needy wards if the members would vote to override. The local bankers also made a big fuss about investments of Citicorp in South Africa -- which gave some council members an excuse for voting against opening competition to all those bigger banks just because of investments by one of those banks.

Mr. Barry doesn't take defeats all that well and tried to find the votes to sustain his veto. But too many council members had been blinded by the local bank blitz. Now Mr. Barry is asserting that his veto was really a "strategic" move to "raise the level of consciousness of the community about banking" and to force local banks that backed the narrower bill to put up more development money.

If that makes the mayor feel better, let it be; but the test of what he and the council can and should do for the neighborhoods and for the individual customers of banks in this city is yet to come. There is talk of more legislation to address the question of what conditions might be attached to letting the bigger banks enter the local market and make good on their pledges of assistance. Will enough council members work with the mayor to enact a bill that could reap the fruits of genuine competition in banking here? The votes of each council member -- first in committee and later if legislation does emerge -- will bear close scrutiny.