HAVING OFFERED "banking" services to thousands of people in the District, many of whom are Spanish-speaking immigrants, Fernando Leonzo is now in plenty of hot water. This is not simply because his company, the Latin Investment Corp., has been operating for years as a bank without a charter or deposit insurance, although that's fairly obvious by now. Rather it's because last week, Mr. Leonzo abruptly locked his doors on thousands of Latin Investment Corp. customers when he could no longer meet their demands for their own money.

Where was government during all of this? It turns out that officials have suspected since 1987 that Latin Investment was illegally operating a banking business in this city. The District banking superintendent's office, in fact, had called in the company in January of 1988 after being notified by the U.S. Securities and Exchange Commission and the Comptroller of the Currency that Latin Investment was possibly operating as a bank. But upon concluding that the company was performing basic banking functions unlawfully, the superintendent's office did not seek to shut it down, although this would have been a logical enforcement action to protect the unsuspecting depositor. That option, it should be noted, was arguably available under existing D.C. laws through the Department of Consumer and Regulatory Affairs.

Incredibly, the superintendent's office instead ordered the company to apply for a banking charter. If someone is discovered performing brain surgery without a license, is the proper remedy to order medical school attendance? When Mr. Leonzo ignored the superintendent's order, the Corporation Counsel was notified. The Corporation Counsel's office begged off, claiming lack of prosecutorial power and passed the buck to the U.S. Attorney. After sitting on the case for eight months, the U.S. attorney then forwarded the case to the IRS where it languishes today.

Meanwhile the consequences of official ineptitude, indifference and negligence are plain to see. The numbers of potential losers are as astonishing as the amounts they placed on deposit. Reportedly, more than 2,000 people have entrusted millions of dollars of their hard-earned money -- and in several instances, life's savings -- in Latin Investment Corp. accounts. Already anxious at being shut off from access to their own funds, they were hardly reassured, and probably alarmed, to be told by Mr. Leonzo last week that their money "was safely invested in real estate." Full recovery of their assets appears doubtful; with vigorous collection efforts, some portion can probably be restored. The problem, unfortunately, is greater than Latin Investment and those depositors. Another illegal bank has been uncovered serving what is reported to be part of a growing underground economy in the District, one that is largely immigrant, low-income and vulnerable. The list of phony banks -- and their victims -- could grow. The District government, having aggressively assumed responsibility for non-federally chartered banks from the federal government, has an obligation to create and implement a vigorous regulatory and enforcement program, immediately and without further finger pointing and weak alibis. Too much damage has occurred already. Thus far, the Office of Banking and Financial Institutions, under the direct supervision of its D.C. Council overseer Charlene Drew Jarvis, has been an empty shell of an agency and not much to bank on.