WASHINGTON — Federal Reserve System leaders want Congress to address what they see as problems with industrial loan corporations, while Edward Leary, commissioner of the Utah Department of Financial Institutions, and Sen. Bob Bennett, R-Utah, told a Senate panel Thursday that there is no need to change the nation's banking laws.

Bills in the House and Senate would prevent retail companies from getting into the banking business. Utah is one of seven states that grant charters to the banks, known as ILCs. But critics see the banks as a dangerous combination of commerce and banking.

Retailers Wal-Mart and Home Depot have applied in the past for an ILC charter, but the Federal Deposit Insurance Corp. announced in January that it would not accept any more applications for a year, until Congress could sort out potential problems with the banks.

Scott G. Alvarez, general counsel for the Board of Governors of the Federal Reserve System, told the Senate Banking, Housing and Urban Affairs Committee that because of the "potential future expansion" of these types of banks, Congress needs to examine banking laws.

"Only Congress can craft a solution that addresses the full range of issues created by the ILC exception in a permanent, comprehensive and equitable manner," Alvarez said. "Your decisions on these matters also will influence the structure, soundness and resiliency of our financial system and economy."

But Bennett, who sits on the Senate banking committee, pointed out that Utah has never granted a charter to an ILC that has failed.

"This is neither by accident nor loophole," Bennett said, referring to strong regulations that prevent problems from occurring.

Utah is home to 31 of the 59 ILC banks in the United States and holds $200 billion in ILC bank assets. O'Leary pointed out that the banks "are subject to the same banking laws and are regulated in the same manner as other depository institutions."

"My belief is that this committee should not consider rewriting banking laws to address the desires of particular industry groups or trade associations whose desire is to suppress competition," O'Leary said.

The House Financial Services Committee passed a bill in May that would prevent nonfinancial companies from owning an ILC, but no action has been taken yet on the Senate version of the bill.

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