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First-term Sen. Mark Warner, D-Va., has becoming a leading voice in the Senate on efforts to overhaul regulation of the financial-services industry.

Along with Sen. Bob Corker, R-Tenn., he's been hosting a series of bipartisan briefings with top industry and government voices - Fed Chairman Ben Bernanke was a recent guest - as the Senate prepares in the coming weeks to roll out its plan to revamp regulation.

Warner sat down with Dow Jones Newswires on Wednesday to discuss the issues facing lawmakers. An edited transcript follows:

DJN: You've proposed legislation giving the Federal Deposit Insurance Corp. the authority to wind down large bank holding companies. What should the government do about firms such as American International Group Inc. (AIG)?

Sen. Warner: "The problem is that AIG wasn't a bank holding company. Yes, a bank holding company authority gets at a lot of the issues, but what if the next one was a company like GE Capital? What we're sorting through, is do you leave that authority for non-depository institutions to a systemic risk council rather than empowering the Fed with that authority. The systemic risk council might be the place to identify those financial institutions that are non-depositories."

DJN: How do you see such a council operating?

Sen. Warner: "My view is at least you'd have an independent chair, it would have some staffing, it would draw upon information from each of the prudential regulators. Its sole focus would be to serve as the tripwire; it wouldn't have safety and soundness, it wouldn't have monetary policy, it wouldn't have all the normal day-to-day responsibilities. There might even be systemically risky actions that aren't simply in a single institution but in aggregate..."

"The council would have the ability to start putting in place, whether it be the ability to say 'We need to see a so-called funeral plan approach of how you would unwind such an institution,' or it might be larger capital requirements. There's a real consensus here from everybody - Democrats, Republicans, the Fed - that nobody wants to hear again the too-big-to-fail moniker. You can't put an arbitrary cap on size, but you can make increased capital requirements based on size, based upon the behavior of your risk products..."

"What we want to avoid in this case is the implicit moral hazard argument that we're somehow going to shore up these institutions. Instead, we want to see them into receivership, we want to see them if they fail be able to have them unwound and put out of business and have management and equity holders and debt holders bear the risk."

DJN: Where do you stand on a Consumer Financial Protection Agency?

Sen. Warner: "There is a real sense that there needs to be enhanced consumer protections, particularly for the non-regulated sections of the financial industry. It's an open debate as to whether that's better served as built into the prudential regulator or as a stand-alone agency, and there's also a question where you might have a stand-alone agency to write the rules, but have the prudential regulators enforce those rules."

DJN: The administration and House and Senate leaders are pushing for legislation to pass this year. Do you think that will occur?

Sen. Warner: "There are still timing questions. I don't know whether it's something, if it's on the president's desk at the end of this year or early next year..."

"I just don't see how we cannot act. We've just gone through the worst fiscal crisis in 75 years, we've seen enormous problems with the regulatory structure, enormous holes, actions that were irresponsible and in some places criminal, and the industry was for at least the first six months of the year was acknowledging [the need for change]..."

"I think the biggest thing you have to fight with some members is that this stuff is so complicated that sometimes you can just throw up your hands and default to the status quo. As you start going down some of these paths like the resolution authority for non-bank financial institutions - how do you sort it through, how do you pre-fund it - there are problems at every turn. But you can't just punt."

- By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com

(Corey Boles contributed to this article.)