Oct. 3 (Bloomberg) -- Goldman Sachs Group Inc. must be careful about handing out record bonuses while the banking industry is still under distress to avoid spurring an outcry from Congress, U.S. Senator Mark Warner said.

“I do hope that Goldman Sachs will be a little more sensitive to the optics of their actions,” Warner, a member of the Senate Banking Committee, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” being broadcast this weekend.

Goldman Sachs, the biggest U.S. securities firm before converting to a bank holding company in September 2008, set aside $11.4 billion for pay in the first six months of this year after reporting record earnings. The company must be mindful of the public mood even though it has repaid U.S. aid and has traditionally tied pay to long-term performance, Warner said.

“They ought to be sensitive to the fact that the whole industry is still under a great deal of scrutiny,” the Virginia Democrat said. “You can end up seeing a reaction on the Hill if there’s not some of that sensitivity.”

Goldman Sachs spokesman Ed Canaday declined to comment.

Warner said the banking committee will finish drafting legislation based on President Barack Obama’s proposal to overhaul U.S. financial regulations this month and will meet in November to consider amendments. The legislation can be finished next month, he said.

“If we did not learn the lessons of the worst financial meltdown in all our lifetimes and try to put new rules of the road in place, I think it would be a disaster,” Warner said.

Council of Regulators

Warner said he supports creating a council of regulators to monitor systemic risk that would include the Federal Reserve and the Treasury Department, adding that there is a sense on the committee that setting up a council is the “right way” to go.

The banking panel will consider creating a single bank regulator by merging the oversight powers of the Federal Reserve and the Federal Deposit Insurance Corp., with the Office of the Comptroller of the Currency and the Office of Thrift Supervision, Warner said. The committee plans to take into account the concerns of community bankers, who say merging the four bank regulators would make them “a stepchild” to larger banks, Warner said.

Warner said the government shouldn’t have a say in who replaces Kenneth Lewis as chief executive officer of Bank of America Corp.

“I actually think that the board ought to be making that decision,” Warner said. “The government micromanaging these companies -- that is a very dangerous place to be.”

‘Arbitrary Cap’

Warner dismissed discussion about setting limits on Wall Street compensation, saying it’s “really hard to set an arbitrary cap.”

“The private sector will always find a way around that,” he said. “If too much risk was taken and we end up seeing the institution go down, some notion of a clawback makes a lot of sense.”

Warner said the Senate will pass a health-care bill this year with 60 votes, adding that he hoped to see Republican support for the legislation.

Republicans haven’t supported the legislation even after Democrats on the Senate Finance Committee agreed to such compromises as excluding a government-run insurance program from its legislation, Warner said.

Warner said Virginia voters’ concern about what is happening in Washington is causing Creigh Deeds, the Democratic party’s gubernatorial candidate in Virginia, to fall behind.

“He’s got a month to close this race,” Warner said. “We can turn out the more moderate voters if we can make this a choice not about what is going on in Washington, but about the record of the last eight years in Virginia.”