Dodd: Repealing Volcker Rule Would Be 'Huge Mistake'

While some changes to financial regulatory reform may be "legitimate," dropping the Volcker Rule all together would be a "huge mistake," Sen. Chris Dodd said Monday.

As chairman of the Senate Banking Committee, Dodd was the co-architect of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which President Obama signed into law on July 21. But with the GOP having won control of the US House of Representatives and made gains in the Senate following the midterm elections, Republicans could seek to change the bill or repeal it all together.

"The suggestion we should not either have a Volcker Rule or that you have one that's so tight that it doesn't allow for needed liquidity seems to be a huge mistake," Dodd said. "I do see the regulators coming up with a more nuanced approached than might otherwise been the case had you legislated in this area."

Whatever Republican lawmakers decide to do, Dodd said it is "critically important to maintain" three elements, including how it ends the notion that a financial institution is "too big to fail." Such institutions, he said, shouldn't be able to disregard the "rules of the road" and then expect a taxpayer-funded bailout.

The Bureau of Consumer Financial Protection, added Dodd, is another important element to maintain. It's a place to go should an individual be defrauded on a mortgage or on a stock, he explained.

Finally, Dodd said the Systemic Risk Council an important product that shouldn't go away. The Council, he explained, should look at financial issues and determine what's the best policy going forward.

Watch the video to see the full interview with Sen. Dodd.

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CNBC.com with wires.