(Adds comment from Oklahoma City National Memorial, news conference)

Aug 14 (Reuters) - An Oklahoma man angry with the government has been arrested by the FBI on charges that he tried to blow up an Oklahoma City bank building with a van he thought was packed with explosives, U.S. prosecutors said on Monday.

Jerry Varnell, 23, of Sayre, Oklahoma, was taken into custody on Saturday after an eight-month investigation. Federal prosecutors said he wanted to use an explosive device similar to the one that was detonated outside a federal building in Oklahoma City in 1995, killing 168 people.

According to a criminal complaint, Varnell told an informant for the Federal Bureau of Investigation that he was seeking retaliation against the government and financial institutions.

"I'm out for blood,'" the complaint quoted Varnell as saying.

Federal prosecutors said in a statement the device he sought to detonate was inert, and the public was not in danger.

"He wanted to make the biggest impact wherever he was going to place this bomb," FBI agent Raul Bujanda told a news conference in Oklahoma City.

The BancFirst building is a few blocks from where the Alfred P. Murrah Federal Building once stood.

Bomber Timothy McVeigh used a fuel and fertilizer bomb to turn the Murrah Federal Building into a tomb of rubble on April 19, 1995, in one of the deadliest attacks in modern U.S. history. More than 680 people were injured. McVeigh was executed in 2001 for his role in that attack.

"We are disheartened that a young man who calls Oklahoma home would resort to domestic terrorism, knowing the deep sense of loss still felt by people impacted by the Oklahoma City bombing," the Oklahoma City National Memorial & Museum said in a statement. The memorial honors the victims, survivors and others affected by the 1995 attack.

Varnell made a brief appearance at a federal court in Oklahoma City on Monday and was scheduled to have a detention and preliminary hearing on Tuesday, said Scott Williams, a spokesman for the U.S. Attorney for the Western District of Oklahoma.

Prosecutors were not immediately able to say if Varnell had a lawyer.

Prosecutors said that during the investigation an undercover agent had posed as a co-conspirator and agreed to help Varnell build what he believed was a 1,000-pound (454 kg) explosive.

Agents arrested him after he made a call on Saturday to a mobile phone he believed would detonate a device in a van parked beside a BancFirst Corp building in downtown Oklahoma City, the complaint said.

Varnell was charged with malicious attempted destruction of a building in interstate commerce and could face up to 20 years in jail if convicted.