July 2 (Bloomberg) -- President Barack Obama criticized the bonus-driven culture of financial trading desks at Wall Street banks as a risk to the stability of the financial system.
Obama said in an interview to be aired tomorrow on American Public Media’s Marketplace radio program that an “unfinished piece of business” is to address banks that “take big risks because the profit incentive and the bonus incentive is there for them.”
Obama said banks need to change “how they work internally” to alter incentives for traders.
“Right now, if you are in one of the big banks, the profit center is the trading desk, and you can generate a huge amount of bonuses by making some big bets,” Obama said. In the event of “a really bad bet,” he added, “you might end up leaving the shop, but in the meantime everybody else is left holding the bag.''
Obama said the 2010 Dodd-Frank financial regulatory law that his administration backed has reduced the risk by requiring banks to hold more capital as a cushion against a financial institution triggering a broader crisis. It also reduces the risk to taxpayers, he said.
Still, he said, he has told his economic team that the administration should take steps ‘‘to continue to see how can we rebalance the economy sensibly, so that we have a banking system that is doing what it is supposed to be doing to grow the real economy.’’
The problem is ‘‘going to require us looking at additional steps we can take,’’ Obama said, without specifying what those might be.
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