US Presidential Election 2012

Stop rewarding bankers for risky bets, Obama says

PUBLISHED : Saturday, 27 October, 2012, 12:00am
UPDATED : Saturday, 27 October, 2012, 3:47am

President Barack Obama has said the next important step for making the US financial sector safer is to make sure executive pay is less closely tied to risky bets.

In an interview in the latest Rolling Stone magazine, Obama says that despite passage of Dodd-Frank financial reform legislation, there is more to be done to make financial markets safe after the damage caused by the crisis of 2007-2009.

"The single biggest thing that I would like to see is changing incentives on Wall Street and how people get compensated," Obama says. It's questionable, even after enactment of Dodd-Frank reforms, that those incentives have completely been changed, he adds.

The Rolling Stone interview has stirred controversy because of the president's use, at one point, of a barnyard epithet in a hypothetical reference to Republican Mitt Romney.

Obama is quoted as saying: "Kids have good instincts. They look at the other guy and say, 'Well, that's a bulls***ter, I can tell'."

The White House did not dispute the remarks but a re-election campaign official stressed that the comments were "part of a casual conversation at the end of the interview".

The wide-ranging interview covers Obama's first term, what he views as his biggest accomplishments and his fierce fight with Romney for the White House.

Obama says the stability of markets is still at risk because people making risky bets are handsomely rewarded if the bets pay off, but face limited consequences if those bets go sour.

"It tilts the whole system in favour of very risky behaviour," he says.

"By the time the chickens come home to roost, they're still way ahead of the game."