Obama criticises Wall Street’s ‘big bonuses for bankers’ culture
United States President Barack Obama has attacked the risk-taking, big bonus culture of Wall Street, claiming that it poses a threat to the economic security of the country.
Speaking in an interview with the radio programme Marketplace, he promised that he would do everything in his power to make the financial world more transparent.
Mr Obama said that while a lot had been done in the way of improvements, following on from the credit crunch of 2008, there was still “unfinished business” – the system requires further and deeper reforms.
“You can generate a huge amount of bonuses by making some big bets; you will be rewarded on the upside,” he told the interviewer.
“If you make a really bad bet, a lot of times you’ve already banked all your bonuses. You might end up leaving the shop, but in the meantime everybody else is left holding the bag.”
One of the things that the United States president is calling for is a fundamental rethink in the way that banks operate, especially in terms of trading.
What is required is a transformation in the way traders are incentivised to make money – there has to be less risk involved but with the same possibilities of success.
Another problem is changing the nature of Wall Street and the engine behind its growth. Mr Obama explained that over the last 60 years, revenue has increasingly been generated on arbitrage – trading bets.
Instead, what should be producing revenue, for Wall Street and the economy at large, is greater investment in companies that deliver tangible goods and services, and actually employ people.
“What I’ve said to my economic team, is that we have to continue to see how we can rebalance the economy sensibly,” he expanded.
“So that we have a banking system that is doing what it is supposed to be doing to grow the real economy, but not a situation in which we continue to see a lot of these banks take big risks because the profit incentive and the bonus incentive is there for them.”
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