Were Obama’s comments on Wall Street pay out of touch?
It’s been a while since President Obama took a public shot at Wall Street. Maybe he was just saving up for a good one.
The president, while lauding the positive effects of Dodd-Frank, went out of his way to criticize trading desks at big banks, which he feels incentivize risk through, among other things, their bonus structure.
He called profit incentives at big banks an “unfinished piece of business” for his administration, and said he will look to take “additional steps” to rein in risky trading behavior. He didn’t offer any suggestions as to what those steps would be.
“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,” he said on an American Public Media’s Marketplace radio show. If those bets go south, “everybody else is left holding the bag.
His comments are, quite frankly, a bit odd, if no other reason than their timing. Trading desks are being throttled by low volatility, new regulations and fallout from maneuvers of central banks.
Traders saw a huge pay cut last year and are on pace for an even less fruitful 2014. Layoffs are occurring across the board. And reform over how traders are paid has already happened, though maybe not to his standards.
Most traders aren’t sitting at their desks, smoking cigars and counting hundred dollar bills. They’re grinding it out, trying to stay employed.
Plus, with the ban on proprietary trading, banks are no longer placing singular bets that could cripple their institution or affect the overall economy.
Obama’s comments were “just weird,” said Alan Johnson, founder of Wall Street compensation consultancy Johnson Associates. I have to agree. His words would have been more befitting in years past. I felt like I was reading an old interview someone dragged up.
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Quote of the Day: “Trading is so far down from the peak, they’ve spent an endless amount of time and energy to reform trader pay -- to say that trader pay needs to be reformed is just bizarre.” – Alan Johnson