President Obama, who once called bank executives "fat cats" and their pay "obscene," says Wall Street needs to change executive pay incentives that reward risky bets that can yield fortunes but can also devastate financial institutions.
In an interview with Rolling Stone magazine, Obama says that despite congressional passage of a financial regulation overhaul in 2010, there still are not enough adequate means of holding risk takers in the industry accountable if their investment schemes fail.
"You still have a situation where people making bets can get a huge upside, and their downsides are limited," Obama says in the edition that hits newsstands on Friday. "So it tilts the whole system in favor of very risky behavior."
The wide ranging interview with presidential historian Douglas Brinkley covered topics ranging from Republican presidential challenger Mitt Romney's secretly recorded remarks to donors about Obama supporters to Supreme Court Chief Justice John Roberts' tie-breaking decision declaring Obama's health care plan constitutional.
Obama's appearance on the magazine's cover comes less than two weeks before the Nov. 6 election and underscores the president's outreach to young voters in key battleground states. Obama also has agreed to a cable television interview with MTV that is to air Friday.
When Congress wrote new financial regulations two years ago, it included "say on pay" provisions giving shareholders the right to vote on executive pay packages. But Obama said there was still a need to limit compensation, though he said it could be accomplished with a mix of legislation and corporate governance.
"I think a legitimate concern, even after Dodd-Frank, is, `Have we completely changed those incentives?"' Obama said, referring to the legislation by the names of its two chief Democratic sponsors, then-Sen. Christopher Dodd of Connecticut and Rep. Barney Frank of Massachusetts.
"These days, you've got guys who are making five years of risky bets, but it's making them $100 million every year," Obama told Brinkley. "By the time the chicken comes home to roost, they're still way ahead of the game."
In the interview, Obama also said he was not surprised by Roberts' decision upholding the constitutionality of the health care law. Roberts upheld the individual insurance requirement at the heart of the law as a tax, but rejected Obama administration arguments that the mandate was justified by the Constitution's clause giving Congress power over interstate commerce. That clause has been used to justify congressional authority for most federal programs since President Franklin D. Roosevelt's New Deal in the 1930s.
Obama, a former constitutional law professor, shared the view of some legal scholars who say Roberts rejected the Commerce Clause argument to give himself flexibility to restrict congressional power in the future.
"It was interesting to see them, or Justice Roberts in particular, take the approach that this was constitutional under the taxing power," Obama said. "The truth is that if you look at the precedents dating back to the 1930s, this was clearly constitutional under the Commerce Clause. I think Justice Roberts made a decision that allowed him to preserve the law but allowed him to keep in reserve the desire, maybe, to scale back Congress' power under the Commerce Clause in future cases."
Obama said he was surprised, however, when Romney, in remarks meant to be private, told donors in May that the 47 percent of the public who backed Obama believed they were victims and were entitled to government assistance. Obama has used that remark to portray Romney as out of touch.
"That sense that folks who have contributed to this country but are at the lower ends of the income scale are somehow looking for government to do something for them, or feel some sense of entitlement, is just fundamentally wrong," he said.
With Halloween approaching, Brinkley, in a lighter moment, asked what he would like Romney to wear as a costume.
"I don't know about this Halloween," Obama replied. "Next Halloween I hope he'll be an ex-presidential candidate."