Repurchases done on the open market, which constitute the vast majority of all buybacks, are nothing but manipulation of the stock market. So why are companies allowed to do them? Because of the 1980 election of Ronald Reagan as president on a platform of market deregulation. In November 1982, after Reagan had appointed Wall Street banker John Shad as chairman of the Securities and Exchange Commission (SEC), the agency adopted Rule 10b-18, which permits a company to do buybacks that can amount to hundreds of millions of dollars per day, trading day after trading day, without fear of being charged with stock-price manipulation. Rule 10b-18, which remains in force 35 years later, is a license to loot the U.S. business corporation.
The argument for rescinding Rule 10b-18 is overwhelming. As research I’ve done with the Institute for New Economic Thinking documents, buybacks wreak immense damage on households, companies, and the economy. The profits that major corporations reinvest in productive capabilities form the foundation for a prosperous middle class. Buybacks deprive companies of that investment capital, instead serving as a prime mode of making the richest households richer while eroding middle-class employment opportunities.
Link here.
The argument for rescinding Rule 10b-18 is overwhelming. As research I’ve done with the Institute for New Economic Thinking documents, buybacks wreak immense damage on households, companies, and the economy. The profits that major corporations reinvest in productive capabilities form the foundation for a prosperous middle class. Buybacks deprive companies of that investment capital, instead serving as a prime mode of making the richest households richer while eroding middle-class employment opportunities.
Link here.
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