David F. Ruccio — Buyback this!

I have been arguing, since 2016 (e.g., here, here, and here), that one of the likely outcomes of the kind of corporate tax cuts Donald Trump and his fellow Republicans have supported—and, as we saw, eventually rammed through—would be an increase in inequality. That’s because corporations would likely use a portion of their higher profits to engage in stock buybacks, leading to an increase in stock prices. And stock ownership in the United States is already grotesquely unequal. Therefore, the rise in equity prices would disproportionately benefit the small group at the top of the wealth pyramid.

And that’s exactly what is happening. As CNN Money reports, U.S. corporations have showered Wall Street with $214 billion of stock buyback announcements so far this year....

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Buyback this!
David F. Ruccio | Professor of Economics, University of Notre Dame

Pam and Russ Martens — Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes

Last Monday, Thomas Hoenig, the Vice Chairman of the Federal Deposit Insurance Corporation (FDIC), sent a stunning letter to the Chair and Ranking Member of the U.S. Senate Banking Committee. The letter contained information that should have become front page news at every business wire service and the leading business newspapers. But with the exception of Reuters, major corporate media like the Wall Street Journal, Bloomberg News, the Business section of the New York Times and Washington Post ignored the bombshell story, according to our search at Google News.

What the fearless Hoenig told the Senate Banking Committee was effectively this: the biggest Wall Street banks have been lying to the American people that overly stringent capital rules by their regulators are constraining their ability to lend to consumers and businesses. What’s really behind their inability to make more loans is the documented fact that the 10 largest banks in the country “will distribute, in aggregate, 99 percent of their net income on an annualized basis,” by paying out dividends to shareholders and buying back excessive amounts of their own stock.

Hoenig writes that the banks are starving the U.S. economy through these practices and if “the 10 largest U.S. Bank Holding Companies were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5 percent of annual U.S. GDP.”...

Hoenig also urged in his letter that there be a “substantive public debate” on what the biggest banks are doing with their capital rather than allowing this “critical” issue to be “discussed in sound bites.”

Much more in the post.

Wall Street On Parade
Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes
Pam Martens and Russ Martens

Zero Hedge — Why CEOs Love Buybacks (In 1 Simple Chart)

Zero Hedge
Why CEOs Love Buybacks (In 1 Simple Chart)
Posted by Tyler Durden

Just deserts based on performance and merit, or rent extraction?