Primer on Rule 10b-18 - Stock buybacks.
 

(as airlines are mentioned specifically, by name in this article, and airline CEO's are adamant that they will not accept loans with "no stockbuyback" clauses, this timely)The S.E.C. Rule That Destroyed the Universe

Anyone who wants to grok the genesis of the absolute evil that are "stock buybacks" needs to read the Rolling Stones article about the CFR Rule 10b-18 that changed everything way back in 1982. Prior to this rule change, a company repurchasing its own stocks in quantity was generally regarded as outright illegal stock price manipulation. With executives subject to jail time if they got caught. Previous to this rule, profits were mostly returned to shareholders via dividends or reinvested into the business.

From the article "Board members chosen by shareholders could raid their own companies assets to buy stock and goose share prices... Employees, customers, and society were suddenly in direct competition for resources with executives and shareholders. Should a company invest in a new factory, or should it just deliver instant millions to shareholders and executives paid in options?"

If you want to understand why trillions in profits for decades have been dumped into executive compensation and giant hedge fund stock holders, look no further. It's immoral, anti-capitalist, highly destructive, but thankfully, fixable. And now might be the time.

Actually, it’ immoral, highly destructive, and quintessentially capitalist. It’s emblematic of our out-of-control capitalism. Needs to be fixed.

Along that vein, this is a little more technical article from successful venture capitalist and Professor at NYU Stern School of Business. Capitalists or Cronyists - Scott Galloway.

If you want to know why people are furious at bailing out airlines, and why CEO's are adamant about "no strings attached" money from USG....

I'll quote the relevant part here:

"The rescue package should protect people, not businesses. From 2017 to 2019, the CEOs of Delta, American, United, and Carnival Cruises earned over $150 million in compensation. But, now … “We’re in this together” (i.e., “bail our asses out”).

The rescue package should protect people, not businesses. From 2017 to 2019, the CEOs of Delta, American, United, and Carnival Cruises earned over $150 million in compensation. But, now … “We’re in this together” (i.e., “bail our asses out”)."

Thanks Bernie!!

Reminds me of the Churchill quote:

"The problem with socialists is Socialism. The problem with Capitalism is capitalists."

Bernie 2024?

After the 33 year experiment with the 1987 rule change of 17 CFR 240 10b-18 - Purchases of certain equity securities by the issues and others...

Maybe something more than a little zinger would be in order?

These CEO's, and more specifically, airline CEO's are more corporate raiders than capitalists. They've done nothing illegal, but the old saying "The best way to rob a bank is to own one" comes to mind.

I'm not inclined to agree to any ALV reduction, or hourly wage reduction, or anything else. Based solely on the incredible waste of stock buybacks; something that was criminal until 1987, then magically wasn't, and while CEO pay has gone through the bloody roof, everyone else's wages have stagnated.

So change the law... Quit dumping it in the lap of “that darn capitalism!”

If you’ve got a better system than capitalism let’s hear it! And provide concrete examples of where it’s worked.....

Just to provide balance, another opinion,

https://www.aier.org/article/in-defe...hare-buybacks/

Companies that buy back their own stock don’t see better investment opportunities inside the company or industry. Holding lots of excess cash is an invitation for raider mischief. Taibbi mentions debt trades for stock. Well, the problem isn’t stock buybacks, it’s our stupid tax code taxing income wherever it is earned forcing companies to hold cash overseas rather than repatriate it. Ask any American expat how nasty the US code.

Keep the system but like you said, change the law. In order to change the law, we need to vote for people that will change the law. I don't know many Republicans that would vote to change this law.

The stock buybacks are not a byproduct of out of control capitalism, rather they are a misuse of capital at the hands of immoral managers. The corporate executives are not the ones who contributed the capital, yet they are given control over it, then abuse that control for self enrichment.
The proper method for returning capital to the owners is via dividends. IF a company repurchases shares, any equity/earnings based compensation should require a per share adjustment that reflects the reduced number of shares. A buyback must be accounted for in the same way a reverse split is treated by Wall Street.

Properly regulated capitalism is the best system there is. Bar none. But what we have no is out of control capitalism. Stock buybacks used to be illegal, one day, they are not. There are many other issues where we’ve done away with regulations, always to the benefit of the .001%

Reagan and the post-Reagan republican corporatists have destroyed what was once good about capitalism.

Bernie is my choice for capitalist #1.

Q1 earnings next week for many companies. I hope Bernie's one Netflix account for all senior citizens becomes a reality.

Weird how you blame Reagan, but the Speaker of the House in 1987 was one Jim Wright (D) of Texas, having followed Tip O’Neill (D) of Massachusetts that had held the position for the previous 10 years. Weirdly, Robert Byrd (D) of West Virginia of KKK fame was the majority leader in the Senate. Reagan must have really had some sort of mind control tricks to get get two democratic leaders, well seasoned in politics, to give him stock buybacks late during his second term.

I don’t disagree regarding the moral hazard of executive compensation and stock buybacks, but retreating to your priors (ie your ideological bent) to blame someone you don’t like is at best lazy and at worst intellectually dishonest. I would be much more interested in hearing ideas on how to entice executive talent without creating moral hazard for them to harm their own companies in order to line their own pockets.

Good article, and I appreciate you posting it.

I'm not an economist: but it stands to reason that there has to be a way to avoid raider mischief: Apple has an unreal amount of cash, but you don't see huge banks buying it out to raid their cash reserves. Which, since legal, would be a totally "capitalist" thing to do. At least for the purchaser...not so much for a hollowed out Apple.

Plenty of regulatory changes that need to happen; now seems like an extraordinarily good time to do it.

But at the very least, I'd rather see "excess" profits returned to shareholders via dividends.

i thought regulations were holding ‘Murica back?

/sarc

Maybe we need more "community reinvestment acts" that mandate relaxed lending and trillions in pumped up air to inflate, bust and reinflate real estate bubbles, for social justice and great success!

Housing is a "human right" though, so once its free it won't cost a thing.

I too hate it when human rights get in the way. I thought we were gonna MAGA that away?

Oh no, not even close. Since everything is a human right and we're nothng but citizens of the world in a global democracy, the entire planet will get to take whatever it wants. The only thing we ask for in return is fealty to our leaders.

Always remember, real socialism/communism has never been tried, and the only thing wrong with the previous attempts were the lack of sufficient power, authority and control. Now that we've reached the golden age of peace prosperity and safety, there is no longer any downside.

Rome, but slaves...

We are 244 years into the democratic capitalistic experiment. How it going currently? It's all I know so I hope it's the best system but others have been wrong before. The principles are right in my opinion, freedom, justice, and equality.

Any time people try to change the law to prevent capitalist overreach and exploitation, the right mindlessly screams at the top of its lungs about “muh free market!!!” and “but but but regulation is bad” and “socialism!!!!”

it’s kinda hard to change the laws to prevent this when half the country is bootlicking, temporarily embarrassed billionaires.

Weird how you immediately returned to your ideological priors. Last time you claimed it was Reagan and his ilk that changed the law and did this to us, but both houses of Congress were controlled by the Democratic Party, so either Reagan had a magical touch during his final two years (hardly the case because this is the Iran-contra period), or Democrats also had a hand in the rule change (one might say the majority hand since they controlled both houses of Congress).

You might do well to do real research and analysis rather than casting aspersions of those you don’t like politically.

I’m not sure I ever claimed I supported the Democratic Party in any way, but I’ll leave that to you. If you want to pretend that the entirety of reaganomics was a Democratic Party construct, that also is your right.

Well said, wrote my Congressman about it. Thx

For those of you that want to make sure the Democrats share the blame along with Reagan and the Republicans for CFR Rule 10b-18, please bear this in mind: NO LEGISLATION was involved. It is an SEC REGULATION. Since this administration has been so keen on striking down regulations, here is a great candidate for deletion.