Looting Made Easy: the $2 Trillion Buyback Binge…”Corporations are taking the retirement savings of elderly public employees and using them to inflate their stock prices”
By Mike Whitney
Global Research
August 28, 2015
Corporations are taking the retirement savings of elderly public employees and using them to inflate their stock prices so wealthy CEOs and their shareholders can enrich themselves at the expense of their companies. And it’s all completely legal. Under current financial regulations, corporate bosses are free to repurchase their own company’s shares, push stock prices into the stratosphere, skim off a generous bonuses for themselves in the form of executive compensation, and leave their companies drowning in red ink.
Even worse, a sizable portion of the money devoted to stock buybacks is coming from “massively underfunded public pension” funds that retired workers depend on for their survival. According to Brian Reynolds, Chief Market Strategist at New Albion Partners, “Pension funds have to make 7.5%,” so they are putting their money “in these levered credit funds that mimic Long-Term Capital Management in the 1990s.” Those funds, in turn, “buy enormous amounts of corporate bonds from companies which put cash onto company balance sheets…and they use it to jack their stock price up, either through buybacks or mergers and acquisitions…It’s just a daisy chain of financial engineering and it’s probably going to intensify in coming years.” (“How a Public Pension Crisis Is Driving an Epic Credit Boom“, Financial Sense)
So, once again, ordinary working people are caught in the crosshairs of a corporate scam that could blow up in their faces and leave them without sufficient resources to muddle through their retirement years.
The amount money that’s being funneled into buybacks is simply staggering. According to Dave Dayen at the Intercept:
“Last year, companies spent $553 billion to repurchase outstanding shares, just short of the record $589.1 billion in 2007. Large companies like Apple, General Motors, McDonald’s, Pfizer, Microsoft and more have engaged in buybacks in recent years.
Returning profits to shareholders through buybacks and dividends accounted for 95 percent of all earnings in 2014. As a result, each additional dollar of corporate earnings now translates to under 10 cents of reinvestment, according to a study by J.W. Mason of the Roosevelt Institute.”
(“SEC Admits It’s Not Monitoring Stock Buybacks to Prevent Market Manipulation“, Dave Dayen, Intercept)
The Rest…HERE
