Greed & Corruption – American Decline – Part 9

Authors: Aleksandar Adzic & Gemini

Aleksandar:

Is the banning of stock buybacks practically impossible due to the lobbying and corruption of legislators?

Gemini:

The power of corporate lobbying is immense. However, saying a ban is “practically impossible” ignores several historical and current trends. These trends suggest the tide could turn. Economic policy is rarely permanent; it functions like a pendulum that swings between deregulation (favoring capital) and regulation (favoring labor).

The path to a ban—or at least significant restriction—is difficult. However, there are several “cracks in the armor” of the current system.

1. The Power of Public Perception

Legislators are sensitive to the “Corruption Narrative.” Recent data shows that over 80% of Americans (across both parties) support banning members of Congress from trading stocks. While stock buybacks are a more technical issue, they are increasingly being linked in the public mind to:

• Stagnant Wages: The argument that “the money for your raise went to a billionaire’s buyback” is a powerful political tool.
• National Security: In early 2026, figures like Donald Trump threatened to ban buybacks for defense contractors. They argued that the money should be used to “build things” rather than enrich shareholders. This frames buybacks as a threat to national strength, which can override traditional corporate lobbying.

2. The “Salami Slicing” Approach (Incrementalism)

Total bans are rare in modern politics, but “death by a thousand cuts” is common. We are already seeing this:

• Taxation: The U.S. implemented a 1% excise tax on buybacks in 2022. There are active 2025-2026 proposals to increase this to 4%. If the tax becomes high enough, buybacks become “economically irrational” compared to reinvestment.
• Sector-Specific Bans: During the COVID-19 pandemic, airlines were banned from buybacks as a condition of their bailouts. This set a legal and political precedent: If you take public help, you cannot engage in financial engineering.
• Disclosure Rules: The SEC has recently pushed for daily reporting of buyback activity. Forcing CEOs to “show their work” in real-time adds transparency. It makes it much harder to manipulate the stock price without getting caught by regulators or the press.

3. The “Institutional” Counter-Pressure

Not all powerful groups want buybacks.

• Pension Funds: Long-term investors, such as teacher retirement funds, often prefer that a company reinvests in its future. This approach makes the stock valuable in 20 years. They are increasingly voting against “short-termist” boards.
• National Competitiveness: Governments are starting to realize a critical issue. If their domestic companies, like Intel or Boeing, spend all their cash on buybacks, problems arise. Meanwhile, foreign competitors, such as TSMC or Airbus, dedicate theirs to R&D. As a result, the country loses its industrial edge. This makes a buyback ban a matter of National Industrial Policy rather than just “fairness.”

4. The Obstacles (Why it feels “Impossible”)

The lobbying you mentioned is the primary barrier. Corporations spend billions to ensure that:

1. The Safe Harbor (Rule 10b-18) remains intact.
2. Executive Compensation remains tied to stock prices. When a CEO’s personal wealth depends on the stock price, they will invest heavily in lobbying. This is done to keep the buyback tool available.
3. Dark Money allows them to fund the campaigns of “pro-buyback” candidates without the public knowing who is paying.

Summary: Is it Impossible?

Conclusion: A “practical” ban is more likely to come in the form of heavy taxation or stringent requirements (e.g., “you can only buy back stock if you pay a living wage and invest 2x that amount in R&D”). This bypasses the political difficulty of an outright “ban” while achieving the same result.

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adzica

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