Leave it to the nim-witted politicians to come up with a plan that prevents corporations from buying back their shares. During the greatest market crash of our lifetimes, they want to keep the few entities capable of creating a market from helping us. They may as well shut down the markets if they’re not going to allow them to function as they’re designed.
These are the same people that want to prevent short-selling and other important market clearing processes. But buybacks in particular creates great benefits to all shareholders large and small. Let’s face it, we all own stocks – especially the big ones. Government employees, the largest single buying group of shareholders in blue-chip stocks via their Federally sponsored Thrift Savings Account (TSA) particularly the C Fund. The only thing that makes these stocks go up is people buying them. When nobody else can buy them, some of our politicians want to prevent the last bastion of hope. They prefer these corporations pay higher taxes or greater dividends, but buybacks are better.
Buybacks give shareholders the choice. If shareholders want or need cash from their investment, there is somebody to provide that liquidity. If they don’t want the cash, they definitely appreciate the gain in share value and those benefits show up in other economic ways such as Consumer Confidence, one of the most important forward looking indicators. This is exactly the same as the Fed buying back bonds to stabilize the price of debt, or paying Cash for Clunkers.
In short, politicians hand-cuffing the professionals that provide liquidity at times like this is a greater, much longer lasting virus, that threatens everybody not just the most vulnerable.