Robert Armstrong and Laura Noonan wrote in the Financial Times that six of the largest banks in the U.S. will buy back more than $10 billion of their shares in the first quarter of 2021. Before we dive into why this is no legalized crime let explain what a buy back if for those of you who may not be familiar with the term. A stock buyback, which is also known as a share repurchase; occurs when a company buys back its own shares from the marketplace with its accumulated cash. A stock buyback is a way for a company to re-invest in itself. The repurchased shares are absorbed by the company, and the number of outstanding shares on the market is reduced. Because there are fewer shares on the market, the relative ownership stake of each investor increases….Including all the shares the company already owns, making the companies market cap increase but not based off of performance but solely of the power of purchasing its own shares and having the stock valuation increase as the absorb the demand of shares on the market. This unique tactic was actually illegal until 1982. The SEC, operating under the Reagan Republicans, passed rule 10b-18, which made stock buyback legal. Up until the passing of this rule, the Securities Exchange Act of 1934 considered large scale stock buybacks a form of market manipulation. After these banking elites pulled back on dividends and stock buybacks in early 2020 because of the plandemic and the economic recession, bank’s capital levels have been getting larger and larger over 2020. The Federal Reserve stated in late December 2020 that the banks could start buying back their shares. Mike Mayo, an analyst at Wells Fargo, believes that the largest U.S. banks, excluding Wells Fargo, “could buy back up to 15 percent of their shares over the next one to two years.â€
Let’s take a look at the largest U.S. bank which is JP Morgan (chase). JPM (JP Morgan) is expected to buy back roughly $3.2 billion in stock in the first quarter of 2021! The bank announced in December that its board had granted approval for the organization to buyback $30 billion over an “indefinite timeframe.â€
In December 2020, Morgan Stanley (NYSE: MS) also got its board approval of a $10 billion in a stock buyback program. Morgan is expected to buy back about $1.8 billion in the first quarter of 2021. Well, what about bank earnings? The biggest banks will begin to provide their earnings later this week. However, bank earnings were not so bad in the fourth quarter of 2020. Most of the banks are set to post lower profits in the fourth quarter, down from a year ago. But, JPMorgan is expected to earn far more than the other banks, earning just a little less than $8 billion. Furthermore, this performance is almost double that of the second place finisher, Bank of America Corp. (NYSE: BAC). JPMorgan Chase is the standard of big banks in the U.S. and leads the pack in many other areas as banking accelerates into the new era of banking.
JPMorgan also realizes that in this technology age, scale is one of the most important characteristics of the “new†Modern Corporation. Jamie Dimon, CEO of JPMorgan has got the bank on the track to taking its dominance even further than what has been achieved already.
In my opinion, America will become even more highly concentrated…It’s just a matter of time. Through doing this legalized crime companies or should I say banks for the sake of this argument, are able to absorb the market and become monopolies over industries, simply by buying its very own stock and manipulating stock valuations therefore increasing their market cap.
