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After Passing Stress Tests, Wall Street Banks to Spend Like a Drunken Sailor – on their Own Stock Buybacks

Courtesy of Pam Martens.

The Fed's Stress Tests Are  Like the Wizard of Oz: An Illusion to Delude the Public

The Fed’s Stress Tests Are Like the Wizard of Oz: An Illusion to Delude the Public

Yesterday, the Federal Reserve announced the second leg of its 2017 stress tests for the nation’s most systemic financial institutions. Known as the Comprehensive Capital Analysis and Review (CCAR), the Fed said it “did not object to the capital plans of all 34 bank holding companies” although Capital One Financial will be required to “submit a new capital plan within six months that addresses identified weaknesses in its capital planning process.”

That all clear from the Fed unleashed what JPMorgan Chase CEO Jamie Dimon fondly refers to as “animal spirits” on Wall Street. The Fed had barely made its announcement when three of the biggest Wall Street banks announced they were earmarking about $47 billion to gorging on their own share buybacks. JPMorgan Chase led the pack with a potential buyback of $19.4 billion over the next 12 months, according to Bloomberg News. Citigroup has projected potential buybacks of $15.6 billion while Bank of America said it may buy back as much as $12 billion.

The mega banks on Wall Street are engaging in these buyback binges despite a growing chorus of critics who say the practice harms the overall economy.

In the September 2014 issue of the Harvard Business Review, William Lazonick wrote the following:

“Five years after the official end of the Great Recession, corporate profits are high, and the stock market is booming. Yet most Americans are not sharing in the recovery. While the top 0.1% of income recipients—which include most of the highest-ranking corporate executives—reap almost all the income gains, good jobs keep disappearing, and new employment opportunities tend to be insecure and underpaid. Corporate profitability is not translating into widespread economic prosperity.

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