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House Hearing Today Examines Wall Street’s Brand of Capitalism Versus the Health of the U.S. Economy

Courtesy of Pam Martens

Congressman Brad Sherman

Congressman Brad Sherman, Chair of House Subcommittee on Investor Protection, Entrepreneurship and Capital Markets

The House Financial Services’ Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will convene a hearing at noon today that is titled: “Promoting Economic Recovery: Examining Capital Markets and Worker Protections in the COVID-19 Era.” You can watch the hearing live at this link.

One of the topics for the hearing will be corporations buying back their own stock and paying dividends during the pandemic, actions which benefit shareholders rather than the overall economy. The House is considering legislation that would require that until all federal aid under the CARES Act has been repaid by the corporation, it cannot “pay bonuses to executives, may not pay executives in connection with their termination, may not engage in stock buybacks, and may not pay dividends to shareholders.”

The Subcommittee has a very sound, and urgent, basis to explore this topic, particularly as it pertains to the mega banks on Wall Street. In July of 2017, Thomas Hoenig, then Vice Chair of the Federal Deposit Insurance Corporation (FDIC), sent a letter to the U.S. Senate Banking Committee. He made the following points which are more critical today than at any time in history:

“[If] the 10 largest U.S. Bank Holding Companies [BHCs] were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5 percent of annual U.S. GDP.

“Four of the 10 BHCs will distribute more than 100 percent of their current year’s earnings, which alone could support approximately $537 billion in new loans to Main Street.

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