How Stock Buybacks Quietly Rigged the Market

Once upon a time, stock buybacks were a crime.
If a company used its own money to inflate its stock price, executives could be prosecuted for market manipulation. Today, that same practice drives trillions of dollars in “shareholder value” — enriching the few, hollowing out the many, and redefining capitalism itself.

This episode of The Financial Historian uncovers how a single rule change in 1982 quietly legalized one of the most powerful financial manipulations in history. We’ll trace the journey from the Great Depression — when buybacks were banned — to the Reagan-era deregulation that unleashed them, turning the stock market into a self-reinforcing illusion of prosperity. The result? An economy where growth is engineered, inequality is structural, and debt is the invisible fuel keeping it all alive.

• In 1934, the SEC effectively outlawed stock buybacks as “market manipulation” after they worsened the 1929 crash.
• For nearly 50 years, corporations reinvested profits into workers, factories, and innovation — not stock prices.
• Rule 10b-18, introduced in 1982, quietly gave companies legal protection to repurchase shares under vague limits.
• Since then, U.S. corporations have spent over $7 trillion on buybacks — more than on capital investment.
• Buybacks artificially boost earnings per share and executive bonuses, even without real growth.
• Companies now borrow to finance buybacks, creating massive corporate debt and fragile balance sheets.
• The wealthiest 10% of Americans — who own 90% of all stocks — capture almost all of the gains.
• What was once seen as manipulation is now the cornerstone of modern capitalism.

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