Former Goldman Sachs CEO Lloyd Blankfein weighed in on the debate raised this week by lawmakers who want to restrict companies from buying their stock.
In a tweet on Tuesday, Blankfein challenged the premise that corporate stock buybacks divert resources away from workers and meaningful investments. “The money doesn’t vanish,” he said. “It gets reinvested in higher growth businesses that boost the economy and jobs. Is that bad?”
On Sunday, Sen. Chuck Schumer of New York and Sen. Bernie Sanders of Vermont said in a New York Times opinion column that they were going to introduce a bill that seeks to put preconditions on companies that want to buy their stock, including that they pay workers at least $15 an hour and provide other benefits.
Last year, more than $1 trillion of buybacks were announced by large companies, including Apple‘s record-shattering $100 billion stock purchase plan. Critics of the practice say it rewards stock-owning executives instead of using company cash to build the business, and is especially jarring in light of high-profile layoffs and plant closings last year.
But the counter-argument is that buying by companies last year helped support a market that was otherwise down 6 percent.
“A company used to be encouraged to return money to shareholders when it couldn’t reinvest in itself for a good return,” Blankfein wrote on Tuesday.
Blankfein retired as chairman of Goldman at the end of December after stepping down as CEO at the end of September.
Originally published at CNBC