AhlulBayt News Agency (ABNA): A recently released report shows that the largest US banks returned nearly all of their profits to shareholders in 2025, a trend that analysts say diverts capital away from the productive economy and further concentrates wealth.
At the same time, banks earn about 3.65 percent interest on reserves held at the Federal Reserve, a rate significantly higher than what they pay to depositors. Analysts note that tens of billions of dollars that previously flowed back to the US Treasury now remain on bank balance sheets, with no direct public benefit.
Critics argue that the US financial system effectively incentivizes banks to hoard assets rather than channel them into lending, local development, or broad-based wealth creation. Bank executives, however, contend that US corporate law obliges them to prioritize shareholder interests and that deviating from this principle could even expose them to legal action.
In the eighteenth and nineteenth centuries, corporations in the United States were largely viewed as public-serving entities, chartered for specific purposes such as building canals, bridges, banks, and infrastructure, with limited scope and profits. Over the twentieth century, this conception gradually shifted toward maximizing shareholder value as the dominant corporate objective.
Another major turning point came in 1982, when the US Securities and Exchange Commission amended regulations to legalize large-scale corporate share buybacks. As a result, companies increasingly boosted earnings per share and market prices by reducing the number of outstanding shares rather than paying stable cash dividends. Critics liken this approach to a “casino model”, arguing that gains stem not from productive activity but from rising stock prices for subsequent buyers, while executives—whose compensation is often tied to share performance—also benefit.
According to Gallup data, nearly 40 percent of Americans own no stocks, while the Federal Reserve reports that the top 10 percent of households hold more than 90 percent of all equities. Consequently, when banks distribute profits through share buybacks, a large segment of society effectively receives no share of these financial gains.
Some reform measures have nonetheless been proposed. Reuters has reported that the White House is preparing an order to limit dividends, share buybacks, and executive bonuses at underperforming defense contractors. The US Treasury secretary has also voiced support for revitalizing local banks, emphasizing their role in lending to small businesses, farmers, and first-time homebuyers.
At the same time, the concept of “public banking” is being advanced as an alternative model. A prominent example is the Bank of North Dakota, a state-owned institution that keeps capital within the state, finances infrastructure projects, and returns profits to the public treasury, without displacing private local banks.
In Congress, proposals such as a National Infrastructure Bank have also been introduced, aiming to mobilize private capital for public projects and redirect funds from stock buybacks toward production, housing, and infrastructure.
Experts argue that the core problem lies in the United States’ misaligned “financial plumbing”—a system designed to extract short-term profits for shareholders rather than to strengthen the real economy. Under this structure, megabanks are reinforced, community banks are weakened, and wealth accumulates at the top instead of circulating through society.
Analysts warn that if existing laws continue to push banks in this direction, either the rules must be reformed or new institutions must be created to represent the public interest within the current framework. Otherwise, tens of billions of dollars that could fund schools, bridges, housing, and infrastructure will continue to flow into bank balance sheets and the pockets of a small shareholder minority.
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