Stock buybacks hit a new record last year. According to a report in the Financial Times, the world’s 1,200 largest publicly traded companies spent $1.3 trillion to buy back their own shares. Another study shows that U.S. corporations lead the world in buybacks. Almost 80 percent of American firms have engaged in buybacks, compared to about 45 percent in the rest of the world.

This practice is a scam intended to pump up share prices. Companies often borrow money in order to buy their stock, in a kind of arbitrage play that adds nothing of value to the economy but enriches insiders.

It’s often forgotten, but stock buybacks were illegal until 1982, as a flagrant form of stock manipulation. In that year, Reagan’s SEC adopted Rule 10b-18 to allow them.

Ironically, this shift was promoted as a way of combating corporate raiders using leveraged buyouts for hostile takeovers. Buybacks made the shares more expensive to purchase. But this was really a case of one kind of financial-engineering abuse, that should have been prohibited outright, creating yet another abuse that should have been banned.

Executive compensation is often tied to the share price, which creates a conflict of interest. Corporate money that should be invested in innovation goes instead for financial engineering that does nothing for the economy.

Lately, there have been efforts to discourage buybacks. The CARES Act prohibited companies receiving financial aid from the government from using it to buy back their own stock. But since money is fungible, that prohibition had little impact. According to the FT report, buybacks did decline in 2020, but bounced back to a new record of almost $1.1 trillion in 2021 until that record was broken in 2022.

The Biden administration also succeeded in enacting a 1 percent tax on buybacks. But corporations have treated it as a cost of doing business, and the buyback trend continues.

SEC Chair Gary Gensler is one of the most public-minded and uncorruptible SEC leaders in decades. He has criticized buybacks, and last week strongly supported a new SEC rule increasing disclosures related to buybacks.

But this is also weak tea. Like the 1 percent tax, it is not likely to affect the buyback trend. The SEC has the power to restore the pre-1982 absolute ban. Gensler needs to get that done.