Stock Buy-Backs Not The Cause Of Bank Problems
The problem with this argument, first of all, is that no one has really claimed that stock buy-backs will increase a company's value, at least not after the buy-backs are made. However, the key fallacy here is that maximizing a company's value is not (or shouldn't be) a self-end. No company exist for its own sake, it exist for the sake of its shareholders. Hence, what should be maximized is not a company's value (except when that maximizes shareholder value), but shareholder value. That means performing share buy-backs (and paying out dividends) whenever the marginal return of equity is lower for investments performed by the company then when investments are performed by the shareholders independently. When the return on the other hand is higher within the company no share buy-backs should be performed and dividends should be limited, while possibly even new shares should be issued.
Thus, it is an open question whether or not share buy-backs are good or not. It depends on where the money can be put into the best use. Turning now to the second flaw in Englund's argument, the specific case of American banks, how could Englund possibly claim that it would have been better if the evidently incompetent management and analysts at American banks would have had even more money at their disposal to invest in the inflated American housing market? Given how incompetent the staff (the ones responsible for investment decisions) of American banks has been, there can be no doubt that the less money they have at their disposal, the better. And that means that stock buy-backs helped limit the malinvestments created during the housing bubble and that had by contrast Englund's anti-stock buy back views been prevalent, even greater malinvestments would have been made and even more value would have been lost.