Members of Congress on both sides of the aisle found rare agreement Thursday in their outrage at trading app Robinhood, after it took the highly unusual step of curbing trading in GameStop and another stock whose price has increased exponentially, AMC Entertainment Holdings Inc.
Firebrand lawmakers Sen. Ted Cruz, a Texas Republican, and New York Democratic Rep. Alexandria Ocasio-Cortez appeared to be united on the matter — for an hour, at least.
“This is unacceptable. We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” the AOC tweeted. “As a member of the Financial Services Cmte, I’d support a hearing if necessary
“Fully agree,” Cruz responded.
Fully agree. ? https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
Ocasio-Cortez, though, made clear that she is not interested in working with Cruz due to his objection to certifying the Electoral College results, which she blames for encouraging or sparking the mob that stormed the U.S. Capitol on Jan. 6.
“I am happy to work with Republicans on this issue where there’s common ground, but you almost had me murdered 3 weeks ago so you can sit this one out. Happy to work w/ almost any other GOP that aren’t trying to get me killed. In the meantime if you want to help, you can resign,” she tweeted.
The hedge fund Melvin Capital shorted GameStop stock, a sort of borrowing stock for a certain amount of time and selling it immediately in hopes of buying it again at a lower price, and then returning it to the place it “borrowed” it from, making a profit in the process.
Individuals on the Reddit forum WallStreetBets, armed with the free trading app Robinhood, forced a short squeeze on GameStop stock, driving the price of the stock from below $20 a few weeks ago to a high of over $469 on Thursday. Robinhood on Thursday prevented users from buying any more shares of GameStop and some other stocks involved in similar short squeeze battles.
Some observers see the dynamic as a Wall Street versus the masses battle, prompting lawmakers with some populist streaks on both sides of the aisle to speak up in outrage about the unusual trading situation.
“This entire episode has demonstrated the power of technology to democratize access to American financial institutions, ultimately giving far more people a say in our economic structures,” California Democratic Rep. Ro Kanna said in a statement. “This also showed how the cards are stacked against the little guy in favor of billionaire Wall Street Traders. While retail trading in some cases, like on Robinhood, blocked the purchasing of GameStop, hedge funds were still allowed to trade the stock. We need more regulation and equality in the markets.”
Republican Sen. Roger Marshall of Kansas — where AMC Theaters, another company involved in a short squeeze war prompting trading activity this week, is based — also raised his eyebrows at the situation.
“Kansas-based company @AMCTheatres has been shutout by popular trading apps like @RobinhoodApp and others. I’m not an attorney, but something isn’t right here. We need to look into this,” he said in a tweet.
Kansas-based company @AMCTheatres has been shutout by popular trading apps like @RobinhoodApp and others. I’m not an attorney, but something isn’t right here. We need to look into this.
— Dr. Roger Marshall (@RogerMarshallMD) January 28, 2021
Ocasio-Cortez’s fellow left-wing “Squad” member, Michigan Rep. Rashida Tlaib, also called for a Financial Services Committee hearing on the matter.
“This is beyond absurd. @FSCDems need to have a hearing on Robinhood’s market manipulation,” Tlaib tweeted in response to the Robinhood trading halt. “They’re blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who’ve used the stock market as a casino for decades.”
This is beyond absurd. @FSCDems need to have a hearing on Robinhood’s market manipulation. They’re blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who’ve used the stock market as a casino for decades. https://t.co/CGkJxVfzkv
— Rashida Tlaib (@RashidaTlaib) January 28, 2021
Massachusetts Sen. Elizabeth Warren, a longtime Wall Street critic who has worked for years on financial reform issues, chimed in on the remarkable surge in GameStop stock with a warning for hedge funds and the investment class.
“For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price,” Warren said. “It’s long past time for the SEC and other financial regulators to wake up and do their jobs – and with a new administration and Democrats running Congress, I intend to make sure they do.”
Other Democrats have been less forceful.
Asked about the unusual market activity on Thursday, House Speaker Nancy Pelosi said, “Interesting, isn’t it?” before noting that she believes the Securities and Exchanges Commission and the Biden administration are investigating the issue.
