Legislators from both major parties criticized Robinhood on Thursday after the California-based financial services company announced it had restricted its customers’ ability to buy shares in GameStop and other companies whose shares were topped up by online retail investors.
Robinhood announced earlier in the day that GameStop and other stocks targeted by investors on the disrespectful WallStreetBets Reddit forum were limited, citing “recent volatility.”
Message board investors had sent the video game company’s shares up 1,500% in the past few weeks, creating catastrophic “pressure” on hedge funds that had bet that the company’s shares would continue to decline. In a reversal, GameStop’s shares fueled Thursday after the restrictions were put in place.
Rep. Ro Khanna, D-Calif., A progressive who represents Silicon Valley, called for “more regulation and equality” in the financial markets in a statement on Robinhood’s move.
“While retailers blocked the purchase of GameStop in some cases, such as Robinhood, hedge funds were allowed to continue trading the stock,” said Khanna.
“Rather than investing in future technology to help America win the 21st century, Wall Street poured billions into short selling these stocks to crash this company and put the workers out of business. The future of this country lies in this access and equality in all areas of our country’s economy, “said Khanna.
Rep. Rashida Tlaib, D-Mich., A member of the Financial Services Committee, went a step further, calling Robinhood’s move “absurd” and calling for a hearing on “Robinhood’s market manipulation”.
“They are blocking trading to protect Wall Street hedge funds and stealing millions of dollars from their users to protect people who have used the exchange as a casino for decades,” said Tlaib.
Alexandria Ocasio-Cortez, DN.Y., MP, also on that committee, said she would support a hearing if necessary and condemn Robinhood’s move as “unacceptable”.
Rep Maxine Waters, D-Calif., Chair of the Financial Services Committee, did not return a request for comment.
Robinhood wasn’t the only broker restricting GameStop’s sales. Interactive Brokers announced on Wednesday that it had restricted sales of its stock. Charles Schwab said Thursday that his customers could still trade with GameStop but noted that certain types of higher risk transactions are limited.
The other securities imposed by Robinhood are American Airlines, AMC, BlackBerry, Bed Bath & Beyond, Castor Maritime, Express, Koss, Nokia, Sundial Builders, Tootsie Roll Industries, and trivago.
The anger directed against Robinhood comes when trading with GameStop and other dejected companies was heralded on Reddit and elsewhere as some sort of populist victory against the shadow forces of high finance.
Melvin Capital, one of the hedge funds that are tightly in stock, said it closed its position Tuesday afternoon after taking a huge loss. Two companies, Citadel and Point72, provided the fund with nearly $ 3 billion.
Robinhood, whose name recalls the mythical thief who stole from the rich to give to the poor, has stylized itself as a democratizing force in the markets.
Senator Ted Cruz, a Conservative Republican from Texas, picked up the Robinhood trademark in a post on Twitter Thursday morning. With a confused facial emoji, Cruz posted a tweet from Robinhood in March 2016 stating, “Let the people act,” along with his statement announcing restrictions on GameStop and AMC.
Cruz later republished Ocasio-Cortez’s tweet on his own page, writing, “I totally agree.”
Alexandria Ocasio-Cortez and Ted Cruz
Stephen Maturen | Getty Images; Reuters
In response, Ocasio-Cortez said that Cruz “almost murdered me three weeks ago for you to expose” and asked him to resign.
Another Republican, Senator Marsha Blackburn of Tennessee, wrote, “Free the dealers on @RobinhoodApp.”
Senator Elizabeth Warren, D-Mass., A senior financial regulation Democrat, wrote on Twitter on Wednesday: “For years the same hedge funds, private equity firms, and high net worth investors dismayed by GameStop trades have treated the stock market as they have their own personal casino while everyone else pays the price. “
“It’s been a long time since the SEC and other financial regulators woke up and do their jobs – and with a new administration and Democrats running Congress, I want to make sure they do,” Warren wrote.
A Robinhood spokesperson declined to comment, but referred CNBC to a blog post titled “Keeping Customers Informed by Market Volatility”.
“Our mission at Robinhood is to democratize finances for everyone.” The contribution is. “We are proud to have created a platform that has helped everyday people from different backgrounds shape their financial future and invest long-term.”
The Post stated that the company’s employees “continuously monitor the markets and make changes if necessary”.
So far, the White House and top officials from major financial regulators have yet to weigh up one way or another. White House press secretary Jen Psaki said Wednesday that President Joe Biden’s economic team, including Treasury Secretary Janet Yellen, is monitoring the GameStop situation.
Fed chairman Jerome Powell was pressed on Wednesday’s soaring shares of GameStop, saying only that the central bank was not responsible for soaring prices in the markets.
“I think the link between low interest rates and assets is probably not as close as one might think because there are so many different factors that affect asset prices at any given time,” Powell said.
The Securities and Exchange Commission said Wednesday that it is “working with our colleagues to assess the situation”. Declined to comment Thursday.
At WallStreetBets, posters popped Robinhood celebrating their legislature support while encouraging each other to hold on to their stocks.
“RASHIDA IS WITH US,” wrote a user named MrPostmanLookatme in a post that received more than 28,000 supportive votes.
More than 1.3 million people actively browsed the forum with around 4.6 million members on Thursday afternoon.
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