A partisan congress was united by outrage after the app Robin Hood and other stock retailers have frozen some individual trades in response to one massive spike in GameStop and AMC stocks fed by internet chat rooms. Some hedge funds had bet heavily on the demise of those companies, and the resulting volatility and Robinhood’s willingness to impose restrictions in ways that seemed to favor big investors and punish smaller annoyed Democrats and Republicans.
“Totally agree,” Senator Ted Cruz tweeted, one of the most conservative senators, in response to one tweet from Representative Alexandria Ocasio-Cortez, a Democratic socialist who scolded Robinhood for deciding to “prevent private investors from buying stocks, while allowing hedge funds to trade the stocks freely as they see fit.”
The leaders of the House and Senate committees responsible for overseeing the financial sector plan to hold hearings on Robinhood’s decision and the circumstances that led to the market changes.
“We must deal with the hedge funds whose unethical behavior has directly led to the recent market volatility and we must examine the market in general and how it has been manipulated by hedge funds and their financial partners to allow themselves to benefit while others are paying the price”, said Maxine Waters, the chairman of the House Financial Services Committee.
Rep. Patrick McHenry, the Republican on the committee, said in a statement that he had asked Waters for a hearing.
On Capitol Hill on Thursday afternoon, Cruz called for transparency, saying lawmakers wanted to know why Robinhood had stopped trading the stocks defended on Reddit by WallStreetBets and other chat rooms.
Moderate Republican Senator Pat Toomey called the retail investor freeze “deeply troubling,” but also expressed concern about how the trading frenzy would end. “Besides, it will end badly for most, that’s a bubble that will burst and it will eventually collapse,” said Toomey.
The new chair of the Senate Banking Committee, Sherrod Brown, also said he plans to hold a hearing on the matter.
“American workers have known for years that the Wall Street system is broken. They have paid the price. It is time for the SEC and Congress to make the economy work for everyone, not just Wall Street,” he said.
During a televised interview on Thursday, Senator Elizabeth Warren addressed the US Securities and Exchange Commission directly, accusing the agency of failing to formulate rules and turning the stock market into a “ casino. ”
“We need an SEC that goes a step further, that is going to set some clear rules and then be willing to enforce those rules,” Warren said.
At the end of Wednesday, the SEC issued a statement saying it “was monitoring ongoing market volatility” and would work with regulators to assess the situation.
On Thursday at the White House press conference, press secretary Jen Psaki referred reporters to the SEC statement and declined to comment further. On Wednesday, Psaki said members of the economic team, including Secretary Janet Yellen, were also monitoring the situation.
Thursday night, an email from Robinhood to users of the service said it would allow “limited purchases” of GameStop and AMC securities on Friday.
Despite their common reaction to the actions of online trading services, tensions between the political parties persisted after the January 6 Capitol riots.
“I am happy to work with Republicans on this issue where there are common ground, but you almost had me killed three weeks ago so you can hold out,” Ocasio-Cortez wrote in a tweet responding to Cruz’s support for her position on Robinhood. .