Ocasio-Cortez Urges Scrutiny of Robinhood Curbs on GameStop
(Bloomberg) -- Representative Alexandria Ocasio-Cortez assailed the trading curbs imposed on GameStop Corp. by Robinhood Markets Inc. and other platforms, saying the restrictions on high-flying stocks demand closer scrutiny from U.S. regulators and Congress.
The New York Democrat, a top voice in the progressive movement and a member of the House Financial Services Committee, said in a series of tweets that she would favor holding hearings on restrictions affecting stocks such as the video-game retailer GameStop, which fell as much as 68% Thursday after curbs were imposed.
“This is unacceptable,” Ocasio-Cortez wrote in a tweet Thursday. “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.”
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Ocasio-Cortez added that scrutiny of trading freezes should apply to any retail providers that have frozen stock purchases, not just Robinhood. Her comments were backed by Senate Republican Ted Cruz, who retweeted her post minutes later, adding “Fully agree.”
Cruz later told reporters he wanted to see “some transparency, some answers.”
“On the face of it, it seems to favor a handful of rich, influential players at the expense of ordinary citizens and ordinary traders,” Cruz said.
Senator Pat Toomey, who is poised to become the top Republican on the Senate Banking Committee, said he’s disturbed by Robinhood and other platforms blocking trades.
“I find it very disturbing that a platform would suddenly freeze out investors,” Toomey said. “People should be free to make the investment decisions they choose.”
Lawmakers and the Biden administration are being forced to quickly respond to the turmoil on Wall Street touched off by retail investors whose speculative bets have driven up share prices of companies like GameStop and AMC Entertainment Holdings Inc.
The gains in those companies have triggered steep losses at some hedge funds that had bet against the stocks, and the gyrations in share prices have prompted Robinhood, Interactive Brokers and other platforms to curtail activity in several high-flying stocks.
Congressman Ro Khanna, who represents Silicon Valley, said the recent activity shows the need for “more regulation and equality” in markets.
“We’re done letting hedge fund billionaires treat the stock market like their personal playground, then taking their ball home as soon as they lose,” the Democrat said in a statement. “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.”
It’s not clear whether other lawmakers will join progressives in calling for additional oversight.
Ocasio-Cortez rejected Cruz’s overture on Twitter, saying he should resign after his challenges to November’s presidential election were echoed by the rioters who stormed the Capitol on Jan. 6. Some of the rioters were recorded saying Cruz would want them to invade Congress. Ocasio-Cortez, who is often vilified by right-wing commentators, said she faced specific threats that day that made her fear for her life.
The GameStop turmoil even drew the attention of House leaders. Speaker Nancy Pelosi told reporters Thursday that the Biden administration is looking into the situation and suggested Congress may open its own inquiry.
“We will all be reviewing it,” she said at a news conference on Thursday. “It’s interesting.”
GameStop’s volatile trading briefly pushed the stock to No. 1 on the Russell 2000 Index -- despite trading restrictions. But shares then fell as much as 68% from their high and trading was halted for the second time on Thursday.
Jared Bernstein, a member of President Joe Biden’s Council of Economic Advisers, reiterated that the U.S. Securities and Exchange Commission is looking into the trading frenzy. But he suggested the situation was merely a symptom of broader inequality in the U.S. economy.
“For me, and for the president, where this goes is that we’re not going to measure our progress by the stock market,” Bernstein said on CNN. “You’ve got a booming stock market and you’ve got rising poverty. That is at the core of the problem that we are trying to solve, not just in the near term but lastingly.”
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