Tags: Newsmax TV | kustoff | gamestop | robinhood | regulation

Rep. Kustoff to Newsmax TV: Dems Using GameStop for More Regulation

(Newsmax TV/"Spicer & Co.")

By    |   Thursday, 18 February 2021 08:10 PM

Rep. David Kustoff of Tennessee said he believes Democrats are using the uproar surrounding the trading of GameStop stock on the no-fee brokerage app Robinhood as an excuse to add more regulation and crowd out small investors.

The 54-year-old Republican, a member of the House financial services committee who represents Tennessee’s 8th Congressional District on the western edge of Tennessee, told Newsmax TV that Democrats are trying to justify the rare scenario of the GameStop trading situation of late January and early February as a means to impose regulations that will harm small investors.

''They want more regulation,'' Kustoff said on ''Spicer & Co.'' ''And I think they want to crowd out the small investor, and price him or her out, put all types of roadblocks. And I think that’s wrong. I think most people see that that’s wrong. But they essentially want to create more regulations through the SEC, the Securities and Exchange Commission.''

Kustoff’s comments come after he earlier in the day attended a hearing by the House financial services committee. He said one or two more hearings will be held.

The issue revolves around the trading of stock in GameStop, a video game retail chain, which had been in decline like many retail chains due to online purchases. Several hedge funds had ''shorted'' the stock — meaning they ''borrowed'' shares of the stock and immediately sold it with the expectation that the price would drop. After the stock price fell, they would buy it back at the lower price and return it from those from whom it was ''borrowed'' (usually the company itself) and pocket the difference.

But an investor on Robinhood liked the stock, convinced fellow small investors via the online message board Reddit to buy it, which countered the hedge fund moves. Because of the purchases the stock increased in price, which required the hedge funds also to buy it to mitigate their losses. That drove the price even higher.

The flurry of buying sent the price from about $39 a share on Jan. 20 to more than $347 a share in a week. It plunged to about $194 a share on Jan. 28 and then rose again to $325 a day later. It dropped $5.06, or about 11%, Thursday to close at $40.69 a share.

During the buying and selling binges, Robinhood had to suspend trading because it did not have the capital to cover the trades, Kustoff said, resulting in accusations that it was conspiring with the hedge funds to assist them and hurt the small investor.

Kustoff said Democrats are using the rarity as an excuse.

''Name me a Democrat who doesn’t love more regulation,'' Kustoff said. ''To me if you're an account holder, you’re a small investor, if you don’t think Robinhood does a good job, then go somewhere else. There are plenty of other online brokers who can do the job and do it well.''

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Rep. David Kustoff of Tennessee said he believes Democrats are using the uproar surrounding the trading of GameStop stock on the no-fee brokerage app Robinhood as an excuse to add more regulation and crowd out small investors. The 54-year-old Republican, a member of the...
kustoff, gamestop, robinhood, regulation
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2021-10-18
Thursday, 18 February 2021 08:10 PM
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