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Congress to Review Robinhood's GameStop Stock Response

a gamestop store front in union square
(John Minchillo/AP)

Thursday, 28 January 2021 05:32 PM

The House Financial Services and Senate Banking committees said Thursday they will hold hearings on the stock market after users of investment apps faced trading limits following the "Reddit rally" that put a charge into GameStop and other volatile stocks that were touted in online forums.

Sen. Ted Cruz, R-Texas, told reporters lawmakers needed answers "to why they halted the trading."

"It seems to favor a handful of rich influential players at the expense of ordinary citizens and ordinary traders," Cruz said.

White House press secretary Jen Psaki declined to comment on Robinhood's actions.

"We must deal with the hedge funds whose unethical conduct 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 benefit themselves while others pay the price," Rep. Maxine Waters, D-Calif., who heads the House panel.

Waters added the hearing will focus on "short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors."

An army of retail investors routed Wall Street professionals this week, placing hedge funds in a costly "short squeeze" after the funds had bet on future declines in GameStop and other out-of-favor stocks.

But on Thursday, brokerages Robinhood Markets Inc and Interactive Brokers restricted buying shares in red-hot GameStop and several other stocks that soared after being shorted by professionals. Late Thursday, Robinhood said it will allow limited buying Friday.

"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," Rep. Ro Khanna, D-Calif., who noted hedge funds were allowed to continue trading stocks while individual investors were handicapped by trading limits on Robinhood.

Rep. Alexandria Ocasio-Cortez, D-N.Y., and Cruz were among a growing number of lawmakers who agreed Congress needed more information.

Ocasio-Cortez tweeted the restriction was "unacceptable," adding Congress needed to know more about the move "to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."

Cruz took to Twitter retweeting Ocasio-Cortez with rare words of agreement, writing "Fully agree."

Tesla CEO Elon Musk backed Ocasio-Cortez's criticism of Robinhood on Twitter responding "absolutely."

Sen. Sherrod Brown, the incoming Banking committee, chair, said "People on Wall Street only care about the rules when they're the ones getting hurt."

A Robinhood spokeswoman declined to comment on the lawmakers' criticism.

Sens. Mike Lee, R-Utah, and Patrick Toomey, R-Pa., also joined the critics of Robinhood as did Khanna.

U.S. Representative Rashida Tlaib, a Democrat, called the restriction "beyond absurd."

Tlaib urged on Twitter that Congress "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."

© 2021 Thomson/Reuters. All rights reserved.


   
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The House Financial Services and Senate Banking committees said Thursday they will hold hearings on the stock market after users of investment apps faced trading limits following the "Reddit rally" that put a charge into GameStop and other volatile stocks.
house, financial, services, senate, banking, committees, hearing, gamestop, robinhood, wall street
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2021-32-28
Thursday, 28 January 2021 05:32 PM
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