Lawmakers from both major parties went after Robinhood on Thursday after the California-based financial services firm announced it had restricted its customers’ ability to buy shares in GameStop and other companies whose shares have been driven up by retail investors organized online.
Robinhood announced earlier in the day that it had restricted trade to GameStop and other stocks targeted by investors on the irreverent WallStreetBets Reddit forum, citing “recent volatility.”
Investors from the message board had sent shares of the video game retailer up 1,500% in recent weeks, in the process pulling off a calamitous “squeeze” for hedge funds who had bet the company’s shares would continue to slide. In a reversal, shares of GameStop tanked on 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 financial markets in a statement about Robinhood’s move.
“While retail trading in some cases, like on Robinhood, blocked the purchasing of GameStop, hedge funds were still allowed to trade the stock,” Khanna said.
“Instead of investing in future technologies to help America win the 21st Century, Wall Street poured billions into shorting this stock to crush this company and put workers out of business. The future of this country lies in that access and equality across every sector of our economy,” Khanna said.
Rep. Rashida Tlaib, D-Mich., a member of the financial services committee, went further, calling Robinhood’s move “beyond absurd” and demanding 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,” Tlaib said.
Rep. Alexandria Ocasio-Cortez, who also sits on the financial services committee, said she would support a hearing if necessary, condeming Robinhood’s move as “unacceptable.”
Rep. Maxine Waters, D-Calif., the chair of the financial services committee, didn’t return a request for comment.
Robinhood was not the only broker to limit sales of GameStop. Interactive Brokers on Wednesday said it had placed restrictions on sales of the stock. Charles Schwab said Thursday that its customers could still trade GameStop but noted that it limited certain kinds of transactions involving more risk.
The other securities Robinhood placed restrictions on are American Airlines, AMC, BlackBerry, Bed Bath & Beyond, Castor Maritime, Express, Koss, Nokia, Sundial Growers, Tootsie Roll Industries and trivago.
The anger directed at Robinhood comes as the trading in GameStop and other beaten down companies has been heralded, on Reddit and elsewhere, as a type of populist victory against the shadowy forces of high finance.
Melvin Capital, one of the hedge funds short on the stock, said it had closed its position on Tuesday afternoon after taking a huge loss. Two firms, Citadel and Point72, infused the fund with nearly $3 billion amid the squeeze.
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.
Sen. Ted Cruz, the conservative Republican from Texas, seized on Robinhood’s branding in a post on Twitter on Thursday morning. Using a bemused face emoji, Cruz posted a March 2016 tweet from Robinhood declaring, “Let the people trade,” alongside their statement announcing restrictions on GameStop and AMC.
Cruz later re-posted Ocasio-Cortez’s tweet to his own page, writing: “Fully agree.”
(In response, Ocasio-Cortez said that Cruz “almost had me murdered 3 weeks ago so you can sit this one out,” and called on him to resign.)
Another Republican, Sen. Marsha Blackburn of Tennessee, wrote: “Free the traders on @RobinhoodApp.”
Sen. Elizabeth Warren, D-Mass., one of the leading Democrats on financial regulation, wrote on Twitter on Wednesday that “For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price.”
“It’s long past time for the SEC and other financial regulators to wake up and do their jobs – and with a new administration and Democrats running Congress, I intend to make sure they do,” Warren wrote.
A spokesperson for Robinhood declined to comment, but directed CNBC to a blog post titled “Keeping Customers Informed Through Market Volatility.”
“Our mission at Robinhood is to democratize finance for all.” the post reads. “We’re proud to have created a platform that has helped everyday people, from all backgrounds, shape their financial futures and invest for the long term.”
The post says that employees of the company “continuously monitor the markets and make changes where necessary.”
So far, the White House and top officials at the major financial regulators have yet to weigh in one way or the other. Jen Psaki, the White House press secretary, said Wednesday that President Joe Biden’s economic team, including Treasury Secretary Janet Yellen, is monitoring the GameStop situation.
Federal Reserve Chair Jerome Powell was pressed on GameStop’s surging stock on Wednesday, and said only that the central bank was not responsible for rising prices in the markets.
“I think the connection between low interest rates and asset values is probably something that’s not as tight as people think because a lot of different factors are driving asset prices at any given time,” Powell said.
The Securities and Exchange Commission said on Wednesday that it was “working with our fellow regulators to assess the situation.”
Meanwhile, in WallStreetBets, posters slammed Robinhood and celebrated their support from lawmakers while encouraging each other to hold onto their shares.
“RASHIDA IS WITH US,” a user known as MrPostmanLookatme wrote in one post that garnered more than 28,000 supportive votes.
More than 1.3 million people were actively browsing the forum, which has about 4.6 million members, on Thursday afternoon.
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