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Congress plans hearings after GameStop stock frenzy and Robinhood trading freeze

Robinhood reverses decision barring GameStop
Robinhood reverses decision barring GameStop 03:02

A partisan Congress was unified by outrage after the app Robinhood and other retail stock trading companies froze some individual trading in response to a massive spike in GameStop and AMC stock fueled by internet chat rooms. Some hedge funds had bet big on the downfall of those companies, and the resulting volatility and the willingness of Robinhood to impose restrictions in a way that seemed to favor big investors and punish smaller ones irked Democrats and Republicans alike.

"Fully agree," tweeted Senator Ted Cruz, one of the most conservative Senators, in response to a tweet from Representative Alexandria Ocasio-Cortez, a democratic socialist who scolded Robinhood for deciding to "block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."

The leaders of the House and Senate committees responsible for financial industry oversight plan to hold hearings looking into Robinhood's decision and the circumstances that led to the market changes. 

"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," said Maxine Waters, the chair of the House Financial Services Committee. 

Representative Patrick McHenry, the ranking Republican on the committee, said in a statement that he had asked Waters to call for a hearing. 

On Capitol Hill on Thursday afternoon, Cruz called for transparency and said lawmakers demand to know why Robinhood had halted the trading of the stocks championed on Reddit by WallStreetBets and other chat rooms. 

Moderate Republican Senator Pat Toomey called the retail investor freeze "very disturbing" but also raised concerns about how the trading frenzy would end. "By the way it's going to end badly for most, that's a bubble, that's gonna burst and it's gonna end up collapsing in price," Toomey said. 

Incoming Senate Banking Committee Chairman Sherrod Brown also said he plans to hold a hearing on the issue.

"American workers have known for years the Wall Street system is broken. They've been paying the price. It's time for the SEC and Congress to make the economy work for everyone not just Wall Street," his statement read.

During a television interview on Thursday, Senator Elizabeth Warren took direct aim at the U.S. Securities and Exchange Commission, accusing the agency of failing to articulate rules and letting the stock market turn into a "casino."

"We need an SEC that's gonna step up, that's gonna put some clear rules in place and then that will be willing to enforce those rules," Warren said. 

Late Wednesday, the SEC issued a statement saying it was "monitoring the ongoing market volatility" and would work with regulators to assess the situation. 

On Thursday during the White House press briefing, press secretary Jen Psaki referred reporters to the SEC statement and declined to provide additional comment. On Wednesday, Psaki said members of the economic team including Secretary Janet Yellen were also monitoring the situation. 

On Thursday evening, an email from Robinhood to users of the service said it would allow "limited buys" of GameStop and AMC securities Friday.

Despite their common response to the actions by online trading services, tensions between the political parties remained after the January 6 Capitol riots. 

"I am happy to work with Republicans on this issue where there's common ground, but you almost had me murdered 3 weeks ago so you can sit this one out," Ocasio-Cortez wrote in a tweet responding to Cruz's support of her stance on Robinhood. 

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