A leading Senate Democrat announced on Thursday that he would hold a hearing on the “broken” state of Wall Street as the stock market reels from the frenzy surrounding video game retailer Gamestop.
“People on Wall Street only care about the rules when they’re the ones getting hurt,” said incoming Senate Banking and Housing Committee Chair Sherrod Brown, D-Ohio.
“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. That’s why, as incoming Chair of the Senate Banking and Housing Committee, I plan to hold a hearing to do that important work.”
House Financial Services Committee Chair Maxine Waters, D-Calif., similarly announced she would hold a hearing on the issue.
“As a first step in reining in these abusive practices, I will convene a hearing to examine the recent activity around GameStop (GME) stock and other impacted stocks with a focus on short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors,” she said in a written statement.
The controversy over GameStop has been viewed by some as a populist uprising that met unfair resistance from Wall Street.
GameStop stock has rocketed from below $20 at the start of January to close around $350 Wednesday.
The stock continued its wild ride Thursday, opening at $263 per share and jumped up to $468 per share within 29 minutes. Even before investors sat down for lunch at noon, the stock had fallen to $112 only to rise to $483 at 2 pm. It wound up closing down two hours later at $193.60 sinking more than 44%.
The action was even wilder Thursday: The stock swung between $112 and $483. At midday it was down 27% at $255.
Hedge funds, Point72 — run by New York Mets owner Steve Cohen– and Chicago-based Citadel, infused almost $3 billion into Melvin Capital, which saw massive losses after betting against the video game retailer.
Citadel does business with Robinhood, the trading app that helped fuel the massive stock activity hitting Melvin Capital. Robinhood said Thursday investors would only be able to sell their positions and not open new ones in some cases, and Robinhood will try to slow the amount of trading using borrowed money.
Meanwhile, financial disclosures have revealed that newly-confirmed Treasury Secretary Janet Yellen received around $810,000 in speaking fees from Citadel, raising questions about conflicts and any potential government intervention in the ongoing upheaval.
Yellen’s financial disclosure shows her making $337,500 for multiple days in Oct. of 2020 from Citadel. She similarly banked $292,500 in October of 2019 and $180,000 in December of that year.
The White House said on Wednesday that Yellen was monitoring the situation.
White House Press Secretary Jen Psaki was asked Thursday during the daily briefing whether Yellen would recuse herself from advising the president on Gamestop. Psaki did not commit one way or another.