Robinhood’s Trading Freeze Unites Political Foes From Cruz To Warren — And They’re All Angry - Forbes

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Topline

Online brokerage app Robinhood has achieved the rare feat of bringing lawmakers from both parties together after it restricted retail investors from buying shares in GameStop and other companies, with most lawmakers who weighed in on the development Thursday condemning the move.

Key Facts

Sen. Pat Toomey (R-Pa.) told reporters he finds it “very disturbing” that the app would “suddenly freeze out retail investors who are simply exercising their right to make a purchase,” adding, “By the way, it's going to end badly for most. That's a bubble.”

The comments from Toomey, an establishment Republican, come after conservative Sen. Ted Cruz (R-Tex.) tweeted that he “fully” agrees with firebrand progressive Rep. Alexandria Ocasio-Cortez’s (D-N.Y.) call for hearings into the decision.

Progressives have seized on the development as an example of runaway corporate greed and the need for financial regulation, with Rep. Ro Khanna (D-Calif.) stating, “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.”

Sen. Elizabeth Warren (D-Mass.) has been particularly vocal, arguing in a CNBC appearance on Thursday “the SEC has never even completed its rules defining what market manipulation is. So that means, in effect, what you’ve got is a casino.”

House Republicans, meanwhile, turned it into a referendum on elitism, with Sen. Roger Marshall (R-Kans.) alleging “Wall Street is trying to silence Main Street,” which he said is “insulting and wrong,” and Rep. Jeff Fortenberry (R-Neb.) taking aim at “Big Hedge, with outposts in South Hedge-i-stan (Wall Street) and North Hedge-i-stan (Greenwich, CT).”

Reps. Kelly Armstrong (R-N.D.), Joyce Beatty (D-Ohio) and Rashida Tlaib (D-Mich.) all called for hearings, while Rep. Ken Buck (R-Colo.) tweeted, “There is nothing more fundamentally anti-competitive than blocking consumers from the marketplace. Congress needs to investigate [Robinhood]'s behavior immediately.”

Key Background

Retail investors on the investment subreddit r/wallstreetbets started buying GameStop shares en masse earlier this week in an effort to thwart hedge funds’ short positions, prompting Robinhood to block those investors from buying stock in GameStop, AMC and other companies in a similar position on Thursday.

Crucial Quote

“Robinhood's decision-making appears to have united AOC, Elizabeth Warren, Pat Toomey and Ted Cruz in opposition. Ouch,” tweeted Bloomberg Senate reporter Steven Dennis.

Surprising Fact

Sen. Jack Reed (D-R.I.), a member of the Senate Banking Committee, told reporters “everybody's talking about” Robinhood but that the Senate is not yet prepared to hold hearings because it has not yet passed an organizing resolution giving the Democratic majority control of committees. “I mean, if this happened two or three or four months from now and the committees were set, I think, Chairman [Sherrod Brown (D-Ohio)] would probably move very quickly to have a hearing,” he said.

Tangent

After stating during a press briefing on Wednesday that the Biden administration’s economic team, including newly-confirmed Treasury Secretary Janet Yellen, are “monitoring” the GameStop situation, White House press secretary Jen Psaki told reporters on Thursday the administration has no additional comment on the story.

Chief Critic

“The WH should have more pressing issues than to investigate stock forums on Reddit.  We are a nation based on free speech and capitalism,” Citron Research, one of the hedge funds that has lost big on GameStop, tweeted on Wednesday.

What To Watch For

Robinhood announced on Thursday that it plans to allow “limited buys of these securities” starting Friday. “We’ll continue to monitor the situation and may make adjustments as needed,” it added.

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Robinhood’s Trading Freeze Unites Political Foes From Cruz To Warren — And They’re All Angry - Forbes
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