The story of GameStop and Wall Street may just be beginning. The curtain has been pulled back on a complex, little-understood tool of Wall Street called short selling. In a country so divided, it has added fuel to the fire of suspicion about wealth inequality, power, populism, and who has access to getting rich.
Dave Portnoy of Barstool Sports said, “I think it’s criminal. I think there has to be an investigation, I think people have to go to jail.”
But who, if anyone, should go to jail?
The institutional hedge funds who tried to short sell GameStop’s stock? Making it less valuable, so they could later buy it back at a lower price and make big profits? Or the ragtag group of little guys — the Reddit-based traders who stuck it to the institutional traders — by teaming up to buy GameStop, elevating its price way beyond its worth, draining billions from Wall Street wallets?
Or the Investment firm Robinhood, that, amidst GameStop’s stratospheric climb, blocked buying the stock, turning off the spigot of institutional losses. Some fingers are pointing at the ironically named Robinhood and its Wall Street allies.
Portnoy added, “I don’t know, but I’ve never been more convinced about market manipulation and the people the hedge funds controlling the game than today.”
Robinhood’s CEO has defended the buying halt. Vlad Tenev said, “The reason we did it was because Robinhood is a brokerage firm. We have lots of financial requirements, including sec net capital requirements and clearing house deposits, so that’s money that we have to deposit at various clearing houses. … In order to protect the firm and protect our customers, we had to limit buying in these in these stocks.”
Some believe the GameStop episode may spur, in the financial world, the kind of populist revolt that in the political world got Donald Trump elected in 2016 and prompted the British Brexit.
British politician Nigel Farage said, “I gotta tell you, I’m with the ordinary traders, I’m with the ordinary people. It’s about time Wall Street got a bloody nose after all. Back in 2008, the last big financial crash where many lost their jobs, what happened to most of the big Wall Street firms and banks? They all got bailed out with taxpayers’ money.“
The Securities and Exchange Commission is investigating, but too late, say some.
Former SEC Chairman Laura Unger said, “Everybody’s scratching their heads over this. What should happen? What is the right thing to do to control this or stop this, not unlike what we saw on Jan. 6 at the Capitol, right? If you don’t have the police in there at the right time, things go a little crazy.”
President Biden’s new Treasury Secretary Janet Yellin has promised to be a “voice for fiscal sanity,” but some say she is compromised on Wall Street reforms.
Farage said, “She’s earned $815,000 from the very same hedge fund that’s deeply involved on the short side with GameStop. She’s done another $7 million over the last few years, speaking to the Wall Street giants.”
And while the GameStop incident has produced an unlikely political marriage — Republican Texas Sen. Ted Cruz agrees with Democratic New York Rep. Alexandria Ocasio Cortez that congressional investigations must happen. But Democrats may be more beholden to Wall Street.
Wall Street contributed vastly more to Democrats and specifically to candidate Biden than Trump in the last election cycle — $50million to Biden, only $10 million to Trump, according to the Center for Responsive Politics.
