WASHINGTON (Reuters) – The U.S. House Financial Services and Senate Banking committees said on Thursday they will hold hearings on the stock market after users of investment apps faced trading limits following the “Reddit rally” that put a charge into GameStop and other volatile stocks that were touted in online forums.
“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 Representative Maxine Waters, a Democrat who heads the House panel.
Waters added the hearing will focus on “short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors.”
An army of retail investors routed Wall Street professionals this week, placing hedge funds in a costly “short squeeze” after the funds had bet on future declines in GameStop and other out-of-favor stocks.
But on Thursday, brokerages Robinhood Markets Inc and Interactive Brokers restricted buying shares in red-hot GameStop and several other stocks that soared after being shorted by professionals. Late Thursday, Robinhood said it will allow limited buying on Friday.
“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,” said U.S. Representative Ro Khanna, who noted that hedge funds were allowed to continue trading stocks while individual investors were handicapped by trading limits on Robinhood.
Democrat Alexandria Ocasio-Cortez and Republican Ted Cruz were among a growing number of lawmakers who agreed Congress needed more information.
Ocasio-Cortez, a member of the U.S. House of Representatives, tweeted the restriction was “unacceptable,” adding Congress needed to know more about the move “to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.”
Senator Ted Cruz, a Republican, took to Twitter retweeting Ocasio-Cortez with rare words of agreement, writing “Fully agree.”
Cruz told reporters that lawmakers needed answers “to why they halted the trading. … it seems to favor a handful of rich influential players at the expense of ordinary citizens and ordinary traders.”
White House spokeswoman Jen Psaki declined to comment on Robinhood’s actions.
Tesla Chief Executive Elon Musk backed Ocasio-Cortez’s criticism of Robinhood on Twitter responding “absolutely.”
Senator Sherrod Brown, the incoming Banking committee, chair, said “People on Wall Street only care about the rules when they’re the ones getting hurt.”
A Robinhood spokeswoman declined to comment on the lawmakers’ criticism.
Republican Senators Mike Lee and Patrick Toomey also joined the critics of Robinhood as did Khanna, a Democrat.
U.S. Representative Rashida Tlaib, a Democrat, called the restriction “beyond absurd.”
Tlaib urged on Twitter that Congress “have 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.”
(Reporting by David Shepardson; Editing by Doina Chiacu, Howard Goller and David Gregorio)
