Ted Cruz Stands With AOC Over GameStop Stock Trading Freeze?

In case you missed it this week, or don’t fully understand what actually happened with regard to the stock market this week and the company GameStop, here’s a recap and look at what occurs during the rare moment when the left and right seem united at a common enemy. Their remedies may be different, but nearly everyone agrees that when small-time retail investors (e.g. not billionaires or millionaires) are effectively frozen out of the free market while hedge funds trade freely during a period of volatility, then something is wrong.

It all started earlier this week in a message board on Reddit when a group of individual investors was determined to make an impact against hedge funds engaging in prolific short selling of GameStop’s (Ticker: GME) stock.

Some background on what went down before we get into the bipartisan response:

Wall Street investors have been betting that struggling video game retailer GameStop would fail for a long time. But over the past few months, a bunch of Reddit users have been pushing up the value of GameStop shares instead. At first, it was because they believed the company was better off than the Wall Street doubters believed. But as GameStop value has soared, Wall Street’s bad bets have cost the investors billions of dollars.

Now, the Reddit users are in it to win an epic battle against Wall Street too.

At one point, the Reddit users from the forum r/WallStreetBets have sent the stock up more than 14,300% (you read that right), though it’s gone through wild fluctuations. They’ve spread their strategy to struggling movie chain AMC, too. In their wake, these online market players have upended Wall Street, creating a drama filled with memes, app trading disasters and weird internet lingo as big-time investors have lost billions of dollars.

It’s a crazy story, complete with cameos by Tesla CEO Elon Musk and CNBC financial commentator and former hedge fund manager Jim Cramer. There’s even Michael Burry, one of the subjects of the book and movie The Big Short, who happens to be a prominent investor in GameStop.

Even Silicon Valley found a way to get in the middle of this mess. It’s wild.

Some individual investors made thousands of dollars, sometimes tens of thousands, in profit riding the stock up from around $12 per share to well over $300, then selling out. The price rise forced certain hedge funds, currently engaged in shorting the stock, to repurchase shares at inflated prices to cover their short all the while taking massive losses, well into the billions of dollars.

That’s when it all stopped for the individual investors. Robinhood, one of the most aptly named and easy-to-use stock trading apps shut down the ability to buy GameStop, AMC theaters, and others involved in the pumping scheme. TD Ameritrade and Schwab also took similar steps to lockout retail investors (e.g. ordinary people) from the ability to buy and sell these certain stocks.

Meanwhile, hedge funds and banks were free to buy and sell as needed, along with other Wall Street entities who needed to halt the stock volatility and shore up their positions.

At this point, with individuals being locked out, by an app ironically named Robinhood, some lawmakers had enough and started firing warning shots:

The battle between the financial establishment and small individual investors is heating up, and the situation is already becoming political — in some cases providing some interesting common ground.

The anger is bipartisan. Rep. Alexandria Ocasio-Cortez (D., N.Y.), Rep Ro Khanna (D., Calif.), Sen. Ted Cruz (R., Texas) and even Donald Trump Jr., eldest son of the former president, have all called out the situation as unfair for individual investors.

As Robinhood and other brokerages halted buying of Gamestop (GME), AMC (AMC) and other stocks Thursday, only allowing users to sell their positions, a wave of anger — and accusations of hypocrisy toward Robinhood — washed over parts of the trading community.

Hedge funds could buy and sell, but on many platforms, retail investors could only sell.

“This is unacceptable,” AOC tweeted on the news. “Fully agree,” Ted Cruz responded.

In a statement Thursday, Democrat Rep. Ro Khannna of California also supported the small investors’ rights to buy.

You have to see the visual to get a better representation of what this looks like on Twitter:

For Sen. Ted Cruz to “fully agree” with Rep. Alexandria Ocasio-Cortez (AOC) on just about anything should prompt fears of the impending apocalypse.

Other lawmakers quickly joined the bandwagon, Democrat and Republican alike, and it appears that congressional hearings will soon take place with companies like Robinhood forced to testify on exactly why they decided to lockout individual investors from their trading platform at critical times:

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.

When politicians get involved, even with “good intentions,” it’s still scary when Congress decides, in a bipartisan way, to find a villain and start crafting legislation. Sometimes the best move is to do nothing and let the market sort it out. Robinhood will pay a price as a trading platform, and it will face competition from other companies looking to provide a more truly “free and open” platform that pledges not to lockout investors during market volatility.

The moves by brokerage houses to turn off trading often comes in the guise of “protesting” small investors from taking losses. However, that seems to often only be a one-way street where smaller, individual investors need to be “protected” from themselves while hedge funds, risking billions, are left to essentially gamble and risk at their pleasure. The result looks like a rigged game from the outside, where Wall Street is “protected” at the expense of Main Street.

When the government comes to help, however, be careful who and how they’re helping.


Nate Ashworth

The Founder and Editor-In-Chief of Election Central. He's been blogging elections and politics for over a decade. He started covering the 2008 Presidential Election which turned into a full-time political blog in 2012 and 2016 that continues today.

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