AOC calls for hearings on Robinhood shutting down trading on Reddit investors

United States House Committee on Oversight and Reform hearing ?Protecting the Timely Delivery of Mail, Medicine, and Mail-in Ballots?

This week, we discussed the topic which has been all over the political, financial and online worlds: the Reddit small investors who successfully gamed the system to screw over billionaire hedge-funds. The hedge funds had shorted the stocks of several failing companies like GameStop, only to see small investors organize on Reddit to mass-invest in those stocks, inflating the stock prices and causing hedge funds to lose billions in a matter of days. Many of the Reddit small investors were using the Robinhood platform to invest. But then as soon as the hedge fund billionaires began to weep on their yachts, suddenly all of those stock trading platforms were pulling the plug on trading:

Several retail stockbrokers, including Robinhood, said they would allow trades of GameStop and other volatile companies after restricting customers’ ability to purchase securities earlier in the day.

“Starting tomorrow, we plan to allow limited buys of these securities,” Robinhood, a popular trading app, said. “We’ll continue to monitor the situation and may make adjustments as needed.”

Robinhood, which has attracted millions of millennials to trade on its platform by eliminating trading fees and making stock trading easy, had said Thursday morning that it would limit buying of the kinds of securities that have sparked an enormous rally in shares of GameStop, the video game retailer at the heart of the frenzy, and AMC Entertainment Holdings, the movie theater chain, and a number of other companies. The decision quickly drew fire.

[From The NY Times]

The billionaires are big mad that the “little guy” is gaming the system in the same way the billionaires do regularly. That’s it, at it’s most basic level. And instead of taking the L and writing off some billion-dollar losses, those hedge funds exerted pressure on Robinhood and other trading platforms to change the rules mid-game.

As you can imagine, elected officials like AOC and Elizabeth Warren have been using their platforms to explain what’s happening and why additional regulation is needed, and why there should be hearings and investigations into what’s happened this week. Robinhood’s decision to halt trading on GameStop has turned everyone into a populist – on this somewhat narrow issue, AOC, Ted Cruz and Don Trump Jr find themselves agreeing. But when Ted Cruz agreed with AOC on Twitter, she told him to go f–k himself (atta girl).

US Senate Judiciary Committee hearing: “Breaking the News: Censorship, Suppression, and the 2020 Election”

Photos courtesy of Avalon Red.

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28 Responses to “AOC calls for hearings on Robinhood shutting down trading on Reddit investors”

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  1. JanetDR says:

    Love her responses to Cruz! I don’t know that much about how the stock market works, but just enough to understand that it’s a house of cards that makes me nervous. Very nervous considering that my future is all tied up in it. Love to see underdogs win though!

    • escondista says:

      Explaining this (much is borrowed from Reddit):
      “Short selling” a stock essentially means that you “borrow” a stock in order to sell it, then agree to buy it back again in the future and return it to what you borrowed it from.

      Ex. stock is selling for $10. I borrow it and sell it for $10. Its price is falling, and later on it’s selling for $5; I buy it back and give it to the lender and now I’ve made $5.

      The risk is if the price increases, you have to buy it back at that price. So if it sells for $20, I have to buy it back and I’ve lost $10.

      The danger here is there is no limit to that buy back requirement. In a normal exchange if you bought a $10 stock and it dropped to $0 you’ve lost $10. If you short sell a $10 stock and it jumps to $1,000 you’ve lost $990!

      Wallstreetbets on Reddit noticed that a lot of companies were short-selling GME stock. They decided to collectively jump in and buy a LOT of GME stock (normal purchases), driving up the price and causing the large number of short-sellers to get really screwed. When the short-sellers have to re-buy their borrowed stock, it causes a surge of demand that drives up the price, which in turn makes other short-sellers have to re-buy in turn, and a cascade of price increases happens (this is the “squeeze”). As long as the actual holders of stock keep holding it they’re reducing the available stock that can be bought and keeping the squeeze going.

      It’s causing massive losses to the short-sellers who are forced to re-buy a portion of their shorts which drives up the cost which triggers being forced to re-buy more portions, etc. Two of the major companies involved have already lost billions – like up to 70 billion.

      My own thoughts: if Dem moderates decide to bail these Wallstreet clowns out of their 70 billion loss, I will never forgive them.

      • Nanny to the Rescue says:

        Escondista, thank you for a good explanation!

        If I may add, this is why stock market is such a phony thing in itself. There’s now a 70 billion loss for some bigshots somewhere and people are loosing their minds and politicians have to interfere, while in the real world nothing happened. Nothing. There isn’t even a loaf of bread more or less in the world and 70 billion dollars just moved around.

      • Audrey says:

        In addition, robinhood froze everyone’s access to purchase more shares yesterday. Each stock wouldn’t even populate when you search for it. If you have stocks for gamestop, amc, blackberry, etc., RH only allowed the option of selling your shares, in response “due to market volatility.” Citadel is linked to RH, which is owned by Melvin Capital, which is the hedgefund banking on the short squeeze, which proves that they enacted to manipulate the market by colluding with each other. To add insult to injury, a lot of retail investors holding on their shares found that their stocks were being sold without their permission at the cost of $118/share, when it was valued at $460 when market closed on Wednesday. 2 pending class action lawsuits have been filed so far

    • fluffy_bunny says:

      Is your money in a mutual fund or a 401k? You should be okay if it’s in some type of vehicle that has an oversight process. It gets iffy when you start investing in individual stocks. We don’t buy large blocks of individual stock. Just a few shares here and there. We also tend to invest in companies whose products we use. A couple have ended up being dogs but the vast majority turn out well.

      • JanetDR says:

        All in 401k and mutual funds, so thanks for the reassurance @fluffybunny as well as explanation @escobdista!

  2. Darla says:

    Oh she destroyed Cruz, it was fantastic.

    Did you guys see the video of that billionaire actually weeping on CNBC about this? I laughed.

    • Eleonora says:

      Haven’t seen that, but I can imagine trash acting like that.

      Spoiled snowflake-brats.

    • Mac says:

      Maybe we should send billionaires $600 checks to help them get through this difficult time.

      • Veronica S. says:

        Oh no no, he wanted us to know he’s disgusted by the fact that we can “sit on our asses at home” having the government pay us a whole $600 to do so while big important people like him collect billions tossing around people’s 401K contributions. It’s an attack on the rich!!!

      • Justjj says:

        Lmao! Here’s 600 dollars. Have a field day. I love the memes that are all: Just cut back on the Starbucks and the avocado toast, billionaires… as if all of us “just sat at home” during the pandemic lmao I can’t with these leeches

    • Justjj says:

      I am going to look this up right now. Billionaire tears! The sweetest sight on earth.

  3. escondista says:

    President Ocasio-Cortez has a nice ring to it.

  4. Becks1 says:

    Ted Cruz’s fixation on AOC is so weird. Its like he’s in elementary school and has a crush on her but cant come out and say that so he just bullies her. she consistently owns him on twitter and yet he keeps coming for her. she’s out of your league a-hole, just back off.

    • whatWHAT? says:

      this, completely.

      I think she drives a lot of the GOP crazy because their pants are telling them “SHE’S HOT!” but their brains are conflicted because they’re supposed to hate progressive women. it used to be they could dismiss all progressive women and/or feminists as “ugly chicks” and no one thought twice but now they have this intelligent and don’t-take-no-sh*t tough woman who also happens to be gorgeous and their brains are breaking.

    • Seraphina says:

      Good point Becks, it is strange that he has this “fixation” on her and agree with whatWHAT? Hahaha. Plus, let’s note that AOC is the EXACT opposite looks wise to the woman he is married to.

  5. sa says:

    I don’t believe in being a “fan” of a politician. I support, and sometimes admire, some politicians, but I don’t think of myself as a “fan” of them. AOC (and Katie Porter) make that distinction a little harder for me.

  6. teehee says:

    Just realized.

    The GOP thinks that condoning and forgiving wrong doing (illegal), is the definition of showing unity.

    BECAUSE: that IS the definition of unity, WITHIN the GOP!!!
    Just turn a blind eye and all is well.
    How can anyone demand accountability? Except of course for THEM from OTHERS not in the GOP?!?!?
    The world simply turns around them and their “beliefs” – nevermind it has nothing to do with their actions and it shipshapes all the time.
    Isnt that the behavior common to all psychologically unwell people…. (narcissist, sociopath, compulsive liars…)

  7. sara says:

    AOC gets all the press but she has no power outside her feud with Ted Cruz. It would be nice to focus on some of the other young representatives accomplishing things.

    • Elizabeth says:

      She has a lot of power because she’s one of the primary faces of the Democratic Party now in the media. She has a lot of power because she’s a member of the House of Representatives. She has a lot of power because she’s formed coalitions and joined together with other progressives. Please don’t reduce her to one Twitter feud.

      • Rose says:

        Lauren Underwood is doing amazing things and getting work done that no one notices because all the attention is on AOC and her theatrics. (Yes, I love it when she curbstomps a traitor too, but you can’t govern by tweet.)

  8. Juxtapoze says:

    AOC’s fierceness makes the little girl inside me (who was trained to be polite & “realistic” with my big dreams) cheer loudly! ✨🙌🙌🙌✨She’s taking back what so many of us women were conditioned to give up.

  9. Justjj says:

    I just love her and love her clapbacks!

    I personally think this whole debacle is hilarious, and that finally, everyone sees as clear as day that the ultra rich of the world simply don’t think money is for the poors. The poors just shouldn’t have access to money.

    They don’t actually believe you can ‘work your way to the top’ or any such nonsense. No. They only care about staying on top at any human cost. As AOC once said “You don’t ‘make’ a billion dollars-you take a billion dollars.”

    The rich are freeloaders and tax evaders who steal capital, labor, productivity and human value each and every day from a global underclass who is basically everyone that isn’t them. Then they don’t pay taxes.

    The entitlement is really something else. Yeet the rich.

    The /r community plotting against Wall Street is the greatest and I hope this isn’t the end. The irony that the app is called Robinhood…

    • Golly Gee says:

      Yes, to everything you said. I also commented yesterday that I hope that Reddit traders are the beginning of a trend. But I’m sure the money on Wall Street will find a way to shut them down as they have begun to do already. Laws need to be changed, but there’s very little chance of that happening. Money is power and power rules.