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Lawmakers to Hold Hearings on GameStop Trading

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Rep. Maxine Waters, D-Calif. (Photo: Bloomberg) House Financial Services Chair Maxine Waters, D-Calif. (Photo: Bloomberg)

The House Financial Services and Senate Banking committees — which have oversight authority of the Securities and Exchange Commission — plan to hold hearings on the recent market instability created by the Reddit GameStop squeeze.

Sen. Sherrod Brown, D-Ohio, incoming chairman of the Senate Banking Committee, says he intends to hold a hearing on the current state of the stock market. “People on Wall Street only care about the rules when they’re the ones getting hurt,” Brown said in a statement. “American workers have known for years the Wall Street system is broken — they’ve been paying the price. It’s time for the SEC and Congress to make the economy work for everyone, not just Wall Street.”

Rep. Maxine Waters, D-Calif., chairwoman of the House Financial Services Committee, said Monday that she’d hold a Feb. 18 hearing titled, “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.”

Waters said in a Thursday statement that “Hedge funds have a long history of predatory conduct and that conduct is entirely indefensible. Private funds preying on the pension funds of hard working Americans must be stopped.”

Waters’ hearing will examine “the recent activity around GameStop stock and other impacted stocks with a focus on short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors.”

The SEC said Friday that it is “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days.”

Acting SEC Chair Allison Herren Lee along with the agency commissioners said Friday that: “Our core market infrastructure has proven resilient under the weight of this week’s extraordinary trading volumes. Nevertheless, extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence.”

Sen. Elizabeth Warren, D-Mass., a member of the Senate Banking Committee, wants Lee to answer questions by Friday on the causes of the recent dramatic shifts in GameStop share prices as well as steps the securities regulatory will take to update and implement rules defining market manipulation.

“The Commission must review recent market activity affecting GameStop and other companies, and act to ensure that markets reflect real value, rather than the highly leveraged bets of wealthy traders or those who seek to inflict financial damage on those traders,” Warren told Lee. “To protect and restore public trust in sound securities regulation and enforcement, the Commission must identify gaps in existing securities laws and rules and ways in which the Commission can improve its enforcement capabilities.”

Gary Gensler Confirmation Fast Tracked?

While confirmation of President Joe Biden’s cabinet members is front and center, James Angel, associate professor of finance at Georgetown University’s McDonough School of Business, told ThinkAdvisor in an email that “the publicity over GameStop highlights the need for the SEC to be fully operational, and this could accelerate” Gary Gensler’s confirmation as SEC chair.

Added Angel: “I doubt that Gensler will have much trouble with confirmation. He is a seasoned regulator who is well known to Congress.”