Opinion: Hypocrisy is on full display as Congress investigates GameStop frenzy

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Many Congressional hearings don’t attract cameras, but today’s House Financial Services Committee discussion of the recent GameStop-Robinhood drama will. This means that we will see some lawmakers expressing deep concern, a frowning concern, over alleged wrongdoing and how the big boys often play by their own set of rules. It‘s so unfair.

He’s also self-righteous and hypocritical, given that when it comes to the stock market, members of Congress – that is, those same greats – actually play by their own rules. More of that in a minute. Find out: Here’s what to expect at the GameStop and Robinhood hearings. You will recall the daily trading frenzy around GameStop GME, + 2.05%, video game retailer, film company AMC Entertainment Holdings AMC, + 2.70%, and fashion retailer Express EXPR, -2.47% was such that Robinhood , the online broker, briefly restricted trading in those stocks last month. Lawmakers want to know if there was any collusion by Robinhood and hedge funds Citadel Securities and Melvin Capital. Ties to Robinhood Hedge Funds For his part, Robinhood CEO Vlad Tenev will say in prepared testimony that his company did not improperly assist the hedge funds and that he restricted GameStop transactions to comply with the compensation claims. “Any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our clients is absolutely false and market-distorting rhetoric,” he said. Robinhood has had issues with regulators before. In December, it agreed to pay $ 65 million in penalties after the Securities and Exchange Commission said it misled customers about how it made money, that is, from fees made when routing customer orders to companies. preferred commercials. While investors knew that their trades were running commission-free, they didn’t know that they weren’t getting the best prices for those trades. Robinhood settled the charges without admitting or denying any wrongdoing, and a lawyer for the company told MarketWatch last month that “[t]The deal ties in with historical practices that don’t reflect Robinhood today. “Foxes Guarding the Chicken Coop Now for the hypocrisy I mentioned earlier. He’s rich. Members of Congress always act holiness about this sort of thing and will do it again today. But They are foxes guarding the chicken coop, because they have access to inside information and can buy and sell stocks based on what they learn. The most recent and egregious example of this occurred last year, when Republican Sen. Kelly Loeffler of Georgia, Jim Inhofe of Oklahoma, Richard Burr of North Carolina and California Democrat Dianne Feinstein got in trouble for selling millions of dollars in stock just before the crash that was triggered by the coronavirus pandemic. The four had just received a briefing at door closed on the pandemic by top health officials. “Members of Congress have immediate access or and very convenient to inside information that the rest of the public does not have, ”says Craig Holman of Public Citizen, a Washington-based consumer rights group. Those senators “after being informed about the economic impact of the pandemic and the impact it would have on the stock market, they immediately abandoned their actions. No one else had access to that information. “His peers, members of the Senate Ethics Committee and, in Burr’s case, the Justice Department, eventually acquitted the four senators of any wrongdoing. But some paid a price. Loeffler finished. losing his seat to Democrat Raphael Warnock, and Burr was forced to resign the chairmanship of the Senate Intelligence Committee and has since said that he will not seek re-election in 2022. This is the ecosystem in which Congress investigates and monitors matters. like today’s GameStop audience. I must emphasize here that, as far as I can tell, most of our elected officials are decent and ethical about such things. But for those who are not, it seems very easy to act cheeky. and get away with it. You know what else is hypocritical? The Senate, which confirms presidential nominations, demands that they get rid of conflicting actions, actions that would conflict. to with their functions in the administration. “They will make sure these new appointees have done so,” Holman says. “But not the senators themselves, nor the House. Members of Congress can buy and sell the shares they want, including shares they oversee directly from their committee positions. “The STOCK Act was diluted In 2012, the” Stop Trading with the Knowledge of Congress Act was passed. (“STOCK Act”), aimed at combating insider trading. It prohibited the use of non-public information for private profit, including the use of inside information by members of Congress and other government employees. But Just one year later, the law’s financial disclosure requirements were watered down. A new law, the so-called “Conflict Trade Prohibition Act,” is making its way through Congress. It would bar legislators and senior staff from trading stocks. We’ll see if it passes, but the question is: will it quietly fade later, like the STOCK law was?