It’s Occupy Wall Street, the sequel. There are elements of the tea party again. It’s Bernie Bros and MAGA maniacs.
The hordes of young retailers who sparked a spectacular increase in the value of video game retailer GameStop this week may lack a single political ideology. But they have forced a reckoning on Wall Street and caught the attention of Washington leaders, who will recognize a populist insurrection when they see one.
Wall Street has long been an easy villain for many on Capitol Hill. The run on speculative traders from both Democrats and Republicans, however, reflects widespread recognition of the impetus that has fueled American politics in recent years and both the rise of President Donald J. Trump and a liberal wing of Democrats Party that grew stronger, in contrast, fuel.
Online brokerage app Robinhood’s decision to set trading limits as hedge funds were hit by wild market fluctuations sparked the rarest of all political events – an agreement between two parties. Lawmakers from across the political spectrum condemned the move and called for hearings on the decision, including Senator Ted Cruz of Texas, a Republican and staunch Conservative, and Representative Alexandria Ocasio-Cortez of New York, a standard-bearer of the left. The Conservative Texas Attorney General and his progressive New York counterpart have both opened investigations into Robinhood.
“For years the stock market has been less and less about the value of business and more and more about casino gambling,” said Massachusetts Democrat Senator Elizabeth Warren, who called for increased regulation on Wall Street shortly after the market frenzy began with GameStop this week.
“GameStop is just the latest and most visible example,” she said in an interview on Friday. “We don’t need to see this as a one-off problem, but as a systemic problem that requires systemic regulation and enforcement.”
While President Biden defeated Mr Trump with a centrist message of restoring political norms, this week’s trade frenzy was a powerful reminder of the strong undercurrent of complaints and institutional distrust in the country. Many believe this will only intensify as the nation grapples with the economic aftermath of a devastating pandemic.
While Wall Street is booming, unemployment has hit a record high, with nearly 10 million fewer employees than early last year – a situation that reminds some former officials of the 2008 economic crisis that led to both the Occupy Wall Street and Tea Party movements .
“It’s not about Republicans and Democrats,” said Newt Gingrich, former Republican House spokesman and ally of Mr. Trump. “It is lots and lots of normal, everyday people who found out they really got ripped off in the last year, just like they got ripped off in 2008 and 2009.” He added, “What you see is an almost spontaneous cultural reaction, where the little boys and girls get together and chase the big ones, so the big ones have to manipulate the game to survive.”
The reality is more complicated. There is little evidence of a central political mission shared by the millions of amateur traders who have aggregated at least two hedge funds betting against the stocks of companies like GameStop and the film chain AMC. One of the creators of the program is far from being a “little guy” who has the financial means to supposedly convert an initial investment of $ 53,000 into $ 48 million. A total of, only about half of the country owns stocks at all.
On Reddit, the online site that fueled the upswing, few of the mostly young participants frame their investment deluge in a clearly partisan way. Still, many write that they were driven by anger over the 2008 financial bailouts that kept the big banks afloat while 10 million Americans lost their homes.
“When that crisis hit our family, we were able to keep our little house, but we lived on pancake mix, powdered milk, beans and rice for a year,” said a person known as Ssauronn on Reddit. “Your husband has been saved and rewarded for making terrible and illegal financial decisions that have negatively changed the lives of millions of people.”
Other posters responded with their own stories of economic struggle and political anger.
“Forget Republicans / Democrats, left / right … the bankers play both sides and are almost always ahead,” wrote a poster identified as ChrisFrettJunior after recounting how his parents got through the recession Fought in 2008.
The decision to bail out the biggest banks, and also to turn down the prosecution of their top executives, led to much of the populist passion that has fueled American politics for the past decade. The Tea Party gained political prominence following the $ 700 billion financial rescue package passed in 2008 and eventually became a force that defeated moderate Republicans and Democrats alike.
After Republicans took control of the house in 2010, Democrats embarked on their own backlash, starting with Occupy Wall Street – a loose coalition of largely liberal protesters who fueled a national conversation about economic inequality.
Politicians today warn that hedge funds, private equity investors, and bankers are unlikely to find the same deep support in Washington. Anger over the bailouts has fueled campaigns by political outsiders, creating a Congress that is less open to the requests of Wall Street and far more intent on using the upheaval to move its agendas forward.
“It’s a lot of political currency to keep hedge fund feet at the fire of Democrats and Republicans,” said Josh Holmes, a Republican strategist and longtime advisor to Senator Mitch McConnell. “If you sit on Wall Street and look at this and dismiss people as people who don’t understand how markets work, you are likely to be in big trouble.”
For the Republicans, the market upheaval was a referendum on elitism. Democrats saw sheer corporate greed and the need for more regulation.
“Big Hedge with outposts in South Hedge-i-stan (Wall Street) and North Hedge-i-stan (Greenwich, CT) has created trillions of US short positions for large US companies,” said Jeff Fortenberry, Republican of Nebraska . “Now they get a chance to get flash mobs from day traders and pay dearly.”
Most of the anger this week was against Robinhood, a brokerage app for younger investors that suddenly restricted trading in GameStop, AMC, and other stocks. Legislators argued that the app protects hedge funds and other large investors from retail investors. Robinhood said the additional restrictions were necessary to meet the government’s financial requirements.
Yet even centrists like Senator Pat Toomey of Pennsylvania, who stands ready to become the top Republican on the Senate Banking Committee, have expressed concerns about the lack of transparency in the online company’s decision-making.
“I find it worrying when retail investors who just want to buy a stock are excluded from the market,” Toomey said in a statement. “Retail investors should be free to buy even highly speculative stocks, just as hedge funds should be free to sell them.”
Although politicians on both sides joined demands for greater control, it was hardly a kumbaya moment for either party.
After Mr Cruz tweeted that he agreed to Ms. Ocasio-Cortez’s request to investigate Robinhood’s action, she quickly declined any support from the Texas Republican who was a prominent supporter of Mr Trump’s baseless allegations of election fraud.
“I’m happy to be working with Republicans on this issue where there is common ground, but you almost murdered me three weeks ago so you could expose this problem.” She answered. “I’m happy to work with almost every other GOP that isn’t trying to kill me. If you want to help in the meantime, you can step back.”
Denouncing her response as “partisan rage” which is “not healthy for our country”, Mr Cruz drew another reply from Ms Ocasio-Cortez while his allies in the House demanded an apology.
The uproar over GameStop and Robinhood comes at a challenging time for the Biden administration, who took office and pledged to restore a sense of calm to the country. The Senate Banking Committee has not yet scheduled a hearing to confirm Gary Gensler’s decision to head the Securities and Exchange Commission and leave the agency with an acting chairman for an indefinite period. On Friday, White House press secretary Jen Psaki postponed questions on the matter.
“It’s a good reminder, however, that the stock market isn’t the only measure of the health of our economy,” she said, an obvious indication of Mr. Trump’s continued fixation on stock prices during his tenure. Mr Biden has not yet commented on the topic.
California representative Ro Khanna, a progressive who represents a district that includes Silicon Valley, said this week’s events should alert lawmakers to the need to tighten financial regulations and increase transparency and equity.
He said the wide range of Republicans and Democrats who have spoken out reflected “a real populist anger in this country”.
“Some people do fancy deals, know the right people, and spend all day short selling their computers,” said Khanna. “And it’s a form of manipulation that has hurt our country. It has enriched the few at the expense of many Americans.”
Although many Americans own no stocks at all, the feeling that Wall Street was playing a rigged system transcends demographic barriers, he argued.
“I think this has been bubbling since the Wall Street crash in 2008,” said Khanna. “And it comes to a boiling point.”