Former Securities and Exchange Commission chairman Harvey Pitt reacts to lawmakers who ask the government to get involved in restrictions on stock trading.
Representative Ilhan Omar called for a new tax on stock trading after a battle between an army of amateur investors and hedge funds caused a dramatic fluctuation in the stock price of GameStop and other heavily sold companies, shaking Wall Street.
GameStop’s stock, which was worth about $ 19 in early January, rose to $ 483 last week, a price rise so dramatic that TD Ameritrade and Robinhood placed restrictions on trading the traditional video game retailer. After plummeting on Thursday, GameStop’s shares made a dramatic recovery on Friday after Robinhood – facing public protests – said he would restore some negotiations.
GAMESTOP NAYSAYERS SEE STOCK CRUSH WITH LOSSES OF $ 6B
“A small tax – 0.1% – on each Wall Street transaction would reduce high-frequency trading, a practice that drains profits from retail investors and benefits only the very wealthy,” tweeted Omar last week.
The tax revenue, which she estimated would raise about $ 1 trillion, could be used to finance progressive policies, such as eliminating student loan debt and offering free college, said the “Squad” member.
Omar had previously introduced legislation with Senator Bernie Sanders, I-Vt., To eliminate all of the country’s $ 1.6 trillion student loan debt. The move would be financed by a “Wall Street speculation tax” on financial investment transactions, including a 0.5% tax on stock trading, a 0.1% bond rate and a 0.0005 tax % on derivatives.
Lawmakers projected that the new taxes would generate about $ 2.4 trillion in a decade.
The frenzy of GameStop’s shares increased last week after local brokers on the Reddit forum “Wallstreetbets” supported the company, betting that stock prices would rise even with Wall Street short-sellers betting the exact opposite. Short sellers – who bet on declining stocks by selling stocks they don’t own – lost billions as a result.
INCREASED INTEREST RATES MEANS PROBLEMS FOR SHARES
The stock market roller coaster, seen by many as a 99% war waged against wealthy Wall Street titans, also raised questions among some lawmakers about increased regulatory oversight and concerns about unprofessional investors who were apparently barred from trading. GameStop shares for a brief period.
“For years, the same hedge funds, private equity firms and wealthy investors dismayed by GameStop trading have treated the stock market as their own personal casino, while everyone else pays the price,” said Sen. Elizabeth Warren, D -Mass. in a statement on Wednesday.
Warren, a 2020 presidential candidate and a leading advocate of strict laws to control Wall Street and the private equity industry, has renewed its push for the Securities and Exchange Commission to regulate the market more strictly.
“It is past time for the SEC and other financial regulators to wake up and do their jobs – and with a new government and Democrats in Congress, I intend to make sure they do,” she said.
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In a statement on Friday, the SEC said it would work to protect “retail investors” by looking at the recent volatility in trading and has pledged to examine actions taken by “brokers who can” put investors at a disadvantage or unduly inhibit their ability to trade certain securities. “
“We will act to protect retail investors when the facts demonstrate abusive or manipulative commercial activity prohibited by federal securities laws,” said the SEC.
He added: “The Commission is working closely with our regulatory partners, both across the government and at FINRA and other self-regulatory organizations, including stock exchanges, to ensure that regulated entities fulfill their obligations to protect investors and identify and pursue potential wrongdoing. “