It’s Occupy Wall Street, the sequel. They are elements of the Tea Party, again. It’s Bernie bros and MAGA-maniacs.
The hordes of young traders who this week have fueled a spectacular rise in the value of video game retailer GameStop may lack a unified political ideology. But they forced a reckoning on Wall Street and caught the attention of leaders in Washington who recognize a populist uprising when they see it.
Wall Street has always been an easy villain for many on Capitol Hill. But the rush to side with speculative traders for Democrats and Republicans reflects the widespread recognition of the impulses that have propelled American politics in recent years, fueling both the rise of President Donald J. Trump and a liberal wing of the Democratic Party that has strengthened itself in opposition.
The decision by the online brokerage app Robinhood to impose trading limits as hedge funds were hit by the strong fluctuation of the market caused the rarest of all political occurrences – the bipartisan agreement. Lawmakers across the political spectrum condemned the move and called hearings on the decision, including Senator Ted Cruz of Texas, a staunch Republican and staunch conservative, and Congresswoman Alexandria Ocasio-Cortez of New York, a standard bearer on the left. The conservative attorney general of Texas and his progressive colleague in New York initiated investigations into Robinhood.
“For years, the stock market has been less and less about business value and more and more like gambling,” said Sen. Elizabeth Warren, a Massachusetts Democrat, who called for greater Wall Street regulation soon after the market frenzy. GameStop started this week.
“GameStop is just the most recent and most visible example,” she said in an interview on Friday. “We need to consider this not as an isolated problem, but as a systemic problem that requires regulation and systemic oversight.
While President Biden defeated Trump with a centrist message to restore political norms, this week’s commercial frenzy provided a powerful reminder of the country’s strong tendency to resentment and institutional mistrust. Many believe that this will only intensify as the country faces the economic consequences of a devastating pandemic.
With the Wall Street boom, unemployment has reached record levels, with almost 10 million fewer people in jobs than at the beginning of last year – a situation reminiscent of some former employees of the 2008 economic crisis that led to Occupy Wall Street and the Tea Party movements.
“These are not Republicans and Democrats,” said Newt Gingrich, the former Republican House Speaker and Trump’s ally. “There are many, many normal and ordinary people who started to discover that they were really stolen last year, just as they were stolen in 2008 and 2009.” He added: “What you are seeing is an almost spontaneous cultural reaction in which the little ones and the girls are getting together and going after the big ones, so the big ones are having to manipulate the game to survive”.
The reality is more complicated. There are few signs of any central political mission shared by the millions of amateur brokers who have combined to squeeze at least two hedge funds that are betting against stocks from companies like GameStop and the AMC film network. One of the scheme’s creators is far from being a “little guy”, with the financial resources to supposedly turn an initial investment of $ 53,000 into $ 48 million. Overall, only about half of the country has shares.
On Reddit, the online site that helped fuel the increase, few of the participants, mostly young people, frame their flood of investments in clearly partisan terms. Still, many write about being angered over the 2008 bailouts that kept the big banks afloat while 10 million Americans lost their homes.
“When that crisis hit our family, we were able to maintain our little house, but we lived on a mixture for pancakes, powdered milk, beans and rice for a year,” posted a person identified as ssauronn on Reddit. “His ilk was rescued and rewarded for terrible and illegal financial decisions that negatively changed the lives of millions.”
Other posters responded with their own stories of economic struggle and political hatred.
“Forget the Republican / Democrat, left / right … bankers play on both sides and almost always come out on top,” wrote a poster identified as ChrisFrettJunior, after reporting on his parents’ struggle during the 2008 recession.
The decision to bail out the biggest banks and also refuse to sue any of its top executives has sparked much of the populist fervor that has spurred American policy over the past decade. The Tea Party gained political prominence after the $ 700 billion bailout package approved in 2008, eventually becoming a force that defeated both moderate Republicans and Democrats.
After Republicans gained control of the House in 2010, Democrats began to face their own reaction, starting with Occupy Wall Street – a coalition of largely liberal protesters that fueled a national debate about economic inequality.
Today, political strategists warn, hedge funds, private equity investors and bankers are unlikely to find the same deep support in Washington. Anger over the bailouts has fueled the campaigns of political outsiders, creating a Congress that is less receptive to Wall Street’s calls and much more eager to use agitation to advance its agendas.
“There is a ton of political money to insure hedge funds against the fire of Democrats and Republicans,” said Josh Holmes, a Republican strategist and longtime adviser to Senator Mitch McConnell. “If you’re sitting on Wall Street looking at this, dismissing people as people who don’t understand the way markets work, I think there are going to be a lot of problems.”
For Republicans, the market turmoil was a referendum on elitism. Democrats saw pure corporate greed and the need for more regulation.
“Big Hedge, with outposts on South Hedge-i-stan (Wall Street) and North Hedge-i-stan (Greenwich, CT), has carried out trillions of short transactions in large American companies facing a difficult phase,” he said. Rep. Jeff Fortenberry, a Republican from Nebraska. “Now they are receiving a punishment for flash mobs from day traders and are paying dearly.”
Most of this week’s anger was directed at Robinhood, a brokerage app aimed at younger investors, which suddenly limited trading on GameStop, AMC and other stocks. Lawmakers argued that the app was protecting hedge funds and other major investors from retail investors. Robinhood said that additional restrictions were necessary to meet the government’s financial requirements.
Still, even centrists like Sen. Pat Toomey of Pennsylvania, who is about to become the top Republican on the Senate Banking Committee, expressed concern about the company’s lack of transparency in online decision-making.
“I find it worrying when retail investors who are simply looking to buy a stock are excluded from the market,” Toomey said in a statement. “Retail investors must be free to buy even highly speculative stocks, just as hedge funds must be free to sell them.”
Although politicians on both sides joined in calls for greater scrutiny, it was hardly a kumbaya moment for both parties.
After Cruz tweeted that she agreed with Ocasio-Cortez’s request for an investigation into Robinhood’s action, she quickly denied any support from the Texas Republican, who was a prominent supporter of Trump’s unfounded allegations of electoral fraud.
“I am happy to work with Republicans on this issue where there is common ground, but you almost murdered me three weeks ago, so you can stay out,” she answered. “I am happy to work with almost any other GOP that is not trying to kill me. In the meantime, if you want to help, you can resign. “
Cruz condemned her response as “party anger” that “is not healthy for our country”, attracting another response from Ms. Ocasio-Cortez, while her allies in the House apologized.
The uproar over GameStop and Robinhood comes at a challenging time for the Biden government, which took office promising to restore a sense of calm to the country. The Senate Banking Committee has yet to schedule a hearing to confirm Gary Gensler, Biden’s choice to head the Securities and Exchange Commission, leaving the agency with an interim president for an indefinite future. On Friday, White House press secretary Jen Psaki postponed questions on the matter.
“It is a good reminder, however, that the stock market is not the only measure of the health of our economy,” she said, an apparent reference to Trump’s persistent fixation on stock prices during his tenure. Mr. Biden has yet to comment on the matter.
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 that the wide range of Republicans and Democrats who spoke out was a reflection of “a real populist rage in this country”.
“Some people get sophisticated degrees, know the right people and spend all day in front of their computers selling short,” said Khanna. “And it is a form of manipulation that has hurt our country. This has enriched a few at the expense of many Americans. ”
While many Americans do not own shares, the feeling that Wall Street has manipulated a fraudulent system goes beyond demographic barriers, he argued.
“I think this has been bubbling up since the Wall Street crash in 2008,” said Khanna. “And it is reaching a boiling point.”