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'Let them trade': Washington struggles with Robinhood politics – Financial Times

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Later this month, the co-founder of Robinhood is likely to find himself being grilled by angry lawmakers in Washington, who are demanding answers over his company’s role in the GameStop trading saga.

Vlad Tenev’s appearance on February 18, which has not yet been formally announced, would come against the backdrop of a wave of populist outrage, after his online brokerage was attacked for imposing limits on trading in GameStop and other stocks that had soared amid wild enthusiasm from retail investors.

Mr Tenev has said the company imposed restrictions after the clearing houses that settle trades demanded it stump up more margin, but the curbs prompted howls of foul play among retail investors, who claim they favoured hedge funds that had placed large bets against the stocks.

Their anger has been taken up by lawmakers across the political spectrum, from Alexandria Ocasio-Cortez, the leftwing Democratic representative from New York, to Ted Cruz, the Republican senator from Texas.

Last week Ms Ocasio-Cortez was one of the first to suggest a need for congressional hearings as she described the restrictions as “unacceptable”.

“We now need to know more about Robinhood’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” she said on Thursday.

But the politics are complex. This week, the value of GameStop shares and other stocks favoured by the army of retail investors have plunged, leaving many nursing significant paper losses.

The attention from lawmakers could quickly shift from whether the trading restrictions imposed by Robinhood and others were unfair to whether more should have been done to prevent people buying stocks that had become overvalued after being egged on by others on social media sites such as Reddit.

“What’s frustrating to me is that too many people are getting caught up in stick-it-to-the-man narrative, which admittedly is an attractive narrative,” Jim Himes, the Democratic member of the House from Connecticut, told the Financial Times.

“It’s being used in the service of exposing some retail investors to huge risk, and I think they’ve probably already been very badly hurt,” he added.

The GameStop affair comes at a time of transition in Washington, with Joe Biden’s new administration vowing a tougher approach to financial regulation compared with Donald Trump.

As early as Thursday, Janet Yellen, the US Treasury secretary, is expected to convene a meeting of regulators from the Federal Reserve, the Federal Reserve Bank of New York, the Securities and Exchange Commission and the Commodity Futures Trading Commission to discuss the issues surrounding Robinhood and GameStop. Gary Gensler, Mr Biden’s pick to be SEC chairman, has however yet to be confirmed for his post.

“Secretary Yellen believes the integrity of markets is important and has asked for a discussion of recent volatility in financial markets and whether recent activities are consistent with investor protection and fair and efficient markets,” a Treasury spokesperson said late on Tuesday.

Any immediate regulatory action taken in response to the GameStop affair is likely to be narrow in scope, including the enforcement of rules against market manipulation, or higher capital requirements for online brokerages such as Robinhood.

But the episode could stoke a more intense political debate about the policing of US equity markets, taxation and disclosure requirements related to hedge funds, and even the Federal Reserve’s loose monetary policies, which have been blamed for fuelling asset bubbles and risk-taking.

“If this sort of craziness continues, and it spreads to other stocks and bigger stocks and just keeps going . . . there’s going to be a real clamouring for something to be done, but I think we’re not there yet,” said Ian Katz, an analyst at Capital Alpha Partners.

Members of Congress have seized the opportunity to make a flurry of declarations about the need to tighten financial rules so they benefit ordinary Americans.

“The way we do things with the big banks and Wall Street in this country — that system is broken,” Sherrod Brown, the incoming Democratic chair of the Senate banking committee, said in a TikTok video on Tuesday. “We do hearings on this, and we fight back.”

Although Mr Brown’s comments suggest the need for fundamental reform of Wall Street regulation, for now much of the political ire is being focused squarely on Robinhood. Elizabeth Warren, the Democratic senator from Massachusetts, this week sent a letter to the company suggesting its ties to certain hedge funds had driven its decision to curb trades.

“The public deserves a clear accounting of Robinhood’s relationships with large financial firms and the extent to which those relationships may be undermining its obligations to its customers,” Ms Warren wrote.

Robinhood declined to comment.

Brad Sherman, the California Democrat who sits on the House financial services committee, said the hearing with Robinhood should serve to determine whether the platform “acted to depress the price” or was put in a position where it had taken on too much risk to “effectuate transactions”.

But he said the episode had raised red flags about excessive risk-taking in the financial system. “If you want to play a video game you should go to GameStop and buy it, not go to Robinhood and buy the stock,” he said.

Tony Fratto, a former senior Treasury official under George W Bush and founder of Hamilton Place Strategies, a consultancy, said critics of existing regulation had ill-defined policy goals.

“How would you propose to regulate this kind of activity out of existence? I haven’t seen a single one of them tell me what that solution is,” he said, adding: “Do they want the SEC policing chat rooms? Are we going to force disclosure on social media?”

For Mr Himes, the big risk of a knee-jerk reaction in Washington is that it could end up being counterproductive, especially if it results in the scrapping of safeguards for ordinary investors instead of bolstering them.

“When Ted Cruz says ‘let them trade’, make no mistake: he’s saying ‘let’s have a libertarian market where people are not protected from the consequences of their decisions’,” Mr Himes says.

“And he’s also saying, ‘let’s remove things like margin requirements and smart regulation around unsophisticated investors getting into options trading’.”

Additional reporting by Lauren Fedor in Washington

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Politics This Morning: Kenney resigns – The Hill Times

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The government says it plans to appeal the May 10 Alberta Court of Appeal decision that found the Impact Assessment Act is unconstitutional because it infringes on provincial jurisdiction.
Liberal MP Michael Coteau predicts that Ontarians will vote Liberal in tight Liberal-NDP races in order to oust the Ford government.
Fearing Russian aggression, Finland and Sweden will likely apply for NATO membership. While Canada supports the membership of these countries, it needs to step up its own contributions, especially in the Arctic: experts.

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Opinion | Abortion and America’s Polarized Politics – The New York Times

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Damon Winter/The New York Times

To the Editor:

Re “How Roe Warped the Public,” by Ross Douthat (column, May 8):

Mr. Douthat argues that the 1973 Roe v. Wade decision was “an inflection point where the choices of elite liberalism actively pushed the Republic toward our current divisions,” but he ignores three glaring facts.

First, Roe v. Wade still aligns well with the American people’s best sense about the complexity of abortion: that it be safe, legal and rare. Second, it was deliberate decisions by conservative elites that weaponized minority opposition to abortion for their own goals. Third, it is the unyielding minority religious belief that personhood begins at the moment of conception that has been driving the divisive politics of abortion for decades.

Frederick Civian
Dedham, Mass.

To the Editor:

Ross Douthat lays the social divisions of this country at the feet of the liberal elites who foolishly made the mistake of codifying a constitutional right not specifically delineated in our Constitution. He overlooks the deliberate choice of abortion as a politically galvanizing issue by movement conservatives who, seeking to unite a party in disarray after the “Southern strategy” and Watergate, fixed on abortion as a standard to unite under.

Abortion was not originally a significant concern of evangelicals and was simply one tool they picked to create and sustain the quest for political control. Mr. Douthat, while thoughtful, is simply dead wrong on this one.

Andrew Mishkin
Portland, Maine

To the Editor:

Ross Douthat’s column about Roe was exceptionally brilliant. In an age when so much opinion content is designed to simplify complex issues, to create easy distillations that fit into previously established convictions, it takes courage to present issues with nuance and complexity and trust that readers will reward you for it.

Well done, Ross!

Ben Lincoln
Mount Desert Island, Maine

To the Editor:

I am a strongly pro-choice feminist, and I understand and respect the perspective of people who are opposed to abortion. However, opposition to abortion has taken on an element that is not pro-life. Not making an exception for instances of rape and incest suggests a lack of compassion, rather than reverence for life. Criminalizing and instigating vigilante injustice suggest not just lack of compassion, but also punishment and vindictiveness.

Where in this response is the love and mercy that are at the heart of the message of Jesus?

Berne Weiss
Estoril, Portugal

Bernardo Bagulho

To the Editor:

Running for Office to ‘Stop the Steal,’” by Barbara McQuade (Opinion guest essay, Sunday Review, May 15), should strike fear in the heart of every patriotic American.

Between now and November, honest Americans of every political stripe need to get the word out that Donald Trump is working frantically to elect “his” state legislators, secretaries of state and election officials who will replace the honest bipartisan ones who said there was no election fraud in 2020. His apparent goal is to have Trump electors tallied instead of legally chosen ones in what could be our last free election.

People need to be reminded how Mr. Trump attempted to cajole officials — even his own vice president — into overturning an honest election. Now he’s learned a better way to do it, and only the voters can prevent this electoral calamity and national tragedy.

Two years from now our democracy could be in as much danger as Ukraine’s is now, but without one missile being launched or one shot being fired.

Bobby Braddock
Nashville

Ivor Prickett for The New York Times

To the Editor:

Re “The Perils of 2 Ukraine War Endgames” (column, May 15):

Ross Douthat is right to envision these endgame scenarios. He fears that if the Ukrainian military (with U.S. weapons support) should come close to expelling the Russian forces, “nuclear escalation suddenly becomes more likely than it is right now.”

If the Russians should decide to end a protracted war with a tactical nuclear strike on Ukraine, the U.S. might be tempted to retaliate against Russia with its own nukes. Both sides have put the nuclear option back on the table.

Even short of World War III, a continuing military stalemate in the Donbas would likely have serious consequences: global grain shortages, starvation in poor countries and eventual upheavals and mass migration. U.S. arms aid would also come with high domestic costs, including the likely abandonment of needed social programs.

The U.S. and NATO should make the reduction of nuclear war risk a top priority. They should stop stoking the conflict with arms shipments. Instead, they should encourage Volodymyr Zelensky to engage in meaningful negotiations with Vladimir Putin, even if it means territorial concessions in the Donbas region.

President Biden’s objective should now be peace through diplomacy, not endless war through the continuing supply of weapons.

L. Michael Hager
Eastham, Mass.
The writer is co-founder and former director general of the International Development Law Organization.

Gabriela Bhaskar/The New York Times

To the Editor:

According to the F.B.I. expert who spoke to my synagogue on Sunday about how to survive an attack by an “active shooter,” we should not encourage mentally ill bigots by giving them heroes, that is, by naming other shooters they can emulate.

In other words, every time the news media repeats the shooter’s name, sick folks will have another person to admire. So stop saying those names. What is horrific to us is cool to them. Don’t name them.

Emily Farrell
Philadelphia

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‘A fine leader:’ Reaction to Alberta Premier Jason Kenney resigning after UCP review

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Alberta Premier Jason Kenney said Wednesday he is stepping down as leader of the United Conservative Party after the party announced he had won a leadership review with just 51.4 per cent of votes. Here is some of the political reaction:

“He was a fine leader. He worked so hard for this province, uniting us Conservatives together back in 2016 and his heart was in this province. And now he’s gone. He’s going to do wonderful things with his life and his career, but it’s a loss to our party.” — Janis Nett, secretary of the United Conservative Party

“There are obviously many things about which we don’t agree, but that doesn’t negate the time and sacrifice that goes into taking on the role of Premier. The work is never easy. The days are long and often difficult, as I’m sure today is. I wish Jason the best.” — Alberta Opposition NDP Leader Rachel Notley

“I respect Jason’s decision. It’s going to be tough going forward for a little bit … but we need to unite as a party and we need to find a leader who can do that, because right now we are divided.” — Conrad van Hierden, constituency association president for Livingstone-Macleod

“No one understands political traditions and conventions more than Jason Kenney and I want to thank him for his decent and honourable concession.” — UCP MLA Brian Jean

“Thank you @jkenney for all your contributions. Through the challenges of the past two years and decades of public service, you’ve been a voice for Alberta and Albertans, and I wish you all the best in the years ahead.” — Prime Minister Justin Trudeau

“Thank you to my friend Premier @jkenney for everything you have done to unite Alberta conservative voters into a new party, defeat a destructive NDP government and lead Alberta through a very challenging time.” — Saskatchewan Premier Scott Moe

“@jkenney my friend, the people of this province owe you a debt of gratitude. You took a province economically ravaged by the NDP & turned it into a thriving place to live and work again. B/c of you less kids will leave our home for jobs somewhere else. I’m so proud of you.” — Former federal Progressive Conservative leader Rona Ambrose

“@jkenney has dedicated his career to serving the people of his province and country. Proud to call him a friend and colleague. Wishing him all the best in his next endeavours.” — Manitoba Premier Heather Stefanson

“Sad tonite to see @jkenney step down. Under his leadership, Alta found a way thru dark times and is now better positioned to thrive than any other prov. Thx for your work PJK. You always tried to do the right thing not just the popular one. Canada is a better country bc of it.” — former B.C. premier Christy Clark

This report by The Canadian Press was first published May 18, 2022.

 

The Canadian Press

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