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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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‘Disgraceful:’ N.S. Tory leader slams school’s request that military remove uniform

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HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.

Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.

A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”

Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.

“If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.

In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”

“I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”

Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.

Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.

Webster did not immediately respond to a request for comment.

At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.

“I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.

“My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.

“Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”

Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.

“We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”

NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”

“I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Saskatchewan NDP’s Beck holds first caucus meeting after election, outlines plans

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REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.

Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.

She says her priorities will be health care and cost-of-living issues.

Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.

Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.

The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Nova Scotia election: Liberals say province’s immigration levels are too high

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HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.

Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.

“That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.

Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.

“I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”

The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.

In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.

“(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”

In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.

“The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”

Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.

Churchill said Houston’s claim about asylum seekers was shameful.

“It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”

In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.

In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.

“Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”

Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.

“Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”

The party estimates the measure would save the average Nova Scotia family about $1,300 a year.

“That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.

Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.

“Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.

This report by The Canadian Press was first published Nov. 7, 2024.

— With files from Keith Doucette in Halifax

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