GameStop stock frenzy enters White House realm
Sen. Warren chides investors for treating stock market like 'their own personal casino'
The market mania that has become GameStop -- shares closed Wednesday up more than 1,600% since the start of the year -- found itself a topic of conversation at both The White House and The Federal Reserve Wednesday.
At the Biden administration's daily press briefing, White House Press Secretary Jen Psaki told the media that Biden's "economic team, including Secretary Yellen and others, are monitoring the situation," referring to the Game Stop spikes.
The market did give the retailer's stock a bit of a slap in the face in after-hours trading with the stock falling 9%.
But with the Dow Jones Industrial Average closing down more than 600 points Wednesday -- for its worst day since Oct. 28 -- Psaki noted as the market was headed for the down day that "It is a good reminder that the stock market is not the only measure of the health of our economy.”
Nodding to the previous Trump administration’s tendency to measure the nation’s success by the stock market’s performance, Psaki added, “It does not reflect how working and middle class families are doing.”
GAMESTOP, AMC GYRATIONS HIT CHARLES SCHWAB, TD AMERITRADE WITH OUTAGES
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP. | 26.57 | -0.79 | -2.89% |
| AMC | AMC ENTERTAINMENT | 4.48 | -0.10 | -2.18% |
| BB | BLACKBERRY LTD. | 2.38 | -0.02 | -0.83% |
But it is unclear how the White House could get involved in the stock market’s surprising turn of events this week which have seen market laggards such as AMC, Game Stop and Blackberry enjoy a flurry of buying activity, In his semi-monthly press briefing, Federal Reserve Chairman Jerome Powell declined to comment on the activity surrounding GameStop.
“I don’t want to comment on a particular company or day’s market activity or things like that. It’s just not something really that I would typically comment on,” he told reporters Wednesday.
GameStop’s shares have soared after a group of Reddit users banded together to buy up the struggling retailer's call options – pushing the companies stock prices to unprecedented levels and hurting market short-sellers.
The strip mall retailer had been fighting the economic trends of the last decade as demand for video game discs dropped following technology advances that allow instant virtual purchases of games – removing the need for the game supplier or the store.
In 2007 a share of GameStop cost roughly $62, but just one year ago the stock had tumbled to $4.31 a share. It closed the 2020 at $18.84 -- a far cry from the $320 close of Wednesday.
Long time Wall Street critic, Sen. Elizabeth Warren, D-Mass., called on the Biden administration to crack down on the financial markets and enforce regulations on hedge funds.
“For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price,” Warren wrote on Twitter Wednesday.
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“It’s long past time for the SEC and other financial regulators to wake up and do their jobs -- and with a new administration and Democrats running Congress, I intend to make sure they do,” she added.
Besides Warren's issues, Wall Street investors are worried about liquidity issues. With some hedge funds taking a bath on the short-selling deals, concerns are mounting that losses by these funds could spill into other areas of the market as the funds needing to raise cash to cover losses sell other stocks.