United States: after GameStop, elected officials conspire to speculative funds, "predators" of Wall

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The left is far from being the only one to step up to the plate: the very conservative Attorney General of Texas, Ken Paxton, has fired red bullets against hedge funds and, even more, against certain brokerage platforms: "It stinks of corruption!" Two parliamentary committees will hear Wall Street institutions to find out if they have not acted in concert. (Credits: Brendan McDermid)

In recent days, elected officials of all stripes, from the conservative right to the progressive left (some observers evoke a "convergence of populisms"), castigate the practices of hedge funds which bet down on companies with fragile financial health, which the video game dealer GameStop and others have paid the price. Two parliamentary groups have announced upcoming hearings to shed light on speculative practices in financial circles: they suspect concerted actions.

In an extremely polarized political landscape, consensus is rare in the United States. But in recent days, elected officials of all stripes, from the conservative right to the progressive left, are standing up against the practices considered manipulative of certain Wall Street players.

Hedge funds betting on the decline in policy sights

The first targets are hedge funds that bet down on companies in fragile financial health, including video game retailer GameStop, AMC theaters or the Bed, Bath & Beyond department store chain.

Betting on the stock market collapse of groups of which they have sold many shares, these funds intend to earn a profit by buying back the sold securities cheaply.

But an army of amateur investors, active among others on the WallStreetBets forum of the community site Reddit, decided to beat these institutions at their own game by massively buying the targeted stocks, which saw their prices rise sharply last week.

"It stinks of corruption": the also right has criticizes the practices of Wall Street

This saga, which fascinates the financial press as much as it disrupts the business community, led Senator Elizabeth Warren, from the left wing of the Democratic Party, to castigate the attitude of the barons of the New York Stock Exchange.

"What is happening with GameStop only reminds us of what has been happening for years on Wall Street. It is a rigged game , " lamented Sunday on CNN the representative of Massachusetts.

"It is time for the SEC to do its job," said Ms. Warren, calling on the US stock market regulator to intervene as quickly as possible.

Independent Vermont Senator Bernie Sanders drew in the same direction, lamenting a "flawed" system and "outrageous" behavior.

The tone is similarly acerbic on the other side of the political spectrum: the very conservative Attorney General of Texas, Ken Paxton, has fired red bullets against hedge funds and, even more, against certain brokerage platforms.

Several of them, including the popular Robinhood app, decided last week to limit speculative securities transactions in the face of surging demand.

"It stinks of corruption," blasted Mr. Paxton on Friday, who asked for additional information from brokers, as did his counterpart in New York State, Democrat Letitia James.

These representatives wonder in particular whether Wall Street institutions have not acted in a concerted manner.

Convergence of populism?

Some observers see in this common front a convergence of right-wing and left-wing populisms in the face of the excesses of American high finance.

This alliance of circumstance is however far from giving rise to a reconciliation between the two political parties.

New York Democratic Congresswoman Alexandria Ocasio-Cortez ("AOC" °, who had deemed Robinhood's attitude "unacceptable", responded curtly on Twitter to Republican Senator from Texas Ted Cruz, who had expressed his approval.

"I'm happy to work with Republicans on this subject where there is common ground, but you almost had me murdered three weeks ago, so you can skip your turn," "AOC" wrote.

On January 6 in Washington, Mr. Cruz and other elected conservatives challenged the official validation of the results of the November presidential election in certain key states, shortly before a crowd of Donald Trump supporters invaded the Capitol.

"If you want to be of service, you can resign," suggested Ms. Ocasio-Cortez to the Texas elected official.

Hearings demanded on speculative finance practices

Two parliamentary groups, the House of Representatives' Financial Services Commission and the Senate Banking Commission, have announced upcoming hearings to shed light on speculative practices in financial circles.

"The greats of Wall Street are only interested in the rules when they are the ones who suffer," denounced Democratic Senator Sherrod Brown, new chairman of the Banking Commission. "American workers have known for years that the Wall Street system does not work - they are paying the price."

Maxine Waters, the Democratic deputy at the head of the House group on financial services, has promised a real investigation into the behavior "predatory and manipulative" of certain market players.

Pressed on all sides, the SEC also pulled out of its reserve at the end of last week by ensuring "to monitor and evaluate closely the extreme volatility of the price of certain shares" and by guaranteeing to "protect small investors when the facts show a abusive stock market activity ".

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