Elizabeth Warren says the GameStop frenzy proves Wall Street is a 'rigged game' and she urges the SEC to 'grow a backbone', 'get off their duffs and do their jobs'
Drama surrounding the GameStop trading frenzy proves that Wall Street is 'a rigged game,' Elizabeth Warren said on Sunday.
The Massachusetts senator, known for her tough take on the financial system, said that the market had been turned into a 'casino'.
She urged the Securities and Exchange Commission (SEC) - founded following the stock market crash in the 1920s to protect investors and the national banking system - to do their job.
'Let's start with the fact we actually don't know who all the players are in this, whether there is big money on both sides,' she said, alluding to accusations that Robinhood, an app to allow small investors to to trade, prevented purchase of GameStop and other stocks at the behest of large hedge funds.
Elizabeth Warren appeared on CNN's State of the Union on Sunday to discuss GameStop
Protesters on Thursday night staged a demonstration outside the New York Stock Exchange
On Sunday The Wall Street Journal reported that one hedge fund, Melvin Capital Management, which has borne the brunt of losses from the soaring stock prices of heavily shorted stocks, lost 53 per cent on its investments in January.
GameStop's founder Vlad Tenev insisted on Thursday night that there had been no outside involvement.
Yet Warren said that the speculation about Robinhood's actions was 'why we need an SEC investigation'.
She told CNN: 'What's happening with GameStop is just a reminder of what's been going on on Wall Street now for years and years and years. It's a rigged game.
'They've turned this stock market, not into a place where you get capital formation to support businesses, but more into a casino.'
Warren said the past week's scandals showed why there should be more transparency.
'We need a market that is transparent, level and that is open to individual investors,' she said.
'It is time for the SEC to get off their duffs and do their jobs.'
Vlad Tenev defended his company's actions in an interview on Thursday night
Broker Robinhood has been the focus of interest in the GameStop surging stocks
Traders, pictured on the New York Stock Exchange on January 9, have had a wild week
Robinhood 'can't be trying to help the hedge funds at the same time it pretends that it is trying to help individual investors,' Warrren said.
'It's not about protecting people from making bad trades. It's about keeping the playing field level,' she said.
'That's why we need regulations.'
Melvin, according to The Wall Street Journal, started the year with about $12.5 billion and is now down to $8 billion.
Melvin had established itself in recent years as one of the top hedge funds on Wall Street, but a short position on stocks including GameStop has cost it significantly.
Warren said that hedge funds and corporations benefit from opaque, inefficient markets.
'If we have a market that is transparent, level, that helps individual investors come into that market and, frankly, helps make that market more efficient,' she said.
'We talk about efficient markets. But the truth is, the hedge funds, many of the giant corporations, they love the fact that the markets are not efficient. They love being able to manipulate these markets because they get better returns, and individual investors lose out.'
Brian Deese, director of the National Economic Council, said the SEC was looking into the GameStop situation but said the Biden team's focus is on 'American families across the country and small businesses on Main Street.'
'The SEC is looking into all of the elements of this situation with a real focus on protecting retail investors and the integrity of the market. I think, bigger picture, what this reinforces is that the stock market is not a good barometer of what is happening in the economy for most American families,' Deese said.
'We're looking closely at this and we are going to look closely at the broader policy questions associated with the equity markets,' he continued.
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