White House press secretary Jen Psaki dodged multiple reporters’ questions Thursday about the saga in the stock market involving amateur stock traders collectively taking on some of Wall Street’s most sophisticated hedge fund by fueling GameStop stock.
“Given all the volatility surrounding Wall Street and GameStop, what is the Biden administration going to protect the average American investor if there’s going to be a potentially major market correction?” CNN reporter asked Psaki.
“The SEC put out a statement,” Psaki said in response. “I believe it was today, or in the last 24 hours, I should say. I’d refer you to that. We’re not going to have any additional comment from here.”
However, the SEC statement released Wednesday that Psaki deferred reporters to ducks on explaining how it is “working” to “access the situation and review” trading limits amid the Reddit-fueled stock frenzy.
“We are aware of and actively monitoring the on-going market volatility in the options and equities markets and, consistent with our mission to protect investors and maintain fair, orderly, and efficient markets, we are working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants,” the statement said.
On Wednesday, Psaki said that Treasury Secretary Janet Yellen was “monitoring the situation” pertaining to the stock market reeling from a frenzy.
“Our team, our economic team, including Secretary Yellen and others, are monitoring the situation,” Psaki said during Wednesday’s press conference. “It’s a good reminder though that the stock market isn’t the only measure of the health of our economy. It doesn’t reflect how middle- and working-class families are doing.”
“Beyond just monitoring it, has he had any conversations with economic officials about what’s going on?” CNN pressed on.
“He’s briefed by his economic team frequently,” Psaki responded, declining to add-on to what Biden has been briefed on. “But I don’t have anything more to read out for you.”
Another reporter followed up by asking Psaki about the news that dominated the airwaves regarding the financial app Robinhood restricting retail traders from buying shares of the Gamestop stocks as well as several other short stocks just shortly before the opening bell in a move that cut off many smaller investors,
“Is the SEC, DOJ, or broader administration specifically looking at Robinhood and other platforms’ decision to prove retail investors from purchasing certain stocks like GameStop?” The reporter asked.
“I don’t have anything more on this, aside from pointing you back to the SEC Statement,” Psaki said, dodging the question yet again.
Robinhood on Thursday took steps to tamper down the frenzy, citing “recent volatility” and prevented its users from buying Gamestop stocks as well as others after a rally that saw shares in the video game retailer soar 1,700 percent this month, including Wednesday’s climb of 135 percent.
After the restriction imposed, shares of GameStop initially reversed their gains, sliding quickly into negative territory. The stock, which traded above $500 at one point in premarket trading, closed down 44% on Thursday.
A third correspondent tried again, this time questioning Psaki regarding speaking fees Yellen received from Citadel, the hedge fund which owns Robinhood, and whether she would recuse herself. There has been some speculation that Citadel pressured Robinhood and other electronic brokers to halt trading in certain stocks.
“You did mention, I believe yesterday, that the Treasury Secretary is monitoring the situation and she’s, kind of, on top of it. There have been some kind of concerns about her previous engagements with Citadel and speaking fees that she has received from Citadel. Are there any plans to have her recuse herself from advising the President on GameStop and the whole Robinhood situation?” the third reporter asked Psaki.
“Well, just to be clear, what I said was that we have — the Treasury Secretary is now confirmed. Obviously, we have a broad economic team. The SEC put out a statement yesterday that I referred to,” Psaki said. “But I don’t think I have anything more for you on it, other than to say, separate from the GameStop issue, the Secretary of Treasury is one of the world-renowned experts on markets, on the economy. It shouldn’t be a surprise to anyone she was paid to give her perspective and advice before she came into office.”
Citadel is invested heavily in Melvin Capital, a hedge fund that was reportedly on the brink of bankruptcy this week due to a surge in GameStop share prices. Melvin Capital closed out its short position in GameStop on Tuesday after taking huge losses due to an army of Reddit traders pushing the retailer’s stock through the roof. Citadel and Point72 have infused close to $3 billion into the hedge fund bailout to shore up its finances.
Yellen received more than $800,000 in speaking fees at several events from October 2019 to October 2020. According to Yellen’s filings with the Office of Government Ethics, Citadel paid Yellen $292,500 for a speech on Oct. 17, 2019, $180,000 for one on Dec. 3, 2019, and $337,500 to speak at a series of webinars held from Oct. 9-27, 2020.
Citadel denied the rumors that they influenced Robinhood’s decision to restrict trading of the GameStop stocks on its platform.
“Citadel is not involved in, or responsible for, any retail brokers’ decision to stop trading in any way,” a spokesperson for the hedge fund said in a statement. “Citadel Securities has not instructed or otherwise caused any brokerage firm to stop, suspend, or limit trading or otherwise refuse to do business. Citadel Securities remains focused on continuously providing liquidity to our clients across all market conditions.”
The David and Goliath battle has attracted the attention of retail traders, celebrities, and lawmakers on both sides of the aisles. Both chambers of Congress have announced that they will hold have hearings into the GameStop-Wall Street trading saga. The Senate Banking Committee said it will hold a hearing on “the current state of the stock market,” and the House Committee on Financial Services announced it would also hold a hearing on the recent market instability.
No date has been set for either hearings.