In order to affect change, one has to understand the problem before them. It is by those standards we can confidently say we are near-certain that this week's upcoming congressional hearings on the GameStop fiasco will be both a useless circus and a intellectual farce.
But just in case we had any doubt left, the nationally televised exercise in Congressional incompetence when it comes to all things capital markets is now said to be focusing on "short selling and stock manipulation".
In addition to short selling and stock manipulation, Bloomberg reported Tuesday that the hearing would also focus on "consumer protection, short squeezes, and the roles of 'gamification' of trading and social media" - which should be a hoot, considering precisely nobody in congress comprehends equity valuations, how capital markets work, what a short squeeze is - or really anything other than how to trade on inside government information.
The topics were reportedly sent out Monday in a "memo sent to members of the House Financial Services Committee by Democratic staff." The memo says that the GameStop chaos “raises questions regarding whether legislators and regulators should take a closer look at existing rules governing short sales and related disclosures, as well as the conflicts between the practice of payment for order flow and firms’ best execution obligations."
Lest we forget, it was short sellers who were the target in the GameStop run up, not the parties who may have conspired to manipulate the price of the security artificially by buying it all at once. Though we can't say we are surprised that Congress already appears to be off-base, before the hearing has even started.
The memo also says: “It also raises important questions about the efficacy of anti-market manipulation laws and whether technology and social media have outpaced regulation in a manner that leaves investors and the markets exposed to unnecessary risks.”
We should not allow unsophisticated investors to buy stocks with money they don’t have. Misuse of margin debt(and options) by novice investors has possibly destroyed more capital than almost any other trading strategy. How does that sound? https://t.co/OfajDovp3u— Diogenes (@WallStCynic) February 16, 2021
Other traders were...well, less than optimistic about the hearing's ability to affect change.
GAMESTOP HEARING TO FOCUS ON SHORT SELLING, MANIPULATION: FBN— Quoth the Raven (@QTRResearch) February 16, 2021
Short sellers got the shit kicked out of them. The fucking stock went up 50x, yet Vlad Tenev is going to make them out to be the bad guy.
We think one trader has the right idea of how to watch the hearing:
I'm going to watch this hearing on an old computer monitor just so I can smash it. https://t.co/WMNd878LwD— Keubiko (@Keubiko) February 16, 2021
Other traders showed their unending confidence in Maxine Waters' ability to comprehend the situation.
I'm sure Maxine Waters will prepare for the hearing with the benefit of her habitual extensive research, and chair it with her customary nuanced understanding and intellectual depth.— Montana Skeptic (@montana_skeptic) February 16, 2021
And of course, the main focus of this hearing shouldn't be "evil short sellers", but rather Citadel's cozy and relatively unknown relationship with Robinhood and why Robinhood, who positions itself as an app for the little guy while funneling orders to Citadel in exchange for cash, didn't have the liquidity to perform its basic functions when market participants all threw their hat in the same ring.
As for our thoughts on the hearing? We think the Chez Quis Maitre D' said it best.