What Did We Learn From The GameStop Hearings?

Like many of you, I was riveted by the House Financial Services Committee’s hearing about the recent volatility in GameStop (GME) and related stocks. Many of you, no doubt, were not similarly riveted and wished the major financial networks cutaway (I was bumped by a network that decided to air the hearings rather than talk to me and I don’t blame them), but I’m glad that the testimony was broadcast in the manner it was. Here are some of my takeaways:

  • That is a huge committee. How do they get anything done? There are 53 members of the committee, meaning about 12% of the 435 member House of Representatives is on it. There are many who must view its unwieldiness as a blessing – a group that large makes it difficult to advance legislation, which benefits those who don’t relish additional rules.
  • No matter how well-funded you are, teleconferencing has its glitches. Neither the ample resources of the US government nor those of brokerage firms and hedge funds were sufficient to guarantee a call without echoes, fuzzy patches, and background noise. At some level, it was nice to see that everyone has the same troubles with remote meetings.
  • There was less grandstanding than many expected. A well-publicized Congressional hearing of this type is often a breeding ground for bloviating and sound bites. The majority of the members really did elicit useful testimony from the panelists. 
  • Payment for order flow sounds unseemly and is incredibly complex, and is at the root of a zero-commission business model, but is unlikely to be at the root of the recent volatility. That said, Citadel seemed to have a role in nearly all facets of the events that ensued.
  • “Roaring Kitty” still likes GME at current prices. And he looks an awful lot like the head of Robinhood.
  • Frivolity aside, Robinhood was really on the brink, and that led directly to the trading curbs. For me, this was the most critically important issue, and they could have used additional witnesses who were able to shed light on the mechanics behind it.
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