U.S. Rep. Ilhan Omar is calling for a new tax on stock trades amid the ongoing turmoil involving GameStop’s meteoric rise in market value bumped up by scores of amateur investors in recent days as well as other heavily shorted firms that have rattled Wall Street.
As the new year began, GameStop stocks were valued at around $19 a share but skyrocketed to as much as $483 a share last week. The increase was so dramatic that investor app Robinhood and firm TD Ameritrade blocked trading on the retailer, which operates from brick-and-mortar locations.
As a result, the stock fell on Thursday but very quickly recovered the following day after Robinhood, which was blasted in public, announced it would reinstate some limited trading.
Omar believes that a “small tax” would put a damper on such trading activity while raising enough revenue to pay off most federal student loan debt.
“Wall Street has made billions on the back of the worst recession since the Great Depression, and fought to deregulate finance to pre-2008 levels. And the moment regular folks beat them at their own rigged game, it’s ‘SHUT IT DOWN.’ How about this: financial transaction tax. Now,” she wrote last week.
“A small tax – 0.1% – on each Wall Street trade would reduce high frequency trading, a practice which drains profits from retail investors and benefits only the very rich,” she added. “We could use the close to $1 trillion it would generate to cancel all student debt and make college free.”
Omar has previously introduced legislation, in conjunction with Sen. Bernie Sanders (I-Vt.), to eliminate all $1.6 trillion of federal student loans. The bill calls for the implementation of a “Wall Street speculation tax” on all investment transactions to include 0.5 percent on stock trades, a 0.1 percent fee on bonds, and a tax of 0.0005 percent on derivatives.
Omar and Sanders projected that the taxes imposed on trading would generate close to $2.4 trillion over 10 years.
The GameStop phenomenon and, specifically, Robinhood’s response, has led to an extremely rare and wide bipartisan rebuke of the platform, though it’s not clear whether Omar’s legislation has a chance of passing.
Last week, as the retailer’s stock began its wild ride, the investor platform was accused of colluding with wealthy hedge fund managers to protect them from major losses after they shorted the company’s stock.
In response, small-time investors who belong to the Reddit group Wall Street Bets bought enough of GameStop’s stock to cause it to rise dramatically, costing hedge funds billions.
In response, the Reddit chat room was initially banned by the chatting platform Discord while Robinhood blocked trades of GameStop stock, all to protect the hedge funds and hurt small-time investors, many speculated.
“This is beyond absurd. @FSCDems need to have a hearing on Robinhood’s market manipulation. They’re blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who’ve used the stock market as a casino for decades,” Rep. Rashida Tlaib (D-Mich.) wrote last week.
This is beyond absurd. @FSCDems need to have a hearing on Robinhood's market manipulation. They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades. https://t.co/CGkJxVfzkv
— Rashida Tlaib (@RashidaTlaib) January 28, 2021
“Yea I don’t recall the part of the story when Robin Hood sells out and starts to be a mercenary for the crown… Apparently everyone has a price,” Donald Trump Jr. noted online as well.
Yea I don’t recall the part of the story when Robin Hood sells out and starts to be a mercenary for the crown…
— Donald Trump Jr. (@DonaldJTrumpJr) January 28, 2021
“Somebody is going to have to explain to me in what world @RobinhoodApp and others literally trying to force a crash by closing the open market is fair? They should all be in jail,” added Barstool Sports founder Dave Portnoy.
Somebody is going to have to explain to me in what world @RobinhoodApp and others literally trying to force a crash by closing the open market is fair? They should all be in jail.
— Dave Portnoy (@stoolpresidente) January 28, 2021
“This is unacceptable. We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I’d support a hearing if necessary,” wrote Rep. Alexandria Ocasio-Cortez (D-N.Y.).
This is unacceptable.
We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
On Friday, the Securities and Exchange Commission, which regulates the financial industry, said it would move to protect “retail investors” by reviewing the GameStop volatility while promising to examine actions taken by “brokerages that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
The agency added: “We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws.”
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