Yellen Calls Meeting With Fed, SEC To Decide GameStop Investors' Fate

Andrew Cummings
February 4, 2021

Treasury Secretary Janet Yellen's plan to oversee a snap meeting of top regulators to discuss recent market volatility signaled the new administration's focus on consumer financial protection after years of emphasis on deregulation.

In the meeting scheduled for as early as Thursday, the former chair of the Federal Reserve hopes to collaborate with the Securities and Exchange Commission, Federal Reserve, the New York Federal Reserve, and the Commodity Futures Trading Commission to assess potential actions to combat the stock frenzy that occurred over the last week as well as potential surges in precious metal prices.

AMC and other stocks saw a significant bump last week fueled by activity from users of the subreddit r/WallStreetBets.

Robinhood was one of the platforms that restricted trading in shares including those of video-game retailer GameStop, whose stock was propelled by what appeared to be an army of retail investors attacking the positions of hedge funds that had bet against it. Others were more interested in riding the wave from about $17 to almost $350 a share. Early trading of their listed stocks in Europe on Wednesday will be the next guide to whether they are in free fall as regulators circle.

The market event drew significant attention to Robinhood, which later moved to temporarily restrict the retail purchase of some stocks, including GME.

But GameStop crashed back to earth, closing down 60 percent at $90 on Tuesday, leaving many traders with huge losses. Posts encouraging silver buying also boosted prices on Monday, although that proved short lived.

The Treasury official said Yellen was looking for an update from the top USA financial regulators.

In the memo granting Yellen permission to call the meeting of regulators, a Treasury ethics official, Brian Sonfield, said it would be "difficult, if not impossible" for Yellen to recuse herself from matters involving market volatility.

Citadel, alongside another fund, extended a $2.75 billion bailout to hedge fund Melvin Capital Management. Numerous president's cabinet choices and picks for other crucial jobs await Senate confirmation - including Gary Gensler, his nominee as SEC chairman.

Yellen's sought an ethics waiver after media reports pointed out that she received $700,0000 in speaking fees from Citadel, LLC.

"Issues relating to these sectors could arise at any time without the opportunity for consultation with the ethics office", and "argue in favor of prior authorization".

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