The corruption behind the Robinhood disaster skyrockets ‘to the moon’

This is exactly how people’s heads end up in guillotines. 

At a time of civil unrest, economic disparity and plain old-fashioned grief, the most foolish thing those in power can do is peacock their most overtly greedy and exploitative practices at the capitalism parade.

Yet that is exactly what they did when, for some reason, Robinhood Markets Inc., Webull Financial LLC, E*Trade Financial Corp. and Interactive Brokers Group Inc., all stock trading platforms, restricted the purchase of Gamestop, AMC Entertainment and Nokia stocks among others.

For quick context, earlier last month a group of retail investors, coordinating through a Reddit thread called r/WallStreetBets, decided to organize a short squeeze on stocks that had been heavily shorted by large scale hedge funds. 

A short squeeze is when investors intentionally drive the price of a stock up in order to force short sellers into paying back the shares they shorted at a much higher price than they bought them at.

Bear in mind that the goal of a short seller is to “borrow” a stock at a certain price, sell it to someone else at that price and only pay back the stock once the share price has gone down (which they’re effectively betting on). If short sellers are forced to pay their positions back at higher prices than anticipated, then the stocks they shorted soar in value from this influx of buyers at such a high price and all those who remain traditionally invested in the stock benefit. 

This move on the part of Robinhood alone, and whoever else their CEO is in cahoots with, restricted their 13 million users from buying any of the stocks involved in the short squeeze. It doesn’t take a mathematician to remark that restricting 13 million investors from buying a particularly hot stock for any interval of time might cost the stock and their investors a decent amount of money — which is exactly what happened.

When hedge funds and big corporations wage these kinds of betting wars among themselves, no one, online brokerages or otherwise, gets in their way or restricts any stocks. The only discernible difference in this case is that it is only the big hedge funds losing money on their shorting positions, and it is mostly everyday retail investors making the big gains. 

There is a somewhat unified sentiment that the trading platforms’ move to limit the trading of these stocks was a bootlicking attempt at appeasing their large hedge fund clients by helping them minimize losses. Members of Congress have mentioned the possibility of a hearing concerning the stock trading platforms and hedge funds involved. The situation is still unfolding and whether or not there will be actual repercussions remains to be discovered, but make no mistake, this only happened because the short squeeze hurt the pockets of very rich corporations. If this was a statement against market manipulation then most of these hedge funds would be out of business by now. 

Many have expressed public outrage by this particular show of seemingly unchecked corporate power, from Donald Trump Jr. to Rep. Alexandria Ocasio-Cortez to Elon Musk to some of the memesters included in the 6.3 million users subscribed to r/WallStreetBets. And these groups of people don’t agree often. 

While we bicker and fight over $20 bills and the significance of the U.S. treasury secretary’s gender, the fact is that we mostly agree on the deeply problematic nature of corporate power in the United States. So, in the interest of fixing an issue that we all agree on and that currently has our undivided attention, let’s hanker down on one specific mechanism by which corporations gain political power in the United States and list a few things you can do about it. 

Generally speaking, lobbying is the practice of attempting to influence legislators on legislation. It has evolved into an industry that spent roughly $3.5 billion dollars on their legislation-affecting activities in 2020 alone. 

The way this plays out in real time is special interest groups, like, say, hedge fund lobbyists, hold fundraising events for legislators and donate bundles of money to them on the tacit agreement that this money is being exchanged for the favorable legislative treatment of their industry. 

Another way this plays out is through direct and roundabout campaign funding from lobbyists to federal parties, candidates and “outside groups,” for upcoming elections. These are effectively another technicality by which political donors can circumvent political donation limits, which are later exchanged for, you guessed it, political favors honoring the highest contributors. In the case of hedge fund lobbying, the industry contributed roughly $200 million to political campaign funding in 2020.

A final way lobbying plays out is through something called “the revolving door.” Legislators, who are not known for their extravagant income, get offered positions at lobbying firms with six figure salaries on the yet-again-tacit condition that these politicians will bear their future employers in mind when crafting legislation. Eighty-six percent of hedge fund lobbyists were once legislators. 

If this doesn’t smell fishy enough yet, a hedge fund called Citadel LLC. that had alleged (and disputed) involvement in Robinhood’s decision to limit the buying of GME, AMC, etc. was also the top contributor to hedge-fund lobbyists in the 2020 election cycle, having contributed roughly $48 million by themselves. 

There is simply no comparable incentive for politicians to hold these hedge funds (or any corporations really) accountable for screwing the little guys when these firms are financing their entire legislative careers. Suggesting a congressional hearing to remedy the hedge fund situation is a hilarious joke once you realize that those hearings are pretty much paid for by the hedge funds themselves. 

In order to see the right people get held accountable for this whole Robinhood fiasco or anything similar, as so many claim to want, then it is necessary to start caring about limiting corporate lobbying. The revolving door needs to close, lobbyist fundraising loopholes need to get plugged and all the same people who were so enraged about this entire ordeal on Twitter need to start monitoring who is bought by who (opensecrets.org is a great resource to start).  

Let’s get awareness of corporate lobbying to the moon!