_Jamie Holcomb is a sophomore journalism major at MU. She is an opinion columnist who writes about social justice for The Maneater._
For decades, Wall Street has fought off government regulations through lobbying to preserve a free market. While some regulations exist, they have mostly been put into place after big financial crises like the stock market crash in 1929 that led to the Great Depression and the recession in 2008. It’s been 11 years since any regulations have signed into law, and Bernie Sanders has been the only senator to propose comprehensive reform.
Billionaire bankers and CEOs have also skirted legal consequences for their actions that preceded the 2008 financial crisis, except for Kareem Serageldin. The recession was caused by an increase in risky mortgages and a subsequent lack of market for those subprime mortgages. It led to decreased home values and thus a loss of investments for many Americans. Lingering anger from the lack of repercussions, along with the COVID-19 recession, fueled an effort to avenge Wall Street executives in January 2021.
It all started on r/wallstreetbets, a corner of Reddit that is dedicated to high-risk bets for amateur investors. Redditors discovered that Melvin Capital, a hedge fund worth billions of dollars, was shorting GameStop stock. Essentially, they were betting on the downfall of the stock and the company, and making lots of money off of it.
Anger toward Wall Street bankers has been bubbling under the surface since 2008 and has been worsened by the 2020 recession. That’s likely why r/wallstreetbets organized what’s called a short squeeze against Melvin Capital and any other hedge fund that’s been shorting GameStop. A short squeeze is when the price of a stock goes up because people are buying it for the sole purpose of forcing companies to buy back the stock at a higher price.
Melvin Capital ended up losing over 50% of its portfolio in the month of January because of the squeeze.
“Never before has a group of amateur investors taken on a hedge fund like this and won,” according to the NBC article “GameStop? Reddit? Explaining what’s happening in the stock market”.
However, r/wallstreetbets didn’t exactly win this fight. While they were successful in driving up the stock price of GameStop and other companies like AMC and Nokia, which were also being shorted, investing companies stepped in to prevent further losses. The investing app Robinhood was the first to prevent the purchase of GameStop shares and started selling user’s shares without their permission, though they deny this.
Robinhood’s mission is to “democratize finance for all,” according to their website, yet they engaged in an orchestrated effort to protect Wall Street instead of the amateur investors they claim to operate for. Suddenly, when regular people are able to make money off the stock market and screw investors, Wall Street wants regulations to prevent this from happening. These same bankers were allowed to tank the stock market in 2008 with no repercussions and laugh at Occupy Wall Street protests while drinking champagne.
The effort to stop investors from hurting Wall Street perfectly illustrates the myth of the free market. It’s fine to game the system and collect a profit from it if you’re a banker for a hedge fund, but not if you’re an average American. Most companies involved in the stock market will protect the capital of the wealthy, even if it means betraying those they claim to serve.
“Capitalism does not work for you. You can try and play the game; but it is stacked against you.” Twitter user @HasBezosDecided said.
This economic system was not designed to benefit the same people that are rebelling against it now. That’s why it’s not enough to simply regulate Wall Street, but to ask the bigger question about why Wall Street was allowed to wreak havoc in the first place. The stock market exists to benefit the wealthy and no matter the laws in place, that won’t change.
_Edited by Sofi Zeman | szeman@themaneater.com_
