Ilhan Omar pushes for new tax on stock trades amid GameStop frenzy
Omar said revenue from the tax could be used to eliminate student loan debt
Rep. Ilhan Omar called for a new tax on stock trades after a battle between an army of amateur investors and hedge funds caused a dramatic swing in the share price of GameStop and other heavily shorted companies, shaking Wall Street.
GameStop shares, which were worth about $19 at the beginning of January, climbed as high as $483 last week, a price surge so dramatic that TD Ameritrade and Robinhood placed restrictions on trading of the brick-and-mortar video game retailer. After plummeting on Thursday, GameStop shares made a dizzying recovery on Friday after Robinhood — facing a public outcry — said it would reinstate some trading.
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“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,” Omar tweeted last week.
Revenue from the tax, which she estimated would raise about $1 trillion, could be used to fund progressive policies such as eliminating student loan debt and providing free college, the "Squad" member said.
Omar has previously introduced legislation alongside Sen. Bernie Sanders, I-Vt., to eliminate all of the nation's $1.6 trillion in student loan debt. The measure would be funded by a "Wall Street speculation tax" on financial investment transactions, including a tax of 0.5% on stock trades, a 0.1% fee on bonds and a 0.0005% levy on derivatives.
The lawmakers projected the new taxes would generate roughly $2.4 trillion over a decade.
The GameStop stock frenzy escalated last week after at-home traders in the Reddit forum "Wallstreetbets" put their support behind the company, betting that share prices would rise even as Wall Street short-sellers gambled the exact opposite. Short-sellers — who bet on stock's decline by selling shares they don't own — have lost billions as a result.
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The stock-market rollercoaster, viewed by many as a war waged by the 99% against wealthy Wall Street titans, has also raised questions among some lawmakers about increased regulatory oversight and concerns about non-professional investors who were seemingly blocked from trading GameStop shares for a brief period.
"For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price," Sen. Elizabeth Warren, D-Mass., said in a statement on Wednesday.
Warren, a 2020 presidential candidate and a leading proponent of strict laws to rein in Wall Street and the private equity industry, renewed her push for the Securities and Exchange Commission to more tightly regulate the market.
“It’s long past time for the SEC and other financial regulators to wake up and do their jobs — and with a new administration and Democrats running Congress, I intend to make sure they do," she said.
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In a statement Friday, the SEC said it will work to protect "retail investors" by reviewing the recent trading volatility and pledged to scrutinize actions taken by "brokerages that may “disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
“We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws,” the SEC said.
It added: “The Commission is working closely with our regulatory partners, both across the government and at FINRA and other self-regulatory organizations, including the stock exchanges, to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing.”