Yellen Consulted Ethics Lawyers Over GameStop Meeting

Yellen summons regulators to discuss financial market volatility

US Secretary Treasury Janet Yellen has requested a meeting with financial regulatory authorities to discuss recent market volatility following a social-media-fueled buying frenzy over shares in video game store GameStop and other stocks shorted by hedge funds.

Yellen will bring together heads of the Securities and Exchange Commission, the Federal Reserve, the Federal Reserve Bank of NY, and the Commodity Futures Trading Commission, a Treasury official told Reuters on Tuesday.

Mass buying by amateur traders over the past two weeks has driven wild price gyrations in companies that big USA fund managers had bet against, including videogame retailer GameStop and cinema operator AMC Entertainment.

The gathering on Thursday puts the newly installed Treasury chief in the spotlight after populist politicians from both sides of the aisle called for investigation of recent events. The accusations only furthered when Big Tech companies such as Google intervened and reportedly deleted more than 100,000 negative reviews listed on the Robinhood app on its store.

After soaring more than 400 percent last week, GameStop shares were dipping Tuesday, losing close to 50 percent early in the day and bringing its two-day collapse to more than 65 percent, with AMC also on the downswing. Some investors openly called on others to bid up the shares of certain names in order to trigger losses for hedge funds that had bet their prices would fall.

"This is the first test for the Biden administration in the reorientation of consumer and investor protections", said Christopher Campbell, a former assistant secretary of the Treasury for financial institutions from 2017 to 2018.

"The commission is closely monitoring and evaluating the extreme price volatility of certain stocks' trading prices over the past several days", the SEC said in a statement Friday.

On Monday, the House Financial Services Committee announced that it would hold a hearing on February 18 regarding "recent market volatility" involving GameStop and other companies.

Melvin Capital is the hedge fund that was at the receiving end of the recent short squeeze of GME, as they had bought a significant amount of short position against Gamestop. "Trust in markets and market integrity is absolutely critical for markets to function and for people to engage in them". Numerous president's cabinet choices and picks for other crucial jobs await Senate confirmation - including Gary Gensler, his nominee as SEC chairman.



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