Yellen ‘monitoring’ GameStop market activity, White House says
U.S. Treasury Secretary Janet Yellen and the Biden administration’s economic team are watching stock market activity around GameStop Corp. and other heavily shorted companies, White House Press Secretary Jen Psaki said.
“Our team is of course – our economic team including Secretary Yellen and others – are monitoring the situation,” Psaki told reporters at the White House on Wednesday. She called the unusual trades in the video-game retailer “a good reminder, though, that the stock market isn’t the only measure of the health of our economy.”
A Treasury Department spokesperson declined to comment. Federal Reserve Chairman Jerome Powell also declined to weigh in on the activity around GameStop.
“I don’t want to comment on a particular company or day’s market activity or things like that. It’s just not something really that I would typically comment on,” he told reporters at a Wednesday afternoon press availability.
A retail-investor frenzy over the company has caused GameStop’s shares to soar in recent weeks, squeezing hedge funds with large short positions in the company.
Shares in the video-game retailer more than doubled as of 1 p.m. in New York, triggering at least two volatility halts as it at once notched its biggest-ever intraday advance. GameStop has surged eightfold in the past week, adding almost $20 billion to its market value.
GameStop’s meteoric rise has captivated Wall Street, as an army of small traders spurred on by Reddit message board posts have pushed the company’s stock price to unheard-of levels. Shares in the company began the year at just $19. Hedge funds who held short positions in GameStop, such as Melvin Capital, have closed out of them as the rally continued, suffering billions of dollars in losses.
While some commentators have cast the frenzy as a populist uprising against Wall Street institutions, others see a dangerous play that could eventually leave investors exposed to major losses. Some wondered if it was the result of purposeful market manipulation.
Investor Michael Burry, who previously championed GameStop in 2019, called the current phenomenon “unnatural, insane, and dangerous.”
“What is going on now – there should be legal and regulatory repercussions,” tweeted Burry, who made his name for his bet against mortgage-backed securities before the 2008 financial crisis.
Burry’s tweet tagged the Securities and Exchange Commission’s Division of Enforcement.