The House Committee on Financial Services is set to hold a hearing on February 18 looking at the role of short selling and online trading platforms in last week's GameStop buying binge.
As committee chair, Rep. Maxine Waters (D-Calif. 43rd District) said it's important to enter the hearing with an open mind.
"I am not starting this hearing taking sides or believing that Robinhood is guilty of anything," Waters told Cheddar. "As a matter of fact, this hearing is going to be educational. It's going to be a learning experience for everybody."
The representative said she'd like to see Robinhood CEO Vlad Tenev, Reddit investor Keith Gill, a GameStop representative, and short sellers attend the hearing.
However, Waters noted that she does not yet understand Robinhood's justification for restricting buying activity of stocks targeted by retail investors. Tenev has said that the company faced liquidity and compliance issues that required a temporary halt in trading activity.
"I don't really know what he's talking about," she said, adding that she wasn't sure how laws regulating reserve and liquidity requirements applied here, but that she would come to the hearing with more information from the Securities and Exchange Commission and the Financial Industry Regulatory Authority. "We're open-minded. We're going to listen."
Waters said that the committee also would look into how Robinhood made its money and investigate its controversial relationship with market maker Citadel Securities, which pays the trading app for the right to execute its trades.
She also acknowledged the class politics that are swirling around the GameStop mania.
"I suspect that there is resentment, and I think there's resentment against short selling," she said. "I think there's resentment against hedge funds being able to borrow and to drive down the price of stock, and so I think that that will be looked at."
Democrats in Congress have shared in the criticism around shady Wall Street practices. House Speaker Nancy Pelosi, or her husband, invested heavily in Tesla prior to President Biden's announcement of a new green agenda that could potentially sink millions into the electric car industry. Sen. Diane Feinstein also admitted recently that she failed to disclose a stock purchase.
Waters, however, said she opposes any blanket ban of trading activity by members of Congress.
"What I think is that members of Congress should be allowed to invest, should be allowed to earn a living in all of the ways [that are] open to the average public, but insider trading absolutely cannot be allowed," she said.
Those who get caught though should have to "pay the price" and get convicted, she added.
