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      in US Politics

      Bernie Sanders: US sick of subsidizing 'starvation wages' at Walmart and McDonald's

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      US taxpayers should not be “forced to subsidize some of the largest and most profitable corporations in America”, Bernie Sanders told a Senate hearing on Thursday.As Congress debates the first rise in the minimum wage in over a decade, the Vermont senator said he had “talked to too many workers in this country who, with tears in their eyes, tell me the struggles they have to provide for their kids on starvation wages” even as the chief executives of companies including McDonald’s, Walmart and others take home multi-million dollar pay packages.Executives from Walmart and McDonald’s were invited to the hearing, titled Should Taxpayers Subsidize Poverty Wages at Large Profitable Corporations?They declined to appear.The senators heard from low-wage workers from McDonald’s and Walmart. Terence Wise, a McDonald’s employee from Kansas City, Missouri, said his low pay had led to his family becoming homeless.“My family has been homeless despite two incomes. We’ve endured freezing temperatures in our purple minivan. I’d see my daughter’s eyes wide open, tossing and turning, in the back seat. Try waking up in the morning and getting ready for work and school in a parking lot with your family of five,” said Wise.“That’s something a parent can never forget and a memory you can never take away from your children. You should never have multiple jobs in the United States and nowhere to sleep.”Sanders cited a government accountability office (GAO) report that found nearly half of workers who make less than $15 an hour rely on public assistance programs that cost taxpayers $107bn each year.Walmart spent $8.3bn on stock buybacks in 2017, the Walton family, the chain’s founders, are worth over $200bn and have increased their wealth by $50bn since the start of the pandemic, said Sanders. And yet the company “cannot afford to pay its workers at least $15 an hour”.“If Walmart thinks they’re going to avoid answering that question because they’re not here today, they’re deeply mistaken. The American people are sick and tired of subsidizing the wealthiest family in America,” said Sanders.The hearing comes at a tense moment for minimum wage advocates. Joe Biden campaigned on a pledge to increase the minimum wage to $15 an hour from its current level of $7.25. The proposal is part of his $1.9tn Covid stimulus package.But that package faces stiff opposition from in the Senate with the Republican minority set to vote against it and some Democrats opposing the wage rise.A recent Congressional Budget Office concluded 27 million Americans would be affected by an increase in the minimum wage to $15, and that 900,000 would be lifted out of poverty. But the CBO also said the increase would lead to 1.4m job losses and increase the federal budget deficit by $54bn over the next 10 years. The Economic Policy Institute, and others, have called the report “wrong, and inappropriately inflated”.Republican Senator Mike Bruin told the hearing that an increase would be unfair on states with a lower cost of living and would hurt small businesses.“We need to slow it down,” he said. “The main result is you are going to hurt Main Street,” he said. More

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      in US Politics

      GameStop hearing live: Robinhood CEO and others in trading saga testify before Congress

      by

      Key events

      Show

      3.59pm EST15:59
      Tenev admits Robinhood did not have the collateral to back the huge increase in trade

      3.31pm EST15:31
      Are Robinhood users better off than the average investor?

      2.44pm EST14:44
      Tenev addresses the suicide of a former customer

      1.42pm EST13:42
      ​Tenev defends decision to freeze buying of GameStop

      1.04pm EST13:04
      Reddit CEO and Reddit user involved in r/WallStreetBets forum testify

      12.12pm EST12:12
      House committee hears testimony from those involved in trading controversy

      Live feed

      Show

      4.19pm EST16:19

      Representative questions whether it is reckless to gamify investment
      Cindy Axne of Iowa targeted Tenev with questions about the Robinhood app’s design and the consequences of gamifying trade. She asked who truly stands to benefit from the rise of Robinhood, which Tenev has repeatedly asserted aims to “democratize” investment.
      “Your clients are not your customer – the users are the product, your customer is sitting next to you – it’s companies like Citadel securities that stand to make a fortune on retail order flow,” Axne said.
      Axne noted that Robinhood incentivizes inviting friends to the app and gamification of trading, “adding gaming elements that look like gambling.”

      Updated
      at 4.45pm EST

      4.08pm EST16:08

      Robinhood took from its customers to boost its own business model, lawmaker alleges
      Michael San Nicolas of Guam, a Democrat, congratulated the small investors who orchestrated the short squeeze: “Robinhood made that possible,” he said.
      But he also questioned Tenev about the $3bn shortage, and where the money borrowed to cover it came from. Tenev said he got $3bn from venture capitalists, which San Nicolas argued means Robinhood materially benefited from the shareholders.
      San Nicolas said Robinhood’s Silicon Valley ethos of “move fast and break things” led it to value scale over anything else.
      “That’s where I have a serious concern,” he said. “Your business model causes you to take extraordinary risks, and you took from customers to protect your position. That is very, very troubling.”

      Updated
      at 4.20pm EST

      3.59pm EST15:59

      Tenev admits Robinhood did not have the collateral to back the huge increase in trade

      Vlad Tenev admitted during questioning on Thursday that Robinhood halted buying on the platform because it did not have the funds to back the huge influx of trading in the Reddit frenzy.
      Robinhood is required to place a deposit using its own funds at a clearinghouse to cover risks until trades are settled between a buyer and seller. On 28 January, the company was informed by its clearing house, NSCC, that it had a deposit deficit of approximately $3bn – up from $124m just days before.
      Anthony Gonzalez, a Republican from Ohio, asked if Robinhood indeed had that $3bn of collateral at the time.
      “At that moment, we would not have been able to post the $3bn of collateral,” Tenev said.
      Gonzalez said that proves Robinhood was “unprepared to protect his constituents and customers from non-consensual liquidation” and “barely avoided disaster”.
      “In a sense, I love your company,” Gonzalez said. “At the same time, I believe a vulnerability was clearly exposed.”

      Updated
      at 4.23pm EST

      3.36pm EST15:36

      Reddit CEO is asked if financial advice on the forum can be trusted
      Steve Huffman, CEO of Reddit, conceded in questioning on Thursday that users on the forum responsible for the GameStop buy-up are an “eccentric” bunch but that they did not breach any of the platform’s terms of service.
      He said financial advice on Reddit, in fact, is better than what is seen on TV because each post has been vetted by its voting process, which requires endorsement by hundreds and even thousands of users before it is widely visible. Huffman:

      On Reddit you’re seeing retail investors who are giving authentic advice based on their knowledge, and you would not call into question positions they may hold before they talk about it on television.

      3.31pm EST15:31

      Are Robinhood users better off than the average investor?

      One issue that has come up repeatedly in today’s hearing is what Robinhood has to offer consumers, besides ease of entry into the investment space.
      Lawmakers’ questioning has offered a rare look into the profit model of Robinhood and just how much customers have made and lost on the app.
      Jim Himes, a Democratic representative of Connecticut, asked Robinhood CEO Vlad Tenev whether customers would make more if they had bought a low-cost S&P 500 index fund rather than individual stocks on Robinhood’s app.
      Tenev said that Robinhood customers have made $35bn in profits, but is unwilling to say what rate of return that represents. Himes said that number means little without more context.

      Updated
      at 3.46pm EST

      2.53pm EST14:53

      Did Reddit’s coordinated buying represent market manipulation? Expert says no
      The meteoric rise of GameStop stocks was fueled largely by a frenzy on Reddit community r/WallStreetBets. Arkansas Republican Representative French Hill asked Thursday whether that constituted “market manipulation” – artificially impacting the price of a security or otherwise influencing the market for personal gain.
      Keith Gill, who is also speaking on Thursday’s panel, has been sued in a class action lawsuit accusing him of exaggerated claims and misrepresented posts as part of his role on Reddit in kicking off the GameStop market frenzy, which personally netted him more than $30m.
      “I think there’s little evidence at this time that there’s any false or deceptive conduct taking place,” said Jennifer Schulp, director of financial regulations studies at the Cato Institute speaking on the forum.
      She did say due to the anonymous nature of Reddit it is possible there is some “deceptive behavior” that could not readily be determined. Other have argued that Robinhood’s freezing of GameStop stocks in response to the buy-up itself represented market manipulation.

      Updated
      at 3.32pm EST

      2.44pm EST14:44

      Tenev addresses the suicide of a former customer

      Robinhood chief executive officer Vlad Tenev addressed in the hearing on Thursday the suicide of a 20-year-old man that was tied to the trading platform.
      The family of Alex Kearns is currently suing Robinhood in a California court after the newbie trader took his own life believing he owed $730,000 due to a glitch on the app, a year before the Reddit investing frenzy that caused many to gain or lose huge sums of money in a very short time.
      His death led to former SEC chair Jay Clayton and current lawmakers calling for better legislation to prevent such losses from happening in the future.
      In Thursday’s hearing, Congressman Emanuel Cleaver II of Missouri asked Tenev to explain how someone with no experience could invest such a potentially devastating amount of money in such a short time. Tenev again cited Robinhood’s mission of “democratizing finance for all”. His full response below:

      The passing of Mr. Kearns was deeply troubling to me, and to the entire company. We have taken a series of very aggressive steps to make our products safer for our customers, including adding additional education, as well as strengthening and tightening the requirements for getting options and bettering our customer support line. It was a tragedy and we went into immediate action to make sure that we are not just the most accessible option for trading for our customers but the safest as well.

      Updated
      at 3.33pm EST

      1.57pm EST13:57

      Everyone is shouting
      Representative Brad Sherman, Democrat from California, had some pointed questioning for Citadel owner Ken Griffin regarding how the average trader on Robinhood is treated compared to more wealthy Wall Street traders and larger firms.
      He asked about payment for order flow – a controversial practice in which stock brokers get a kickback for essentially selling the ability to execute trades. This allows some larger customers to avoid paying higher transaction fees. Sherman said it is a means for hiding the true costs of trading.
      Griffin kept attempting to skirt the question: “Congressman, I believe that’s an excellent question – the execution quality that we can provide as measured by terms of price improvement is heavily related or correlated to the size of the order we receive.”
      “Everybody I’ve talked to in this industry says when you’re a broker being paid for order flow, you get a worse execution,” Sherman replied, referencing the dealing in which Robinhood is paid for its customers’ trades by market-makers like Citadel.
      Finra fined Robinhood $1.25 million in December 2019 for this practice, saying it sent customer trading orders to broker-dealers without guaranteeing the best price.
      Griffin defended the payment for order flow practice, saying “it has allowed the American retail investor to have the lowest execution cost they’ve ever had in the history of US financial markets”.
      Sherman also repeatedly asked if the average Robinhood customer gets the same deals and prices as larger firms like Fidelity.
      “Is the Robinhood customer getting the same price as the Fidelity customer?” Sherman asked Griffin.
      Griffin wouldn’t say, talking around the answer and explaining that it can’t be determined “because the Robinhood community tends to be smaller in quantity” before getting cut off again.
      “You’re evading questions by making up other questions,” Sherman shouted. “You are doing a great job of wasting my time. If you want to filibuster you should run for the Senate.”

      Updated
      at 2.28pm EST

      1.42pm EST13:42

      ​Tenev defends decision to freeze buying of GameStop

      Tenev, Robinhood’s CEO, said customers would have been very angry if it had prevented them from selling off GameStop shares.
      During the Reddit-fueled meltdown, Robinhood banned the purchase of GameStop buying, but not selling. Many have speculated this was done at the behest of hedge funds who stood to lose millions from the buy-up, which Tenev disputed.
      “Preventing customers from selling is a very difficult and painful experience where customers are unable to access their money,” Tenev said. “We don’t want to impose that type of experience on our customers unless we have no other choice.”

      Updated
      at 3.24pm EST

      1.34pm EST13:34

      Lawmakers roast Robinhood CEO
      In addition to comments from Waters, Robinhood CEO Vlad Tenev faced intense criticism from other lawmakers.
      Carolyn Maloney, a Democrat from New York, accused Tenev of recklessly handling customers’ money.
      “You reserve the right to make up the rules as you go along,” she said.
      “I’m sorry for what happened,” Tenev replied. “I’m not going to say that Robinhood did everything perfect.”

      Updated
      at 1.47pm EST

      1.10pm EST13:10

      Chairwoman Maxine Waters is reclaiming her time
      Maxine Waters, the chairwoman of the House committee on financial services, took a stern tone with executives involved in the hearing on Thursday.

      manny
      (@mannyfidel)
      Maxine Waters: yes or noRobinhood CEO: pic.twitter.com/3oDUwsdD7P

      February 18, 2021

      She frequently interrupted Robinhood CEO Vlad Tenev, demanding he actually answer the questions she was posing as he meandered around the point. Waters stated “yes or no, answer the question” a minimum of ten times in the first hour of the hearing.

      Emily Stewart
      (@EmilyStewartM)
      Maxine Waters to the Robinhood CEO: “I don’t have time, I just need a yes or no answer.” Tattoo it on my arm.

      February 18, 2021

      Updated
      at 1.16pm EST

      1.04pm EST13:04

      Reddit CEO and Reddit user involved in r/WallStreetBets forum testify

      Reddit CEO Steve Huffman explained in his opening statement how Reddit moderation works, what the r/WallStreetsBets community is, and how Reddit dealt with the January stock buy-up.
      He said WallStreetBets is a “real community” with real users.
      He added that Reddit’s content policy prohibits “hate, harassment, bullying and illegal activity” and that threats or harassment of Plotkin and others were removed.
      “A few weeks ago, we saw the power of community in general and of this community in particular when the traders of WallStreetBets banded together at first to seize an investment opportunity not usually accessible to retail investors, but later more broadly to defend all retail investors against the criticism of the financial establishment,” Huffman said.
      Later, a member of that community testified. Reddit user “Roaring Kitty”, real name Keith Gill, started his opening statement by telling lawmakers “I am not a cat”.
      He stressed that he is simply an individual talking about this investment choices, not making suggestions for investments in any official or professional capacity. The goal of his posts, and of the Reddit community, was to make trading more understandable and accessible to the average person.
      “It’s alarming how little we know about the inner workings of the market,” Gill said.

      Updated
      at 3.25pm EST

      12.48pm EST12:48

      Melvin Capital CEO Gabriel Plotkin claims the company was not looking for a bailout
      Gabriel Plotkin, CEO of one of the hedge funds hit by the coordinated Reddit trades, claims Melvin did not coordinate or ask for Robinhood’s ban on trading.
      The GameStop frenzy targeted hedge funds like Melvin with huge short positions in GameStop, which had bet the share price would fall and stood to cash in when it did so. After the Reddit-fueled surge, the fund lost 53% in January. It reportedly received a $2bn+ capital infusion from Citadel as its losses grew.
      “To be sure, Melvin was managing through a difficult time, but we always had margin excess and we were not seeking a cash infusion,” Plotkin said.
      He says he was the subject of antisemitic and threatening posts on Reddit surrounding the markets incident.
      “I want to make clear at the outset that Melvin Capital played absolutely no role in those trading platforms’ decisions,” said Plotkin. “In fact, Melvin closed out all of its positions in GameStop days before platforms put those limitations in place.”

      Updated
      at 1.16pm EST

      12.38pm EST12:38

      Citadel owner Ken Griffin: we had ‘no role’ in Robinhood’s decision to restrict certain stocks
      Ken Griffin is the billionaire owner of hedge fund Citadel and high-speed trading firm Citadel Securities, which works with Robinhood.
      He said in testimony on Thursday that the firm provided securities to meet investors’ needs during the unprecedented surge of trading of GameStop stocks, but had “no role” in the decision made by Robinhood to restrict trading of those stocks.
      The incident “reflects the competence of our firm’s ability to deliver in all market conditions”, he said.

      12.33pm EST12:33

      Opening statements: Robinhood, Citadel, and Melvin Capital CEOs
      We are off running with some opening statements from the biggest players in the Reddit-fueled stock market meltdown.
      First, Robinhood CEO Vlad Tenev spoke about how he came to found Robinhood, talking of his childhood in Bulgaria, where the financial system was “on the verge of collapse”. Tenev said he wanted to give more people access to financial systems.
      “We created Robin Hood to economically empower all Americans by opening mutual markets to them,” he said.
      He referenced just how much money has been created by Robinhood investments, saying “the total value of our customers’ assets on Robinhood exceeds the net amount of money they have deposited with us, over $35bn”.
      Next, Citadel CEO Kenneth Griffin and Melvin Capital CEO Gabriel Plotkin will speak.

      Updated
      at 1.13pm EST

      12.12pm EST12:12

      House committee hears testimony from those involved in trading controversy

      Executives from the investing site Robinhood, the social media site Reddit, and other tech companies are testifying on Thursday in the first public hearing in an investigation into a recent public trading meltdown orchestrated on social media.
      The House financial services committee will hear testimony from parties involved in the recent trading in GameStop, AMC cinemas and other companies whose share values soared to astronomical levels as small investors piled into the stocks.
      We’ll follow the hearing live throughout the day – stay tuned.

      Updated
      at 12.19pm EST More

    • 100 Shares99 Views

      in US Politics

      GameStop hearing: Robinhood founder defends halt to trading

      by

      Robinhood’s chief executive defended the app’s decision to halt trading in GameStop shares at a congressional hearing on Thursday, calling allegations that the company acted to help hedge funds that were hemorrhaging money “absolutely false”. The comments triggered accusations the company is creating a “smokescreen” to deflect blame.Vlad Tenev and other players in the GameStop saga appeared before the House financial services committee in the first public hearing in a wide-ranging investigation into trading in GameStop, AMC and other companies whose share values soared as small investors piled into the stocks.“The buying surge that occurred during the last week of January in stocks like GameStop was unprecedented, and it highlighted a number of issues that are worthy of deep analysis and discussion,” Tenev said.Tenev once again apologized for the trading ban. “Despite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us,” Tenev said.The sometimes fractious hearing was largely divided along party lines, with Democrats calling for more oversight and Republicans arguing against more regulation.“Don’t you see something has gone terribly wrong here?” said Democrat congressman David Scott. He called social media-led stock market bubbles “a threat to the future of our financial system”.Republican Bill Huizenga called the hearing “political theater”, a comment that drew admonition from the committee chair, Maxine Waters.GameStop’s shares surged 1,600% in January as small investors worldwide – many coalescing on the Reddit forum WallStreetBets – piled into the troubled retailer’s shares betting against Wall Street hedge funds that had bet the share price would collapse – a practice known as short-selling. At one point, short-sellers had borrowed far more of GameStop’s shares (140%) to sell short than were available on the market.According to Tenev, Robinhood and other brokers had no choice but to suspend trading in GameStop and other hot investments during this period of “historic volatility”.Robinhood is required to place a deposit using its own funds at a clearinghouse to cover risks until trades are settled between a buyer and seller. On 28 January, the company was informed by its clearing house, NSCC, that it had a deposit deficit of approximately $3bn – up from $124m just days before.With trading in hot stocks suspended, Robinhood moved to raise $3.4bn from investors and trading was resumed.But the suspension triggered a firestorm of criticism among small investors and in Washington, with Republicans and Democrats attacking Robinhood and accusing it of backing the losing hedge funds over small investors.Christopher Iacovella, the chief executive of the brokerage-industry group American Securities Association, dismissed Tenev’s explanation and said the system had worked as it should to defend the US’s financial system.“As the GME [GameStop] short squeeze unfolded, the clearinghouse recognized that an inadequately capitalized broker-dealer could pose a risk to our markets and it took the action necessary to protect the system,” Iacovella said in a letter to the House committee. “Attempts to blame the clearinghouse or the timing of the settlement cycle for what happened during the short squeeze are a smokescreen.”Thursday’s hearing, titled Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, is the first of a series and addressed a number of issues including the “gamification” of investing, the role of social media and potential conflicts of interest.The representatives questioned the role of Citadel, an investment firm that executes Robinhood clients’ trades and also invested in Melvin Capital Management after the hedge fund’s bets against GameStop collapsed.Both Citadel’s founder, Ken Griffin, and Melvin’s founder, Gabe Plotkin, testified at the hearing. In his testimony, Plotkin denied that Citadel “bailed out” Melvin. “It was an opportunity for Citadel to ‘buy low’ and earn returns for its investors if and when our fund’s value went up,” he said.Plotkin said January’s frenzied trading in GameStop was “untethered to fundamentals” and quoted racist messages aimed at him and others, including antisemitic statements such as “it’s very clear we need a second Holocaust, the Jews can’t keep getting away with this.”“The unfortunate part of this episode is that ordinary investors who were convinced by a misleading frenzy to buy GameStop at $100, $200, or even $483 have now lost significant amounts,” said Plotkin.GameStop’s share price has now collapsed from a high of $483 on 28 January to just over $44. But one of the small investors who helped drive the stock to dizzy heights is still a believer.In his testimony Keith Gill, a trader variously known online as Roaring Kitty and DeepFuckingValue, said his investments had made him a millionaire.“GameStop’s stock price may have gotten a bit ahead of itself last month, but I’m as bullish as I’ve ever been on a potential turnaround. In short, I like the stock,” he said. More

    • 125 Shares149 Views

      in US Politics

      Why is Texas suffering power blackouts during the winter freeze?

      by

      Millions of people in Texas have spent days in below-freezing temperatures without power in what officials have called a “total failure” of the state’s electricity infrastructure. How did oil- and gas-rich Texas – the biggest producer of energy in the US – get here?While there are many factors that led to the power outages in Texas, the state’s power grid has come under intense scrutiny in light of the storm. Here’s what we know so far about Texas’s power grid and the role it played in the state’s winter disaster.Who controls Texas’s power grid?The “Lone Star” statelikes to go it alone when it comes to delivering power to its residents. Texas is unique among the 48 contiguous US states in that it relies on its own power grid. The other 47 states are all part of the two power grids that service the eastern and western halves of the country.The Electric Reliability Council of Texas, known as Ercot, manages the state’s power grid. Ercot is technically a non-profit corporation, and while it functions independently from the state’s government, the corporation is overseen by a state agency called the Public Utility Commission of Texas. Members of the commission are appointed by the state’s governor.Texas is the only state in the country, besides Alaska and Hawaii, that is not part of either the Eastern Interconnection or Western Interconnection, the two main power grids in the US. This means that Texas is not regulated by the Federal Energy Regulatory Commission (Ferc), the agency that oversees interstate electric transmission. Instead, Texas is basically “an electrical island in the United States”, as described by Bill Magness, CEO of Ercot. While this means that Texas has more control over electricity in the state, it also means there are fewer power plants the state can rely on for power.Parts of Texas are not serviced by Ercot. El Paso at the western tip of the state gets power from the Western Interconnection, which is why the city has been saved from the most brutal effects of the power outages.Why are so many people without power?Ercot turned off power for millions of customers after several power plants shut down due to the below-freezing temperatures the state is experiencing. Officials at Ercot said the equipment at the plants could not handle the extreme, low temperatures. The choice was either shutting down power for customers or risking a collapse of the grid altogether.Why is Texas on its own power grid?For as long as electricity has existed in Texas, the state, which prides itself on its independence has relied on itself for power. Officials in the state have long had a stubborn will to stay out of the hands of federal regulators.While Magness, Ercot’s CEO, said that the shutdown was due primarily to “reasons that have to do with the weather”, critics have said Texas’s energy market incentivizes cheap prices at the cost of delaying maintenance and improving power plants. In 2011, the state experienced similar blackouts, though for a shorter period of time compared with what has been seen this week.Following those blackouts, the Ferc gave a series of recommendations to Ercot to prevent future blackouts, including increasing reserve levels and weatherizing facilities to protect them from cold weather.Ed Hirs, an energy fellow at the University of Houston, told the Washington Post that Ercot “limped along on underinvestment and neglect until it finally broke under predictable circumstances”.Did renewable energy play a role in the grid’s malfunction?While Republicans have been blaming frozen wind turbines for the state’s blackouts, officials and experts say that malfunctions in natural gas operations played the largest role in the power crisis.Ercot said all of its sources of power, including those from renewable sources, were affected by the freezing temperatures. The state largely relies on natural gas for its power supply, though some comes from wind turbines and less from coal and nuclear sources.Natural gas can handle the state’s high temperatures in the summer, but extreme cold weather makes it difficult for the gas to flow to power plants and heat homes. Michael Webber, an energy resources professor at the University of Texas Austin, told the Texas Tribune that “gas is failing in the most spectacular fashion right now”.With the climate crisis likely to trigger more freak weather events like the one Texas is suffering it is noteworthy that there are places that experience frigidly cold weather that rely heavily on wind turbines and manage to have electricity in the winter. In Iowa, a state which sees freezing temperatures more often than Texas, nearly 40% of electricity is generated by wind turbines.What are officials doing to prevent future blackouts?With millions still without power as of late Wednesday, officials in Texas remain focused on getting power back to residents and remedying the damage from the storm. Politicians from both major parties have criticized Ercot for its handling of the storm, but officials have steered clear of providing examples of specific fixes. Texas’s governor, Greg Abbott, has called for an investigation into Ercot, declaring it an emergency item for the state’s legislative session.But some Texas leaders have made it clear that they believe Texas should remain independent from the national power grids. Rick Perry, a former governor of the state who also served as Donald Trump’s energy secretary until 2019, said: “Texans would be without electricity for longer than three days to keep the federal government out of their business.” More

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      in US Politics

      GameStop: US lawmakers to quiz key players from Robinhood, Reddit and finance

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      Frenzied trading in the shares of GameStop and other companies will be the subject of what is expected to be a fiery hearing in Congress on Thursday, when US politicians get their first chance to quiz executives from the trading app Robinhood, Reddit and other players in the saga.The House financial services committee will hold a hearing at noon in a first step to untangling the furore surrounding trading in GameStop, AMC cinemas and other companies whose share values soared to astronomical levels as small investors piled into the stocks.The hearing, titled Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, is expected to be fractious.Shares in GameStop, a troubled video games chain store, soared 1,600% in January, as an army of small investors, many using the trading app Robinhood, appeared to have bet that Wall Street hedge funds had overplayed their hand when betting the stock price would collapse – a practice known as short-selling.Spurred on by meme-toting members of the Reddit forum WallStreetBets, investors kept buying the shares, driving up the price and triggering huge losses for some hedge funds.Robinhood briefly suspended trading in GameStop and other hot stocks at the end of January and sparked allegations that the hedge funds and others may have pushed Robinhood and other trading platforms to stop the rout.The news managed to – briefly – unite Washington’s deeply divided political elite. Both the rightwing senator Ted Cruz and the progressive representative Alexandria Ocasio-Cortez attacked Robinhood’s decision to halt trading in GameStop by small investors.Ocasio-Cortez sits on the bipartisan financial services committee.Among those testifying are:Robinhood’s CEO, Vlad Tenev.
      Reddit’s CEO, Steve Huffman.
      Gabe Plotkin, founder of the Melvin Capital Management hedge fund, which was forced into a rescue after retail traders crushed its bets against GameStop.
      Ken Griffin, billionaire CEO of Citadel, an investment firm that executes Robinhood clients’ trades and also helped to bail out Melvin.
      Keith Gill, a trader variously known online as Roaring Kitty and DeepFuckingValue and a longtime GameStop booster.
      The hearing marks the first time the major players in the GameStop controversy have all been forced to publicly reckon with the anger the episode provoked among small investors and across the political spectrum.Gregg Gelzinis, associate director for economic policy at the Center for American Progress, said: “The GameStop drama raised quite a few public policy questions but first it’s important for members of Congress to understand how events played out.”Gelzinis said there were still questions about the timeline of events. More broadly, he said, GameStop had highlighted many crucial issues for regulators, including the role and regulation of hedge funds, whether or how Wall Street is using social media to drive investment strategy, the “gamification” of investing by trading apps and the economic incentives at play for the trading platforms.“What would have happened if Robinhood had failed? What would have been the knock-on effects for financial markets?” he asked. “These are huge investor protection questions.“I saw someone on Twitter describe it as a Rorschach test for financial regulators,” he added.The hearing will not be the last inquiry that the executives at the center of the controversy will face. Federal prosecutors have begun an investigation, according to the Wall Street Journal, and the Securities and Exchange Commission, the US’s top financial watchdog, is reportedly combing through social media posts for signs of potential fraud.In the meantime, evidence has emerged that small investors were not the largest buyers of GameStop and other hot companies. According to an analysis by JP Morgan, institutional investors may have been behind much of the dramatic rise in the share price.“Although retail buying was portrayed as the main driver of the extreme price rally experienced by some stocks, the actual picture may be much more nuanced,” Peng Cheng, a JP Morgan analyst, told clients in a note.Gelzinis said Thursday’s hearing was likely to raise as many new questions as it answered but was a necessary first step to understanding the seismic changes in investing that GameStop highlighted.“This is only the start of the story,” he said. “It’s clear this is not just a clearcut small investor versus Wall Street story. It’s a fairly messy picture but hopefully by the end we can paint a clearer picture and draw up some public policy conclusions from it.” More

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      in US Politics

      Democrats urge Biden to fire USPS chief Trump ally who decimated mail service

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      Even in a drama-filled election unlike any other, the postmaster general, Louis DeJoy, and his assault on the postal service stood out.After Trump appointed the businessman to run the agency, DeJoy largely failed in his mission to help the former president discourage voters from casting ballots by mail, but evidence suggests his policies and the pandemic have decimated the postal service. Now many, including Democratic lawmakers, are calling on Biden to act swiftly to remove him and the Trump-majority UnitedStates Postal Service board of governors.Though Biden doesn’t have the authority to remove DeJoy himself, he could immediately appoint a Democratic-majority board that could fire the postmaster general, but the administration has yet to act. That’s left many asking “Why?”“We think he can move quickly and should move quickly and should be bold – there’s no debate about anyone being confirmed by the Senate, so let’s make it strong and powerful,” said Mark Dimondstein, president of the American Postal Workers Union.But it might take some time for that to happen. Representative Gerry Connolly, chair of the subcommittee on government operations, which oversees the postal service, labeled DeJoy a “huge problem” and is calling on Biden to fire the entire board, but told the Guardian he doesn’t think it’s “a fair question” to ask why the president hasn’t acted during his first three weeks in office.“Give him a little bit of time. We’re dealing with huge problems – a pandemic, huge economic challenges, he’s got to make cabinet appointments, he’s got his environmental agenda,” Connolly added. “But this needs to be on the priority list and I believe it will be.”Representative Tim Ryan, who in January sent a letter to Biden calling on him to “clean house”, stressed that late bill payments, late checks and delayed medication deliveries cause problems for many Americans and underscored the urgency. Though DeJoy has refused to release 2021 on-time delivery data, December numbers made public in lawsuits shows that only about 40% of first class mail was arriving on time – down from about 92% the year before.Those who spoke with the Guardian agreed that the delays affect Americans’ daily lives more than sub-cabinet appointments at a federal agency like the Department of Commerce.“We’ve got to hit the reset button because there’s no confidence in DeJoy and the board of governors who obviously have lost all control, and that’s inflicting pain on working-class people in places like Ohio,” Ryan said.Connolly said part of the delay in Biden taking action could stem from the administration “wrestling with” a strategy to remove DeJoy and deal with the board, which currently holds four Republicans and two Democrats. Biden could appoint three new Democrats, and that majority could, in theory, fire DeJoy. But some, like Connolly and Ryan, are calling on Biden to fire the entire board, including its Democrats, who Connolly accused of not providing meaningful resistance to DeJoy’s assault.“They’ve gone along to get along and that’s not what we needed,” Connolly said. “We needed forthright voices calling out DeJoy, so I believe they’re part of the problem, not part of the solution.”Ryan said the Biden administration didn’t respond to his letter, and he suspects that it may fear that immediate action would “create a lot of chaos”.Dimondstein also noted that the board is composed of older white men with no experience in the industry and who want to run the postal service as a business, when it’s actually a service.“We’re asking him to fill the openings immediately with strong postal service advocates and to bring some diversity to the board,” Dimondstein said. That includes someone who represents the interest of rural America, which relies heavily on the postal service because private delivery companies often won’t serve it.There’s also the symbolism: DeJoy, a Trump donor, was appointed to his role in May and immediately set to work enacting controversial changes that dramatically slowed first class mail service in critical swing states where large numbers of Democrats were expected to vote by mail. That’s viewed by many as an attack on democracy and weaponization of an essential service.“If you needed a reminder of how quickly this can become a political hot potato, that was it, and you ignore it at your own peril,” Connolly said.The postal service’s struggles don’t end at DeJoy. Its workforce has been flattened by the pandemic and officials say the operation is in need of a cash infusion and tens of thousands of additional employees. Its ageing equipment and 25-year-old delivery truck fleet are designed to largely handle first class mail but the postal service increasingly delivers packages, which makes the operation significantly less efficient.Meanwhile, a 2006 reform bill required the post office to pre-fund 75 years of its retiree healthcare costs, which has been a financial drag.Bipartisan legislation already introduced in the Senate and House would repeal the 2006 law, but Connolly said he was preparing a “more comprehensive” package that would address other major issues. Democrats are having “internal discussions” about the best approach, he added. Meanwhile, Ryan called on the federal government to provide relief to those who have incurred late fees or had credit scores dinged as a result of slowed mail service.Dimondstein applauded all the ideas, and said the USPS was also well-positioned to expand the services it offers, suggesting ideas like postal banking or electric vehicle charging infrastructure should the fleet be upgraded. That would help generate new revenue, but, regardless of what Democrats do, Dimondstein said they need to move quickly: “People are watching and patience is going to run thin.” More

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      in US Politics

      'Hopefully it makes history': Fight for $15 closes in on mighty win for US workers

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      Fear was the overwhelming emotion Alvin Major felt when, on a chilly November morning in 2012, he went on strike at the Brooklyn KFC where he worked.
      “Everybody was scared,” said Major. He may have been fearful, but what Major didn’t know was that he was about to make American history – an early leader in a labor movement that some historians now see as the most successful in the US in 50 years.
      Major was paid just $7.25 an hour as a cook at KFC, but the consequences of losing his job were dire, as his family was already struggling to make the next month’s rent. “Everybody was scared about going back to work,” he said. “Nobody visualized what this movement would come to.”
      The New York strike by hundreds of majority Black and brown New York fast-food workers was, at the time, the largest in US history – but it would be dwarfed by what was to come. Two years later, strikes had spread across America, and fast-food workers in 33 countries across six continents had joined a growing global movement for better pay and stronger rights on the job.
      In eight years, what became the Fight for $15 movement has grown into an international organization that has successfully fought for a rise in minimum wage in states across the US, redefined the political agenda in the US, and acted as a springboard for other movements, including Black Lives Matter. It now stands perilously close to winning one of the biggest worker-led rights victories in decades.
      Embed map
      This Tuesday, fast-food workers will walk out again, hoping to push through a change that will affect tens of millions of American workers.
      For Major, now 55, it all began in a hall in Brooklyn, where union and community activists had convened a meeting of fast-food workers to see what pressure they could bring on an industry notorious for its low wages and poor conditions, and a state that had shown those workers little interest.
      With a platform to speak, the workers talked about “how you had to be on food stamps, get rent assistance, all these kinds of things, and we’re working for these companies that are making billions”, said Major.
      At one point, a worker showed the burns on his arm he had suffered at work. In a show of solidarity, workers across the room others rolled up their sleeves to show their scars too. Even when injured on the job, workers said, they were too scared to take time off.
      This was not how Major imagined America to be when he moved to the US from Guyana in 2000. “In our family, with 14 kids, my dad’s wife never worked a day. My dad used to work, he took care of us, we had a roof over our head, we went to school, we had meals every day, he had his own transportation.”
      In America, “the greatest, most powerful and richest country in the history of the world”, he found “[that] you have to work, your wife has to work, when your kids reach an age they have to work – and still you could barely make it”.
      Industry lobbying allied to Republican and – until relatively recently – Democratic opposition has locked the US’s minimum wage at $7.25 since the last raise in 2009. Now a raise to $15 looks set to be included in Joe Biden’s $1.9tn Covid relief package – although it will still face fierce opposition.
      Even Biden, who campaigned on the raise, has expressed doubt about whether it can pass. But more progressive Democrats including longtime champion Senator Bernie Sanders are determined to push it through, and it remains in the House Covid relief bill.

      Rep. Pramila Jayapal
      (@RepJayapal)
      I’m thrilled to announce that after working with leadership, we’ve secured a $15 minimum wage in the House’s COVID relief bill!This provision would lift nearly 1 million people out of poverty. It’s long overdue that Congress enacts a minimum wage that is a living wage.

      February 8, 2021

      The stakes are huge. The Congressional Budget Office said this week that 27 million Americans would be affected by the increase, and that 900,000 would be lifted out of poverty at a time when low-wage workers – and especially people of color – have suffered most during the pandemic. The CBO also said the increase would lead to 1.4m job losses and increase the federal budget deficit by $54bn over the next 10 years.
      Other economists have disputed the CBO’s job-loss predictions – the Economic Policy Institute called them “wrong, and inappropriately inflated”. The long-running debate about the real cost of raising the minimum age will no doubt continue. What is certain is that Biden will face enormous political blowback if his campaign promise to raise the minimum wage falls so early in his presidency – a promise that during his campaign he argued was central to his plans to address racial inequality.
      That backlash will also cross party lines – at least outside Washington. The US may be as politically divided as it has been since the civil war, but polling shows the majority of Americans support increasing the minimum wage no matter their chosen party. In November 60% of voters approved a ballot initiative to increase the minimum wage to $15 by 2026 even as they voted to re-elect Donald Trump.
      More people voted for that ballot initiative than voted for either presidential candidate in the state. With Florida, seven states plus the District of Columbia have now pledged to increase their minimum wage to $15 or higher, according to the National Employment Law Project (Nelp) and a record 74, cities, counties and states will raise their minimum wages in 2021.
      The movement, and this widespread support, has changed the political landscape, pushing Democratic politicians, including Biden, Hillary Clinton and the New York governor, Andrew Cuomo, to back a $15 minimum wage, against their earlier qualms.
      Cuomo called a $13 minimum wage a “non-starter” in February 2015. By July, he was racing California to get it into law.
      In the 2016 Democratic presidential primaries, Clinton went from supporting a raise to $12 an hour to $15 as Sanders made ground on the issue. Even Saturday Night Live parodied the pair arguing about who was most for a $15 higher wage.

      [embedded content]

      Big companies including Amazon, Target and Disney have all moved to $15, or pledged to do so. One of Biden’s first executive orders called for federal contractors to pay employees a $15 minimum wage. The federal holdout would be the movement’s biggest win to date, but there is little arguing that they have made significant progress without it – not least for Alvin Major, who now has a union job earning over $17 an hour working at JFK airport and who says he is no longer worried about his bills.
      For Mary Kay Henry, president of the Service Employees International Union (SEIU), this is “the David and Goliath story of our time”. She puts the public support down to the “pervasiveness of underpaid, low-wage work”.
      “Every family in America knows somebody that’s trying to make ends meet through a minimum-wage job. And the pandemic has revealed that essential work in a way that many people hadn’t noticed before, and they now understand how grocery store clerks, nursing home workers, janitors, airport workers, security officers, delivery drivers [and] fast-food workers are all people trying to do the very best job they can, and provide for their families.”
      The SEIU has been a longtime funder and supporter of Fight For $15 and for Henry, the first woman to lead the SEIU, the fight for a higher minimum wage is just the beginning of a greater push for workers’ rights – not least the right to join unions, in a service sector where women and people of color make up a disproportionate number of workers.
      “Eighty per cent of our economy is driven by consumer spending. Service and care jobs are the dominant sectors in the US economy, and we have to create the ability of those workers to join together in unions in this century, just like auto, rubber and steel were the foundation in the last century,” she said.
      “If the US Congress can’t see what the American people are demanding, in terms of ‘Respect us, protect us, pay us’, then they’re going to have a political price to pay in 2022,” she added. “Our nation’s leaders need to get this done. Congress has used its rules to pass trillions of dollars in tax cuts for billionaires and massive corporations, so now it’s time for our nation’s leaders to give tens of millions of essential workers a raise.”
      Backing Henry will be a younger generation of activists who cut their teeth in the Fight for $15 movement and have used it as a springboard into a political debate that is now centered around racial and economic justice. One of those leaders is Rasheen Aldridge, one of the first to take action when the Fight for $15 spread to St Louis, who was elected to Missouri state assembly last November.
      Aldridge was working at a Jimmy John’s restaurant in 2013 when he was approached by a community organizer asking him about his pay and conditions. Aldridge had recently been humiliated by a manager who took pictures of him and a co-worker holding signs they were forced to make, saying they had made sandwiches incorrectly and had been 15 seconds late with a drive-through order. “It was so dehumanizing and just a complete embarrassment,” said Aldridge.
      The organizer talked about the strikes in New York, Chicago and elsewhere, and suggested the same could happen in conservative Missouri. More

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      in UK Politics

      Brexit effects ‘considerably worse’ than expected, says JD Sports boss

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      The consequences of Brexit have been “considerably worse” than expected, the boss of JD Sports has said.Peter Cowgill said red tape and delays in shipping goods to Europe was costing the company “double-digit millions”.He told the BBC’s World at One that the company will probably have to move 1,000 distribution centre jobs to the continent, causing job losses in the UK.The sports retailer’s chairman claimed Britain does not really have a free trade agreement with the EU, explaining that if companies such as his import goods from Asia, tariffs are then applied when goods go on sale in Europe.”I actually think it was not properly thought out,” he said. “All the spin that was put on it about being free trade and free movement has not been the reality.”The new system and red tape just slows down efficiency. The freedom of movement and obstacles are quite difficult at the moment.”I don’t see that regulatory paperwork easing much in the short term.”Mr Cowgill said opening a distribution centre in mainland Europe “would make a lot of economic sense,” with the facility employing around 1,000 people.He said while the company’s warehouse in Rochdale would not be closed, “it would mean the transfer of a number of jobs into Europe.”Similar criticisms have been made by businesses across the UK in the wake of new trading rules with the EU coming into force on 1 January.On Monday, the Road Haulage Association (RHA) said exports from British ports to the EU had fallen by 68 per cent last month compared with the same period last year. Richard Burnett, the RHA’s chief executive, largely blamed Brexit for the stunning drop, saying he “warned repeatedly that there was a lack of clarity over how the new arrangements would work and that hauliers, traders and manufacturers were confused, having had insufficient time to prepare” ahead of the end of the Brexit transition period.The environment secretary, George Eustice, said the government had been forced to advise traders that consignments would likely be rejected at EU ports, adding that it was “in the EU’s interest to restore this trade” so its businesses could buy British shellfish. However, Brussels has said the rules have existed for decades and will not be changed anytime soon. More