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VideoOn Thursday, the House Financial Services Committee is holding a virtual hearing on GameStop and Reddit. Witnesses will include the chief executive and co-founder of Reddit.CreditCredit…Anna Moneymaker for The New York Times
Keith Gill, a young day trader who went by the screen name Roaring Kitty and found himself at the center of the GameStop stock trading frenzy, and four others are part of a panel called to testify in front of the House Committee on Financial Services as it examines the circumstances around the wild spikes in prices of GameStop and other so-called meme stocks.
Mr. Gill is the only non-chief executive on the panel. The other witnesses are Vlad Tenev, the chief executive of the online brokerage firm Robinhood; Kenneth C. Griffin, the chief executive of the trading firm Citadel; Gabe Plotkin, the chief executive of the hedge fund Melvin Capital Management; and Steve Huffman, the chief executive of the social media company Reddit.
Mr. Gill traded his usual red headband and “LolCat” T-shirt for a suit and tie as he appeared for the hearing on Thursday morning, prepared to testify.
But he did not shed his wacky, internet-friendly image entirely. Tacked up on the wall behind him was a photo of a kitten dangling from a thread, stamped with a pithy caption: “Hang in there.”
In his opening statement, he called himself “enormously fortunate” to have made so much money on GameStop, and said he believed in the value of GameStop as reflected by its current price.
“I am not a cat. I am not an institutional investor. Nor am I a hedge fund,” Mr. Gill said. “I do not have clients, and I do not provide personalized investment advice for fees or commissions. I’m just an individual whose investment in GameStop and posts on social media were based upon my own research and analysis.”
Other key statements from the hearing:
“Zero pressure from anyone,” Mr. Tenev of Robinhood said when asked whether anybody on the panel had pressured Robinhood to restrict buying of GameStop. “It was a collateral depository requirement decision made by a Robinhood securities president.”
“We’ve created a world where it’s easier to go buy a lottery ticket than it is to invest in the next Google,” said Representative Patrick McHenry of North Carolina. “We should live in the world where the construction worker or Uber driver trading on Robinhood has the same access to equity shares in Robinhood itself as the white collar employees who work there.”
“I will stress that, first and foremost, Wall Street Bets is a real community,” Mr. Huffman of Reddit said. “The self-deprecating jokes, the memes, the crass-at-times language all reflect this. If you spend any time on Wall Street bets you’ll find a significant depth to this community exhibited by the affection its members show one another.”
“We had no role in Robinhood’s decision to limit trading in GameStop or any of the other meme stocks,” said Mr. Griffin of Citadel. “I first learned about Robinhood’s trading restrictions only after they were publicly announced.”
Sophia June contributed reporting.
A congressional hearing over the sudden rise and fall of GameStop’s shares last month opened with lawmakers from both parties raising concerns about how the frenzy had exposed the ways in which the financial system benefits big players rather than individual investors.
“Many Americans feel that the system is stacked against them and no matter what, Wall Street always wins,” said Representative Maxine Waters, Democrat of California and chairwoman of the committee. She noted that many of the investors buying GameStop shares appeared to be trying to “beat Wall Street at its own game.”
With many retail investors sustaining losses, she said, “there are many whose beliefs that the system is rigged against them have been reinforced.”
The committee’s top Republican, Representative Patrick McHenry of North Carolina, shared similar concerns, saying unequal access to certain types of investments had contributed to financial inequality. He said that new regulations could further shut out small investors, saying that “Americans are far more sophisticated, informed and capable than folks in D.C. give them credit for.”
“We’ve created a world where it’s easier to go buy a lottery ticket than it is to invest in the next Google,” he said. “Is it any wonder why the unhealthy dynamics of GameStop happened?”
Credit…Philip Cheung for The New York Times
The House Financial Services Committee will hold a much-awaited hearing on Thursday to question key players in the two-week trading frenzy that helped drive shares of GameStop, the challenged video game retailer, up more than 600 percent. Here’s who will be in the hot seat.
Keith Gill, known as Roaring Kitty
Mr. Gill, a registered securities broker, advocated shares of GameStop on Reddit but did not disclose his former job at MassMutual as a wellness education director. On Tuesday, Mr. Gill and his former employer were named as defendants in a proposed class-action lawsuit that claimed he misled retail investors who bought shares of GameStop during the rally.
Kenneth Griffin, Citadel
The Chicago billionaire is the founder and chief executive of Citadel Capital, the fund that has found itself attacked on all sides for its role in the trading frenzy. Citadel is a partner with Robinhood, which Citadel pays for the right to fulfill customers’ trades; it makes money by pocketing tiny price discrepancies between buy and sell orders. It also ran to the rescue of Melvin Capital to the tune of $2 billion, when the fund found itself in a squeeze as investors pushed to corner its short positions during the rally.
Vlad Tenev, Robinhood Markets
The Robinhood chief executive has ardently defended the company’s decision to halt purchases of certain stocks during the frenzy, saying mounting lending requirements caused a cash crunch at the online brokerage firm. In the weeks since the frenzy, Mr. Tenev has called for the elimination of the two-day period it takes to settle trades, which he argues was the cause of many of the issues.
Gabriel Plotkin, Melvin Capital Management
Mr. Plotkin’s hedge fund, Melvin Capital, became the source of ire for Redditors for its short position against GameStop. As buyers poured into the company, it faced a cash crisis that forced it turn to Citadel, its partners and Point72 Asset Management for $2.75 billion in emergency funds. Mr. Plotkin has said that threats in the aftermath of the trading frenzy have forced him to hire security for his family.
Steve Huffman, Reddit
The chief executive and co-founder of Reddit has defended r/WallStreetBets forum, the public hub for investors during the so-called meme stock frenzy, as a tool to help close the resources gap that benefits institutional traders. He has said that there wasn’t much his company could do to guard against market manipulation, but the forum “does a really good job showing how dangerous options investing can be, because in my history of watching that community, most of them lose money.” Reddit has taken advantage of surging interest, raising $250 million in new funding earlier this month in a deal that valued the start-up at $6 billion.
Jennifer Schlub, the Cato Institute
An expert on financial markets, Ms. Schlub plans to testify that the meme stock phenomenon didn’t pose a systemic risk. Before joining Cato, she was a director in the enforcement department at the Financial Industry Regulatory Authority.
The House Financial Services Committee hearing on Thursday on the GameStop trading frenzy threatens to be full of noise and bluster. The DealBook newsletter came up with questions lawmakers could ask the key players that might elicit the most illuminating responses.
Vlad Tenev of Robinhood
You’ve been lobbying for real-time settlement of stock trades, saying the current two-day delay led to Robinhood’s trading curbs. If there had been real-time settlement, would your brokerage firm have had enough capital to avoid restrictions at the height of the frenzy?
Robinhood says it offers retail investors free trading, but that’s because your company sells customer trades to market makers like Citadel Securities. Can you explain the benefit to firms that pay you to execute trades?
Brokerage firms lend their clients’ shares to short sellers. Would you consider asking Robinhood users to opt in to allow the lending of their holdings?
Ken Griffin of Citadel Securities
Gabe Plotkin of Melvin Capital
How does allowing stocks in companies like GameStop to have short interest of more than 100 percent — that is, more of a company’s shares being sold short than are available to trade — make financial markets more efficient, as short sellers claim?
Jennifer Schulp of the Cato Institute
You say in your opening statement that the “unintended consequences” of regulatory changes in response to the meme-stock mania should not be underestimated. What are the consequences of not acting? Should investors expect episodes like the GameStop frenzy to become a regular feature of markets?
Steve Huffman of Reddit
Keith Gill, trader
Away from your persona as “Roaring Kitty” on YouTube, you were the director of financial wellness education at MassMutual. With your “financial wellness” hat on, what would have been the message you gave clients about investing in GameStop?
In your opening statement, you say you are “as bullish as I’ve ever been” about GameStop. What’s your price target?
Credit…Charles Krupa/Associated Press
Walmart said on Thursday that it was raising wages for 425,000 of its employees in the United States, as the giant retailer and other companies face mounting pressure to increase pay for low-wage workers.
The wage increases mean that about half of its 1.5 million workers in the United States would earn at least $15 an hour, Walmart’s chief executive, Doug McMillon, said on a conference call with investors.
The move, which was announced as part of the company’s fourth-quarter earnings, does not raise the Walmart’s minimum wage to $15 an hour, which rivals like Target and Amazon have already done.
Walmart’s minimum wage remains at $11 an hour for many workers, though the company has been raising its starting pay for select positions during the pandemic.
The announcement of higher wages comes about a week after Mr. McMillon met with President Biden and his top economic advisers to discuss, among other issues, the administration’s interest in raising the national minimum wage to $15 an hour.
On the conference call with investors, Mr. McMillon was asked about whether the company would eventually raise wages for all its employees to $15 an hour.
Mr. McMillon said the $15-an-hour minimum for all workers was an “important target but it should be paced in a way that is good for the U.S. economy.”
He said the wage increases announced on Thursday were part of helping workers build a career at Walmart by paying workers more over time as they moved into managerial roles.
Mr. McMillon said the new wage raises would be geared toward workers who had been with the company for some time and would be focused on digital and inventory management roles, which have been an important part of the company’s growing online grocery business.
“On the wage side, you will see us continue to make investments at the right time,” Mr. McMillon said.
Credit…Jim Wilson/The New York Times
New claims for state unemployment remain stubbornly high as the labor market struggles to regain momentum after the winter surge in coronavirus cases.
A total of 862,000 workers filed initial claims for state unemployment benefits last week, roughly the same number as the week before, the Labor Department said Thursday, while 516,000 new claims were filed for Pandemic Unemployment Assistance, an emergency federal program for freelancers, part-time workers and others normally ineligible for state jobless benefits. Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 861,000.
Economists had expected to see a steady downward trend in initial claims, but the report amounted to fresh evidence that the economic recovery’s momentum has stalled.
“We’re going in the wrong direction,” said Diane Swonk, chief economist for the accounting firm Grant Thornton. “It’s hard to get away from the fact that week after week we keep hoping for better and this is like a sucker punch.”
Particularly worrying was the rise in claims for Pandemic Unemployment Assistance, which jumped by 174,000 last week. The increase largely reflected a spike in claims in Ohio, most likely because of processing delays after the program was extended in federal relief legislation in December.
The Ohio Department of Job and Family Services said on Feb. 8 that “weekend system upgrades” had made the program available to more than 130,000 Ohioans “who have been waiting to receive these benefits” since December. It also enabled Ohioans to submit new applications.
Despite the challenges in the job market, there have been some positive signs for the economy in recent days. Retail sales surged 5.3 percent in January, a bigger gain than expected, though they were most likely powered by the latest round of stimulus checks and could dip again in February.
AnnElizabeth Konkel, an economist for the career site Indeed, said retail job postings on Indeed were up 2.6 percent from February 2020. Over all, job postings on the site are up 3.9 percent.
“We’re making progress, but there’s definitely still a ways to go,” Ms. Konkel said.
Jay Clayton, the former Securities and Exchange Commission chairman, will serve as the lead independent director of Apollo Global Management, the private equity firm said on Thursday.
The move is intended to improve the Wall Street firm’s governance in the wake of the revelation that Leon Black, one of the firm’s co-founders, had paid $158 million in fees to the registered sex offender Jeffrey Epstein.
The appointment of Mr. Clayton is part of a series of steps Apollo announced last month to expand its board and promote greater independence. Mr. Clayton’s post as lead director may help alleviate concerns about Mr. Black’s decision to remain as chairman even after he steps down as chief executive by this summer.
A report commissioned by Apollo’s board that reviewed Mr. Black’s professional dealings with Mr. Epstein found that Mr. Black did nothing wrong and was unaware of the predatory conduct with teenage girls that led to Mr. Epstein’s arrest in 2019 on federal sex trafficking charges. But the review found that Mr. Black paid twice as much in fees for tax and estate planning services to Mr. Epstein than previously believed.
“I look forward to working with my fellow board members to advance Apollo’s strategy in our ever-evolving markets,” Mr. Clayton said in a statement. He will step into the newly created role on March 1.
Mr. Clayton, who had served as S.E.C. chairman for nearly all four years of the Trump administration, will also be returning to his former law firm, Sullivan & Cromwell, but in the role of special policy adviser and counsel. At the S.E.C., his main mandates were to make it easier for companies to tap the public markets and protect retail investors from market manipulation.
Mr. Clayton’s “appointment underscores our commitment to both rigorous oversight and diverse viewpoints,” Marc Rowan, who will succeed Mr. Black as chief executive, said in a statement.
Credit…Ilana Panich-Linsman for The New York Times
Natural gas futures, which have jumped 13 percent since last week, fell 3 percent on Thursday. Production has stalled, and demand has climbed, as a result of the freezing temperatures.
On Wednesday, Gov. Greg Abbott of Texas signed an executive order directing natural gas providers to stop all shipments of gas across state lines, ordering them to instead direct those sales to Texas power generators. Natural gas is responsible for the majority of the Texas power supply.
Oil futures also continued feel the effects of the winter storms that have disrupted production and caused widespread power outages. West Texas Intermediate, the United States benchmark, rose for a fourth day to $61.28 a barrel. It has held above $60 a barrel this week for the first time in 13 months.
Stocks on Wall Street opened lower on Thursday, following declines in European and Asian stock indexes, as investors considered the latest update on the U.S. labor market. The Labor Department published its weekly report on new state jobless benefit claims, which remained stubbornly high as the labor market struggles to recover after a surge in coronavirus cases this winter.
The S&P 500 index fell 0.8 percent, halting four consecutive days of gains. The tech-heavy Nasdaq dropped more than 1 percent.
Congressional hearing on trading frenzy
Shares in mining companies, including Rio Tinto, BHP and Glencore, were the best performers on the FTSE 100 index. The economic recovery from the pandemic, led by Chinese growth, has meant a boom in metal prices turning into a windfall for shareholders. Rio Tinto shares were up more than 10 percent on Thursday as iron ore futures jumped more 6 percent. The miners all announced large dividend payouts this week.
Daimler, the German car and truck maker, said Thursday that its net profit rose by nearly 50 percent in 2020, as it managed to cut costs more than enough to compensate for a decline in sales and supply chain disruptions caused by the pandemic.
The company, which makes Mercedes-Benz cars, Freightliner trucks and other brands, is among traditional vehicle makers defying predictions that the pandemic would accelerate their decline into irrelevance as the industry shifts to electric vehicles. Daimler shares have tripled since hitting a low point in March 2020, and rose again Thursday.
Daimler’s net profit for the year rose almost 50 percent to 4 billon euros, or $4.8 billion, compared with 2019 after sales bounced back toward the end of the year. Almost all of the profit, 3.6 billion euros, was recorded in the fourth quarter.
For the full year, sales still fell 11 percent compared to 2019, to 154 billion euros. But the company made up the difference and then some by cutting the work force by 7,000 workers or 4 percent of the total, reducing expenditures on research and development and other measures.
Daimler also benefited from the swift recovery of the Chinese economy from the pandemic. China has eclipsed Europe and the United States as the company’s biggest market for Mercedes-Benz cars.
The company said it was optimistic about 2021, forecasting “significant” increases in most major markets during 2021. Daimler warned that shortages of semiconductors, a problem for all carmakers, could be a burden on sales and earnings early in the year.
Ola Källenius, the Daimler chief executive, declined Thursday to set an expiration date for making cars powered by internal combustion engines, as rivals like General Motors or Jaguar Land Rover have done. But he said the company was redirecting resources to emissions-free transportation.
“It’s a tick too early” to make a commitment to stop selling gasoline and diesel vehicles, Mr. Källenius said during a telephone conference with journalists. “But the commitment is there. The journey is going in that direction and we will be ready.”
Daimler said this month that it would split its car and truck divisions into separate companies, a move long favored by investors. Mr. Källenius said Thursday that the amicable divorce, expected to be completed by the end of the year, would allow the two divisions to react more quickly to changes in the industry.
“This is a time when agility in decision making is even more important than it has been in the past,” he said.
Credit…Justin T. Gellerson for The New York Times
A top Federal Reserve official delivered a stark warning on Thursday morning: Banks and other lenders need to prepare themselves for the realities of a world wracked by climate change, and regulators must play a key role in ensuring that they do so.
“Financial institutions that do not put in place frameworks to measure, monitor, and manage climate-related risks could face outsized losses on climate-sensitive assets caused by environmental shifts, by a disorderly transition to a low-carbon economy, or by a combination of both,” Lael Brainard, one of the central bank’s six Washington-based governors, said in remarks prepared for delivery at an Institute of International Finance event.
Her comments come against a grim backdrop as abnormally cold weather wallops Texas — leaving millions without electricity and underlining that state and local authorities in some places are underprepared for severe weather events, which are expected to become more frequent.
Such disruptions also matter for the financial system: They pose risks to insurers, can disrupt the payment system, and can make otherwise reasonable financial bets dicey. That makes it important for the Fed to understand and plan for them, central bank officials have increasingly said.
Ms. Brainard pointed out that financial companies are beginning to address the risk by “responding to investors’ demands for climate-friendly portfolios,” among other changes. But she added that regulators like the Fed must also adapt. She raised the possibility that bank overseers may need new supervisory tools because of the challenges of climate oversight, which include long time horizons and limited precedent.
“Scenario analysis may be a helpful tool” to assess “implications of climate-related risks under a wide range of assumptions,” Ms. Brainard said, making it clear that scenarios would be distinct from full-fledged stress tests.
She noted that the Fed’s Supervision Climate Committee, which was announced last month, would work “to develop an appropriate program” to supervise banks’s climate-related risks. The Fed is also co-chair of a task force on climate-related financial risks at the Basel Committee on Banking Supervision, a global regulatory group.
Weighing in on climate risks publicly is new territory new for the Fed. Officials spent years tiptoeing around the topic, which is politically charged in the United States. The central bank only fully joined a global coalition dedicated to research on girding the financial system against climate risk late last year, and it has recently seen pushback from Republican lawmakers over the possibility of climate-tied bank stress tests.
Credit…Felix Schmitt for The New York Times
The aerospace giant Airbus announced a 1.1 billion euro loss for 2020 on Thursday and warned that the industry might not recover from the disruption caused by the pandemic for two to four years, as new virus variants delay a resumption of worldwide air travel.
The world’s largest planemaker eliminated its dividend for a second straight year and predicted a leveling off in deliveries of its popular commercial jets, the company’s chief executive, Guillaume Faury, said.
“As of today we only expect the market to recover between 2023 and 2025,” Mr. Faury said. “The pace of recovery will depend not only on the pandemic and the rate of vaccinations, but also on the decision of governments, if they choose to tighten pandemic conditions or, as I hope, restore freedom,” he said.
The aircraft manufacturer, based in Toulouse, France, said revenue fell by 29 percent to 49.9 billion euros (about $60 billion). Still, the company is outperforming its rival Boeing, which suffered a $11.9 billion loss in 2020, weighed down by the setbacks from the 737 Max, which was grounded after 346 people were killed in two crashes involving the plane, and delays of the first deliveries of the 777X.
Airbus delivered 566 aircraft to airlines in 2020, 40 percent less than expected before the pandemic. In a sign of how badly air travel has been hit, some airlines avoided answering Airbus’s calls to alert them that the new aircraft they had ordered before the pandemic hit was ready, Mr. Faury said.
Given the uncertain outlook, Airbus won’t ramp up aircraft deliveries this year, but will instead plan to deliver about the same number of aircraft as it did in 2020. The fall in demand has left around 100 finished jets sitting parked at Airbus factories, down from a peak of around 145 last year.
Investors were not pleased with the update. Shares in Airbus fell over 3 percent in early trading.
Despite the gloomy short-term forecast, Mr. Faury said the company would continue to ramp up for a substantial change in future business, based on a new generation of carbon neutral airlines that it is designing and expects to unveil sometime this decade.
Weighing on the company’s finances were a 1.2 billion euro charge linked to more than 11,000 layoffs carried out last year, as well as another 385 million euros in costs associated with the ending of its A380 super jumbo jet.
Credit…The New York Times
When it comes to government intervention in the economy, the political parameters have shifted.
On the left, there is a sense of opportunity to experiment with the unorthodox, Eduardo Porter reports for The New York Times, with some policymakers considering having the federal government provide jobs directly to anyone who wants one.
The question is, would the Biden administration embrace a policy not deployed since the New Deal?
On paper, at least, a job guarantee would drastically moderate recessions, as the government mopped up workers displaced by an economic downturn. But unlike President Franklin D. Roosevelt’s programs to provide jobs to millions displaced by the Great Depression, the idea now is not just to address joblessness, but to improve jobs even in good times.
If the federal government offered jobs at $15 an hour plus health insurance, it would force private employers who wanted to hang on to their work force to pay at least as much. A federal job guarantee “sets minimum standards for work,” said Darrick Hamilton, an economics professor at the New School for Social Research