Keith Gill, the former MassMutual wellness education director who advocated for shares of GameStop in his free time, is prepared to tell a House committee on Thursday that he never provided investment advice for a fee and did not “solicit anyone to buy or sell the stock for my own profit.”
The statement made no mention of the fact that Mr. Gill was a registered securities broker and a chartered financial analyst while he was posting online about GameStop under the alias Roaring Kitty and another pseudonym that included a vulgarity.
In the five-page statement, Mr. Gill described himself as a true believer in the fortunes of GameStop, a video game retailer, and said his postings online about the company had nothing to do with his job at MassMutual. He portrayed himself as a one-person operation doing battle with wealthy hedge funds, some of which were shorting shares of GameStop and betting on its collapse.
“The idea that I used social media to promote GameStop stock to unwitting investors is preposterous,” Mr. Gill said in the statement, which his lawyer provided to the House Committee on Financial Services in advance of Thursday’s hearing into the speculative and aggressive trading last month in shares of GameStop. “I was abundantly clear that my channel was for educational purposes only, and that my aggressive style of investing was unlikely to be suitable for most folks checking out the channel.”
He said he had shared his investment ideas online because he “had reached a level where I felt sharing them publicly could help others.”
Mr. Gill described himself as an average guy who earned a modest income and was effectively out of work for two years before landing at MassMutual in April 2019. The statement skirted over how much money he had made trading shares of GameStop — though he said he had told his family at one point that “we were millionaires.” He also did not mention that Massachusetts securities regulators are investigating whether he violated any securities industry rules and regulations with his social media postings.
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 its 1,700 percent rally only to suffer losses when the stock quickly gave back most of those gains. The lawsuit contends that MassMutual and its brokerage arm did not properly supervise Mr. Gill, who was an employee until a few weeks ago.
Mr. Gill’s lawyer, William Taylor, declined to comment on the lawsuit. A spokeswoman for MassMutual said the company was reviewing the matter with Mr. Gill.
Mr. Gill is one of a half-dozen witnesses scheduled to testify at the hearing, which will focus on the impact of short selling, social media and hedge funds on retail investors and market speculation.
Robinhood has responded to a long list of questions from Senator Elizabeth Warren, Democrat of Massachusetts, about its businesses practices, and what went wrong during the height of the so-called meme stock mania. The DealBook newsletter got the first look on Wednesday at the broker’s 195-page response.
The questions and responses indicate Ms. Warren’s likely focus as the Senate Banking Committee, of which she is a member, scrutinizes the fintech company and push for securities regulation. More immediately, the back-and-forth serves as a preview of likely themes at a hearing in the House on Thursday on the market frenzy that will include Vlad Tenev, Robinhood’s chief executive.
The letter to Ms. Warren from Robinhood reiterated the company’s previous comments about the capital constraints that forced it to halt trading in some stocks during the height frenzied trading in shares of GameStop, AMC and others.
When pressed by Ms. Warren, Robinhood said it did not “share customer data beyond customer orders” with firms like Citadel Securities, although it did not say what was included in those customer orders. When asked how much money it made from Citadel Securities and other financial firms, Robinhood referred to its public disclosures of payment for order flow contracts — the complex practice through which Robinhood makes its money.
“Robinhood does not receive any money from Citadel Securities other than rebates received through payment for order flow, all of which are disclosed publicly,” a spokesperson for Robinhood told The Times.
Kenneth C. Griffin, the chief of the hedge fund Citadel, will also testify Thursday at the House hearing.
Robinhood also answered Ms. Warren’s inquiries about its use of mandatory arbitration agreements, which can relinquish a user’s right to take the company to court. Robinhood, which said it “is open to reviewing its use of arbitration,” noted that only one of its 2020 cases resulted in a final ruling by an arbiter, with an award for $0.
“Robinhood promised to democratize trading, but hid information about its prerogative to change the rules by cutting off trades without notice — and about customers’ inability to access the courts if they believe they’ve been cheated — behind dozens of pages of legalese,” Ms. Warren said. She may press the Securities and Exchange Commission to ban forced arbitration practices, investigate Robinhood’s relationship with Citadel Securities, explore raising capital requirements for brokerage firms and clarify its rules on market manipulation.
“I’m going to keep pushing regulators to use the full range of their regulatory tools to ensure the fair operation of our markets, particularly for small investors,” Ms. Warren said.
The winter storm that battered much of the United States over the holiday weekend continued to slow auto production across the Midwest on Wednesday.
On Tuesday, several automakers suspended or shut down production at plants from Texas to Indiana as rolling blackouts, natural gas shortages and extreme weather made operating difficult.
General Motors canceled day shifts on Wednesday at factories in Arlington, Texas, and Fort Wayne, Ind., but was back to normal schedules at its plants in Spring Hill, Tenn.; Wentzville, Mo.; and Bowling Green, Ky., a spokesman said.
Toyota canceled early shifts at plants in Tupelo, Miss., and San Antonio, the company said. Both plants were closed on Tuesday. The company’s factory in Georgetown, Ky., went back into operation Wednesday, although two hours later than usual. A plant in Princeton, Ind., that had been idle on Tuesday returned to its normal schedule on Wednesday.
Honda Motor said all of its plants were back to normal hours on Wednesday, a day after cold weather forced the cancellation of shifts at some factories.
The extreme weather has left millions without power and disrupted retail chains, delivery services and manufacturers across much of the South and Midwest. On Wednesday, Texas faced a new onslaught of sleet and freezing rain that the National Weather Service said could be “the worst of all the winter events over the past week.”
Energy prices rose again on Wednesday, a reflection of surging energy demand and expectations of disruptions of Texas-based supply after winter storms hit Southern and central states.
Benchmark prices for American crude oil rose 1.8 percent, with a barrel of West Texas Intermediate crude oil settling at $61.14. The price topped $60 a barrel this week for the first time in 13 months.
Natural gas prices rose 2.9 percent, settling at $3.219 per million British thermal units. The rise followed a 7.5 percent surge in natural gas prices on Tuesday.
“A production rebound could potentially take more than a week or two for the majority of oil and gas wells, but it might take longer for production from nearly all wells to recover,” wrote commodities analysts from Citi Research in a note to clients published on Tuesday.
On Wall Street, markets ended lower but recovered their steepest losses. The S&P 500 lost less than 0.1 percent. The tech-heavy Nasdaq composite index lost 0.6 percent, led by a 1.8 percent drop in Apple shares.
The Stoxx 600 Europe fell 0.7 percent, led by consumer and financial stocks.
The 10-year Treasury yield was down slightly to about 1.29 percent. (It was not, as was previously stated here due to an editing error, down 15 basis points.) On Tuesday, the yield jumped 10 basis points, or 0.1 percentage point, the biggest one-day increase since March. Inflation expectations in U.S. financial markets are at multiyear highs, as investors anticipate that a large government spending package could stoke higher prices. In recent days, this had spurred a sharp sell-off in U.S. government bonds.
Federal Reserve officials were concerned about continuing threats to the economic recovery during their late January meeting and did not see a big risk that inflation would shoot higher in a lasting way, based on minutes from the gathering.
The 10-year break-even rate, one measure of inflation in markets, was at 2.24 percent, the highest since 2014.
Bond yields rose across Europe, reversing an earlier decline. The 10-year yield on British bonds rose slightly to 0.62 percent. Earlier data showed the annual inflation rate increased in January.
Facebook said on Wednesday that it would restrict people and publishers from sharing links to news articles in Australia, in response to a proposed law in the country that requires tech companies to pay publishers for linking to articles across their platforms.
The decision came hours after Google announced it had reached an agreement to pay Rupert Murdoch’s News Corp to publish its news content in a three-year global deal, part of a string of deals it had struck with media companies in recent days to ensure that news would remain on its services.
“The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content,” William Easton, managing director of Facebook Australia & New Zealand, said in a statement about Australia’s legislation. “It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter.”
Facebook’s decision is an escalation of a long-term standoff between tech companies and news publishers, which have argued for years that they are not fairly compensated for articles and other content that generate ad revenue for the technology companies. The tech giants have pushed back, saying that they are merely conduits for the content, and that the proposed law in Australia is untenable.
Still, Facebook has continued to make investments in other areas of news, including expanding its Facebook News tab — a paid partnership program dedicated to showing curated news articles inside the mobile app — to more countries and paid partners. Last month, Facebook started its News Tab service in Britain, unveiling a slate of new partnerships with major British publishers.
Although Google reached an agreement with news publishers, Facebook has positioned itself as having a fundamentally different relationship with them. The social network has maintained that it has largely helped the media industry, and that publishers would not be able to increase their revenue in the same way without Facebook’s aid.
News Corp said on Wednesday that Google had agreed to make “a significant payment” to publish the newspaper publisher’s news content, signaling a breakthrough in a dispute that has dated back to the earliest days of the search engine.
The three-year global deal comes as Australia prepared to pass groundbreaking legislation to force internet platforms to pay for news. In recent days, Google had struck deals with other media companies to ensure that news would remain on its services, but News Corp, a longtime critic of the search giant and publisher of The Wall Street Journal and The Australian, had held out.
Rupert Murdoch’s News Corp has been a vocal and determined critic about how news organizations are not fairly compensated for content that helps to bring in advertising revenue for Google.
Robert Thomson, chief executive of News Corp, said the deal would have “a positive impact on journalism around the globe.” The exact financial terms of the deal were not disclosed.
News Corp said the agreement also included the development of a subscription platform, the sharing of advertising revenue from Google’s technology services and investments into video journalism by YouTube, a Google subsidiary.
Don Harrison, president of global partnerships at Google, said the company had invested to help news organizations over the years. “We hope to announce even more partnerships soon,” he said.
Fox News dedicated hours of coverage on Wednesday to praise for Rush Limbaugh, the right-wing talk radio star whose aggressive and often divisive rhetoric helped pave the way for the network’s prime time hosts.
With Harris Faulkner and Bill Hemmer at the anchor desk, conservative media and political figures called in to offer tributes to Mr. Limbaugh, who died on Wednesday at 70.
Sean Hannity said “there is no talk radio as we know it” without Mr. Limbaugh.
“It just doesn’t exist,” he said on Fox News. “And I’d even make the argument in many ways, there’s no Fox News or even some of these other opinionated cable networks.”
Tucker Carlson said Mr. Limbaugh came “out of nowhere” and became the voice of conservatism and the savior of AM radio. “Here was a guy who took the oldest of mass communication media and turned it into the most powerful force in American politics, and he did it purely out of talent,” he said.
Former President Donald J. Trump said in a call to Fox News that he had last spoken with Mr. Limbaugh three or four days ago. “People, whether they loved him or not, they respected him, they really did,” he said. Mr. Trump also repeated the baseless claim that he had won the election. “Rush thought we won, and so do I, by the way,” he said. “I think we won substantially.”
The broadcast included footage of Mr. Trump’s presenting Mr. Limbaugh with the Presidential Medal of Freedom, the nation’s highest civilian honor, during the State of the Union address last February. Former Vice President Mike Pence, himself a former talk radio host, also called in to say that Mr. Limbaugh “made conservatism fun.”
In his long career, Mr. Limbaugh often referred to feminists as “feminazis”; lost his commentary role on ESPN in 2003 after he said that Donovan McNabb, a Black quarterback for the Philadelphia Eagles, had received too much credit for his team’s success because of his race; and hung up on callers to his radio show with something he called “caller abortions,” an audio montage of a vacuum cleaner sound and human screams. In 2012, he repeatedly attacked Sandra Fluke, a law student who testified at a congressional hearing on birth control, calling her a “slut” and a “prostitute” on his radio show.
When Barack Obama ran for president in 2008, Mr. Limbaugh promoted the falsehood that Mr. Obama had been born outside the United States and lent support to Mr. Trump’s recent claims of election fraud. On his Dec. 23 program, he acknowledged his influence on Fox News.
“And then I got some help starting in 1996,” he said, referring to the year the cable news channel started. “Here comes Fox! Proud of that.”
The White House on Wednesday nominated Jennifer Abruzzo, a prominent union lawyer, to be general counsel of the National Labor Relations Board, the country’s top enforcer of labor rights for private-sector employees.
Ms. Abruzzo’s nomination comes roughly a month after President Biden fired the Trump administration’s appointee to the job, Peter B. Robb, who was unpopular with organized labor. Mr. Robb’s term was not due to expire until November, but unions close to the new president urged his ouster.
The labor board’s general counsel, a Senate-confirmed position, has considerable authority over which cases the agency pursues — such as those in which employees are fired while trying to organize. Unions were frustrated that Mr. Robb had sought to settle a prominent case against McDonald’s that the agency had initiated during the Obama administration, among other decisions.
Before leaving the labor board in 2017, when Mr. Robb was confirmed, Ms. Abruzzo had spent more than two decades there, including a tour as deputy general counsel beginning in 2013.
Her nomination as general counsel drew praise from labor officials. Lynn Rhinehart, a former general counsel of the A.F.L.-C.I.O., called the appointment a “superb choice.”
Ms. Rhinehart, now a senior fellow at the liberal Economic Policy Institute, said Ms. Abruzzo “will hit the ground running and help restore the N.L.R.B.’s credibility as an agency that protects and promotes the right of workers to organize and bargain collectively for improvements at their workplace.”
Federal Reserve officials fretted about continuing threats to the economic recovery and noted financial stability concerns during their late January meeting, minutes from the gathering showed, but they did not see a big risk that inflation would shoot higher in a lasting way.
Fed officials left interest rates near zero at their Jan. 27 meeting and pledged to continue making huge bond purchases as they try to help the economy weather the pandemic. During a news conference following the meeting — and in remarks since — Jerome H. Powell, the Fed chair, has suggested that doing too little to stem the fallout of the crisis is a bigger risk than doing too much. Minutes released Wednesday echoed that watchful stance.
“Participants observed that the economy was far from achieving the committee’s broad-based and inclusive goal of maximum employment and that even with a brisk pace of improvement in the labor market, achieving this goal would take some time,” the minutes said.
The pandemic “continued to pose considerable risks to the economic outlook, including risks associated with new virus strains, potential public resistance to vaccination, and potential difficulties in the production and distribution of vaccines,” officials noted.
While several prominent economists have warned that the government might overdo its coronavirus crisis spending response and set off higher inflation, Fed policymakers have been less concerned. In fact, “many participants stressed the importance of distinguishing” between an anticipated temporary pop in prices later this year and a shift in inflation’s longer-term trend, the minutes showed.
Central bankers were alert to financial stability risks. The Fed’s late-January meeting came as GameStop’s stock rose rapidly, fueled in part by retail traders who had organized on social media. Fed officials discussed that and other concerns.
“Some participants commented that equity valuations had risen further, that initial public offering activity was elevated, or that valuations might have been affected by retail investors trading through electronic platforms,” the minutes showed.
Fed staff members — influential advisers to the policy-setting officials — characterized financial market vulnerabilities as “notable” and called asset valuations “elevated,” the minutes showed. Valuations were deemed “moderate” as recently as November.
A mortgage boom is underway as American families take advantage of historically low interest rates by refinancing or buying homes, based on a new report from the Federal Reserve Bank of New York.
The volume of new mortgages hit a record in the fourth quarter of 2020, surpassing a 2003 high before adjusting for inflation, the New York Fed said in its latest household debt report and an accompanying blog post. That boom in the mid-2000s has since been blamed for leaving households heavily indebted and contributing to the pain of the 2007 housing bust. But the Fed’s researchers noted that today’s run-up looks different.
This time, both lenders and borrowers appear to be treading more carefully, and mainly households with pristine financial histories are borrowing or refinancing. More than 70 percent of originations in the fourth quarter of 2020 went to borrowers with credit scores over 760, the researchers said.
“Although these two bumps in mortgage originations are similar in magnitude, the composition is quite different,” they wrote. Plus, it’s hard to properly compare origination volumes exactly over time, because rising home prices mean that the increase isn’t apples to apples.
Still, “the trend was unmistakably increasing this year, and to a high level,” according to the post.
Mortgage originations for home purchases spiked in the fourth quarter of 2020, with first-time and repeat buyers borrowing to buy homes at a similar pace. The researchers note that even first-time borrowers look more financially stable now than during the mid-2000s housing boom.
Refinancing has also accelerated. That extends to “cash out” refinances, in which borrowers re-up their home loans and pocket some money against their home equity.
The practice jumped in 2020, with borrowers withdrawing $188 billion in home equity over the course of the year compared with just $119 billion the year before, though “cash-out refinance volume is still notably smaller than what was seen between 2003-06” and came mostly in tiny increments.
“At least half of the refinancers borrowed only enough additional funds to cover the closing costs on the new mortgage,” the researchers noted.
The data as a whole paints a picture in which the mortgage market is booming, the Fed researchers said, but with different — and seemingly more stable — underlying characteristics than the ones that led to the 2007 bust.
Fracturing trade, investment and other economic ties between the United States and China would have significant costs for the American economy and for industry, and could ultimately lead to the United States being less competitive, according to a report published Wednesday by a consultancy, the Rhodium Group, and the U.S. Chamber of Commerce China Center.
The report attempts to quantify the economic costs of “decoupling” the American and Chinese economies through the fuller pursuit of policies like those adopted by the Trump administration, including tariffs and higher barriers to investment and immigration.
The report’s authors estimate that American economic output would fall by $190 billion annually if all U.S.-China trade was subject to the kind of 25 percent tariff that Mr. Trump put on more than half of Chinese exports.
On the investment front, the U.S. economy could face a one-time loss of up to $500 billion if policies led to the sale of half of U.S. foreign direct investments in China. And the United States could lose between $15 billion and $30 billion in service sector exports if Chinese tourism and education spending fell by half from its pre-pandemic levels, according to the report.
Daniel Rosen, a founding partner at Rhodium Group, said in a news conference on Wednesday that China had initiated the conflict by adopting practices that have raised national security concerns and violated economic norms. But as the United States responds to those challenges, he said policymakers needed to carefully analyze the cost of their own actions, which could be substantial.
Cutting off the “preponderance of our engagement with China would be so expensive that it would make everyone, even the most hawkish Americans and national security professionals, very uncomfortable. We’re going to have to pay for this stuff. Our choices are not going to be cheap,” Mr. Rosen said.
“It doesn’t mean we don’t act, but it does mean we need to do the accounting carefully so we understand the implications,” he said.
The report found significant costs from decoupling for several U.S. sectors, including aviation, chemicals, semiconductors and medical devices. Restrictions on American sales to the Chinese market would lead to lower revenue for American firms, less investment in factories, jobs and research in the United States, boosting foreign competitors and diminishing U.S. industry, the report said. In the case of semiconductors, it could also push foreign firms to cut American companies out of their supply chains.
In the aviation sector, where the United States records huge sales to China and faces no close Chinese competitor, decoupling would be “insane,” Scott Kennedy, a China expert at the Center for Strategic and International Studies, said during the news conference.
“The Trump administration did essentially no math on this,” he said. “It’s critical that we do the math and not make choices based on faith or ideology.”
The Trump administration embraced the perspective of the business community on some issues, like regulation and taxes, but it was often at odds over trade policy. In particular, trade officials in the Trump administration often derided officials from the U.S. Chamber of Commerce as corporate lobbyists, saying that the chamber’s pro-China policies had led to outsourcing and the loss of American manufacturing jobs.
The Biden administration has promised to take a more strategic approach to advancing American competitiveness, but it may also be under pressure from unions and progressive Democrats not to be seen as putting the concerns of corporations over economic or national security.
Ford Motor became the latest automaker to accelerate its transition to electric cars, saying Wednesday that its European division will soon begin to phase out vehicles powered by fossil fuels. By 2026, the company will offer only electric and plug-in hybrid models in Europe, and by 2030 all of its new passenger cars there will run solely on batteries.
The coronavirus crisis may have accomplished something that a decade of economic growth could not: It spurred a boom in U.S. entrepreneurship. According to a study released on Wednesday, researchers at the Peterson Institute for International Economics found that Americans started 4.4 million businesses last year, a 24 percent increase from the year before. It is by far the biggest increase on record.
The private equity firm Carlyle Group plans to create a $4.1 billion credit line for its portfolio companies that will tie the price of debt to the diversity of a company’s board, the DealBook newsletter reports. Carlyle did not disclose the rates associated with the loans. The three-year facility, which the firm says is the largest of its kind in the United States, is part of an “integrated approach to building better businesses,” said Carlyle’s chief executive, Kewsong Lee.