Making money
Despite what you may have heard, said
Paul Krugman in The New York Times,
the GameStop saga was “not a popu-
list uprising.” As the dust settles on the
stock’s spectacular rise and swift fall,
we’re no longer “reading about little
guys who suddenly became rich.” We’re
reading about little guys “who bought
near the top and lost their life savings.”
Social media acted as an accelerant for
a “very old kind” of Wall Street story, a
“pump and dump,” in which some in-
vestors drive up the price of a stock by
“spreading rumors and/or misinforma-
tion, letting them unload their shares on naïve chumps—bag
holders—at a profit.” A few people on Reddit made money pro-
moting the “narrative of little guys taking on The System.” But
of course Wall Street did, too, as hedge funds saw a profit to be
made and got in on the action, with one financial firm, Senvest
Management, reaping $700 million in a few days.Whoever was the winner here, “the stock market has failed at
its most important function,” said Felix Salmon in Axios.com.
It’s supposed to be driving investment “to the places where it can
do the most good.” Obviously, that’s not what happened in this
speculative mania. Treasury Secretary Janet Yellen brought to-
gether top regulators last week to figure out “what might be done
to prevent a spectacle like GameStop from happening again.”
The House and Senate are also both planning hearings. Finan-cial companies have long argued that
high-volume markets create efficiencies
and benefits for all. The frantic trading
in GameStop proved that’s not always
true, increasing political momentum for
a financial transaction tax— possibly
0.1 percent on every stock market
trade—to discourage high-frequency trad-
ing. Longtime critics of the finance indus-
try have seized on the fiasco. “Investors,
big and small, are treating the stock mar-
ket like a casino,” Sen. Elizabeth Warren
(D-Mass.) wrote to regulators.“The showdown between hedge funds and retail investors on
Reddit is getting a lot of attention in Washington,” said Nir
Kaissar in Bloomberg.com. And it has indeed been a wild ride
for GameStop and a few other stocks. But the clamor for new
regulation “risks rolling back the progress made to democra-
tize markets in recent years.” What investors might most need
protection from is the idea that investing is exciting and they
should have fun riding the surge, said Michelle Singletary in The
Washington Post. Recent headlines make stock trading seem like
“a chance for anyone and everyone to make fast money.” But
for most people, most of the time, “slow and steady is a winning
strategy.” People who become extraordinarily wealthy usually
set objectives and stay patient “regardless of whether the stock
market is up or down.” If that sounds unenticing, that’s a good
thing. “Investing should be boring.”Markets: The GameStop hangover
32 BUSINESS
GettyA Reddit revolution, or a ‘pump and dump’?New proposal to cancel student debt
Top Democrats are again calling on President
Biden to cancel student debt, said Aarthi
Swaminathan in Yahoo.com. A bicameral
resolution brought by Sen. Majority Leader
Chuck Schumer (D-N.Y.), Sen. Elizabeth
Warren (D-Mass.), and Rep. Ayanna Pressley
(D-Mass.) is similar to one introduced last year
calling on the Trump administration to forgive
up to $50,000 in federal student loan debt.
Though the move would be unprecedented,
Warren has argued that there is “sufficient
backing in the law” to allow the new educa-
tion secretary, Miguel Cardona, to “cancel
existing student loan debt” under his statutory
authority to modify existing loans. But while
Biden supports some debt cancellation—up to
$10,000—he has “stressed he preferred a legis-
lative route” over executive action.
Squeezing cash from crash victims
Hospitals are routinely bypassing the discounts
given to insurers to get more money from peo-
ple injured in auto accidents, said Sarah Kliff
and Jessica Silver-Greenberg in The New York
Times. Instead of charging an accident victim’s
insurer, the hospitals place a lien—a claim on
an asset—on the patient’s accident settlement.
Hospital lien laws, passed by many states a
century ago, were “meant to protect hospi-
tals from the burden of caring for uninsured
patients.” Today, however, the practice has
become so common and lucrative (especially in
the case of Medicaid patients) that some hos-
pitals hire “outside debt-collection companies
to scour police records for recent accidents”
to pursue liens. Some hospitals ask patients to
sign waivers “stating they do not want their
health plan billed for care”—a practice that
left one woman with a $34,106 lien.A climate-friendly 401(k) option
An investment adviser wants to fight climate
change with retirement plans, said Robinson
Meyer in TheAtlantic.com. Betterment, a
“robo-adviser” that builds a portfolio through
algorithms, offers a climate-focused 401(k)
that goes beyond the “laudable but frankly
nebulous” promises of environment, social,
and governance (ESG) funds. About half the
portfolio in the new offering is invested in
exchange-traded funds that exclude oil, gas,
and coal extraction. “So Microsoft is here, but
no Exxon.” The rest is committed to a fund
called CRBN, which invests in the companies
with the lowest carbon emissions in their sec-
tors. The fund also invests in green bonds that
“directly finance climate-friendly investments.”What the experts say
Good Sports (goodsports.org) gives low-
income students around the country a
chance to play sports by providing athletic
equipment and clothing. The organization
teams up with dozens of sporting-goods
partners to distribute gear to thousands of
youth organizations and schools across the
country, including districts in Los Angeles,
Philadelphia, Phoenix, and Birmingham,
Ala. Good Sports is working to keep kids
playing sports during the pandemic—and
looking ahead to restoring the full range of
kids’ sports. While many kids believed they
would have to give up on sports, Good
Sports has actually allowed some organi-
zations to create new offerings, like a girls’
softball team in Chicago, to help children
get through the pandemic. Its “Restore
Sports” campaign has a fund-raising goal
of $15 million and has already donated
$8 million in equipment.Charity of the week
Each charity we feature has earned a
four-star overall rating from Charity
Navigator, which rates not-for-profit
organizations on the strength of their
finances, their governance practices,
and the transparency of their operations.
Four stars is the group’s highest rating.