“Fintech is basically if Wall Street and Silicon Valley had a kid,” said Jeff Hauser, director of the Revolving Door Project, a progressive advocacy group. “Over time if they get too strong in these unregulated areas, they will take advantage of people with less access to lawyers and less understanding of the fine print.”
Those suspicions about fintech will be on full display this week when the House Financial Services Committee, led by Rep. Maxine Waters (D-Calif.), summons Robinhood co-founder Vlad Tenev, other executives and hedge fund managers linked to the brokerage for a potentially explosive hearing. Among the witnesses scheduled to testify at the Feb. 18 session are GOP megadonor Ken Griffin, a hedge fund titan whose company, Citadel Securities, is a key source of revenue for Robinhood.
Robinhood halted stock purchases by the small investors as hedge funds and other firms that were betting against GameStop and other struggling companies began to lose massive amounts of money as the stock soared.
The brokerage has attributed the move to demands from a clearinghouse — a middleman that finalizes and settles trades — for $3 billion to back up trades as it continued to rack up buy orders from its customers. But the cutoff of the individual investors drew fire from everyone from Sens. Elizabeth Warren (D-Mass.) to Ted Cruz (R-Texas), who echoed criticism of Robinhood for restricting its customers while hedge funds could keep trading.
Progressive Democrats’ increasingly bitter attitude toward the emerging companies is also being played out in a battle over President Joe Biden’s choice to head the Office of the Comptroller of the Currency, the top cop for the nation’s largest banks, because the expected nominee has close ties to fintech.
Michael Barr has faced pushback for his paid advisory roles at two prominent firms. He advised cryptocurrency trader Ripple between 2015 and 2017 on international payments matters and was a consultant for Lending Club on various projects, including on the “Small Business Borrowers’ Bill of Rights.” Those relationships have raised fears among some progressives that he might be too cozy with the industry.
Senate Banking Chair Sherrod Brown (D-Ohio), who has long been skeptical of claims from the fintech industry, has actively supported an alternative candidate for comptroller, law professor Mehrsa Baradaran.
Finally, a newly energized Consumer Financial Protection Bureau under Biden is set to increase scrutiny of fintech on everything from lending terms to the handling of personal data, a sharp pivot from the CFPB under President Donald Trump, which tended to cast competition from innovative firms as beneficial for consumer protection.
Fintech is an umbrella term that refers to innovation across a broad spectrum, including groundbreaking technology like cryptocurrency, which allows for faster…
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