Robinhood Is Right to Save Day Traders From Themselves

If the powers that be could go back in time to dot-com stock trading in 1999 or subprime mortgage lending in 2005, what would they do differently? That's the question that hangs over comments by both the Biden administration and Securities and Exchange Commission as they watch market volatility generated in part by the wild trading in heavily-shorted stocks like GameStop Corp.

The watchful eye of government may have been part of the reason why the trading app, Robinhood Markets, decided on Thursday morning to limit customers to selling their existing positions in certain volatile stocks rather than continuing to let them buy. The rage on social media generated by that decision shows that the private sector making decisions to rein in market excess has its costs, too. Once a bubble gets to a certain point, rage seems inevitable, the only question being whether it happens after the bubble bursts or before, when companies take steps to protect their customers and themselves. Robinhood is likely going to suffer the wrath of the public for its decision, but ultimately they'll be better off than if they had let the bubble get even bigger.