I agree; its important to keep in mind that GME's total market cap, even after all of this, is only ~$22B. A 140% short position is bad (even if that's the real number, which I doubt), but in the scope of all things, not world-ending. Some hedge funds will die from this, and we'll probably have a few weeks of overall market downturn similar to last year, but we're not talking about "the entire US real estate market" here.
The US government could buy the entirety of GameStop at 3x its current price and it would barely quality for a line on the annual budget report.
22 billion is small compared to the sea of market moves. It’s why a small group of retail investors could push the market. If they levered up 30 to 1 that’s a different story.
Indeed, I'm saying it's not the cost of if they do a bailout, it's the cost if they don't. Maybe I've overestimated the impact of a ~13bn fund evaporating and breaking a clearing house and the liquidity crunch from all their leverage and the linked derivatives. Not sure what hedge fund leverage is these days. Surely it can't be at 2008 levels. We know about Melvin, not sure about others in there.
As I interpret it, it's not clear what institutions have exposure to these at-risk funds and their leverage who are still short GME, and this is what causes liquidity problems. Not 2008 level, but could be Fed intervention level.
The admin can bail out those funds for a trivial line item by taking on the RH user shares. If they don't intervene, I'm suggesting this is the domino for a crunch.
The US government could buy the entirety of GameStop at 3x its current price and it would barely quality for a line on the annual budget report.