What ought to happen (if you ask me, which you did because I'm awesome*)
is that this is a situation that shows that margin requirements should be MUCH, MUCH, MUCH higher. I haven't looked at those in a long time, but back in the late 90s I believe you had to have 5% of a short position (either naked short or a written call option) in equity. That is purely insane (and it's precisely why the hedge funds in question are getting taken to the woodshed right now, because they have to put up capital literally at the end of every trading day to keep their margin requirements fulfilled. The higher GME goes, the more capital they get desperate for, simply in order to not be forced to immediately liquidate in order to meet margin requirements.
So IMHO, it's those margin requirements that should be thrust under the microscope here. Why the heck is it ok to let a guy with $10,000,000 in capital make a $200,000,000 short bet? That's wacko, and these redditors (and whoever is moving along with them) are proving that to near perfection right now.
(*and I am definitely awesome. Just ask our cats when I feed them. I'm like totally amazing.)