When the President Takes a Cut

The federal government is increasingly using equity investments to shape corporate behavior. The approach includes tariffs, government purchasing power, and threats of regulatory action to pressure companies. The government has become a corporate shareholder across multiple industries, including quantum computing, rare earths, and rockets. Deals have required governance concessions, such as veto power over management decisions and leadership roles for American citizens. The administration also required Intel to hand over nearly 10% of the company in exchange for $8.9 billion in grants tied to CHIPS Act and other awards. Unlike past crisis-driven equity programs that ended with quick divestment, this model makes government ownership more routine and raises concerns about crony capitalism.

"When it comes to the government's relationship with business, Donald Trump is the most activist president since Franklin D. Roosevelt. He has wielded tariffs, the government's purchasing power, and the threat of regulatory action to bend companies to his will. Over the past year, the president has even made the federal government a corporate shareholder across a range of industries. Just last week, the Commerce Department announced that it was taking stakes in a portfolio of quantum-computing companies in exchange for $2 billion in investment."

"The federal government's bold entrance into the world of corporate investing began last June, when Trump agreed to allow Japan's Nippon Steel to buy U.S. Steel as long as the combined company granted the United States veto power over certain management decisions and ensured that key leadership roles went to American citizens. In the months since, the administration has taken sizable stakes in rare-earth firms and a new rocket company."

"Most dramatically, the administration insisted last year that the semiconductor giant Intel hand over nearly 10 percent of the company in exchange for $8.9 billion in grants that had already been earmarked in the CHIPS Act and other government awards but not yet paid. Trump now likes to brag that Intel's stock has since surged by 300 percent."

"This isn't the first time that the federal government has taken equity in public companies. But in the past, it happened almost exclusively in times of crisis, as in the bailout of U.S. automakers and Wall Street banks in 2008, and the government promptly divested itself of the stock once the turmoil had passed. Trump, by contrast, is making government ownership commonplace, which means any company that accepts government funding now has to wonder if it'll have to give up shares as a result."

Read at The Atlantic