The Shadow Portfolio: Washington’s Hidden Stakes in Corporate America

The US government has invested $27 billion in stakes across 30 deals, including a prized 9.9% holding in Intel. However, the lack of transparency and accountability surrounding these investments raises significant concerns. A consolidated ledger for these investments does not exist, with each agency operating independently with its own methods of reporting and managing stakes.

The Trump administration’s equity portfolio is nowhere to be found in plain sight. This scattered approach raises questions about the government’s capacity to effectively oversee its growing portfolio. Jonathan Hillman, senior fellow at the Council on Foreign Relations, notes that “the deals announced to date are only the tip of the iceberg…and the real test will be whether Washington can build a system to manage its investments over the long run.”

The government’s handling of its Intel stake is particularly striking. The Department of Commerce holds 433.3 million shares, but nearly two-thirds remain in escrow until Intel meets certain milestones under a Pentagon chip program. This arrangement defies conventional logic, as government equity typically comes with some level of control or information rights.

In the case of Intel, the US government has agreed to vote in tandem with the company’s board on most matters. Public securities filings for many of these stakes are also absent or reveal unusual terms and conditions. For example, the claw-back and profit-sharing provisions tied to Intel’s CHIPS Act grant were eliminated in favor of a passive stake.

The Trump administration’s personal holdings also come under scrutiny in light of its corporate investments. The president’s own assets, including those held in his children’s trust, have been buying into Intel months after the administration’s stake sent the stock soaring. This unprecedented level of presidential involvement merits closer examination.

Washington’s hidden stakes raise far-reaching implications for the government’s role in corporate America. By investing in private companies without clear statutory authority or adequate oversight, the administration is blurring the lines between public and private interests. This trend raises concerns about accountability, transparency, and potential future conflicts.

In comparison to past instances of federal investment, such as TARP, today’s portfolio lacks independent oversight. TARP was marked by regular congressional reports, GAO audits, and a special inspector general to ensure accountability. In contrast, Washington’s current investments operate under a veil of secrecy.

Kevin Hassett, director of the National Economic Council, boasted in 2020 that this investment strategy is “like a down payment on a sovereign wealth fund.” However, others see it as an untested and potentially perilous path. As the administration’s stake in Intel rises to $42 billion, one can’t help but wonder: what are the long-term implications of this strategy, and who will ultimately bear the risk?

The story of Washington’s hidden stakes serves as a stark reminder that government investment can become a recipe for disaster when shrouded in secrecy. It is imperative that lawmakers and stakeholders demand greater transparency and accountability to ensure these investments serve the public interest, rather than exacerbating existing power imbalances.

As the administration continues to tout its vision for a sovereign wealth fund, it’s time for Washington to come clean about its hidden stakes in corporate America.