By Scott Lincicome
Thursday, October 15, 2026
When I first checked
in last year on the Trump administration’s unprecedented ownership stakes
in private U.S. companies, I warned that the 10 equity deals—and “the year
America went (kinda) socialist”—gave us plenty to worry about. Ten months
later, Uncle Sam’s equity portfolio has now grown to cover 35
deals across the steel, critical minerals, semiconductors, quantum
computing, nuclear power, rocket motor, and crude oil industries, using a
variety of laws and agencies to acquire the stakes. Even more deals are likely
on the way—including ones, such as the new Andruil submarine arrangement announced last week, that give
Washington a stake in certain projects instead of entire companies.
Given the radical and opaque nature of the Trump
administration’s moves—recall that Washington hadn’t taken a non-crisis stake
in a healthy company in decades—Cato this week launched our Restoring Free Enterprise project to document, analyze, and
counter the trend. As I wrote in the
project’s introductory essay and in an August piece for the Washington Post, the
government’s ownership stakes raise serious problems that have already begun to
materialize: capital misallocation, politicized business decisions,
preferential treatment, state coercion, corruption, and more.
Yet the biggest problem of all might be the simplest:
Nobody—not even the Trump administration’s own lawyers—can point to a single
U.S. law that expressly authorizes the executive branch to do any of this.
That omission is glaring, and it matters for the stakes themselves, for how
they might get unwound, and for whether anything stops the next president, of
either party, from doing more of the same.
What the law actually says.
It’s been 16 months since the government took its first
stake (last June’s U.S. Steel “golden
share”), yet the Trump administration still hasn’t offered a clear and
detailed legal justification for that deal or any other equity-based
transaction. When Sens. Jack Reed and Roger Wicker asked about the legality of the Defense Department’s equity
deals at a Senate Armed Services hearing in March, the Pentagon’s top
industrial-base official said government lawyers would soon submit something to
Congress on the issue. You’ll be shocked to learn that we’re still waiting for
the memo. Other agencies have been similarly circumspect, offering little more
than a press release with a statutory citation and no elaboration. Sometimes,
we don’t even get that.

The Trump administration’s silence is notable—and
troubling. Without a clear and official paper trail for all these equity deals,
the public is left to guess as to how these expansive new powers—influencing or
even controlling private companies!—are permissible under the law. The table
below, constructed from press releases, SEC filings, and third-party reporting,
is one such guess (and it’s admittedly incomplete). As the final column shows, none
of the laws implicated by these deals expressly authorizes the federal agency
at issue to take an ownership stake in a private, U.S.-based company:

In court, a Justice Department lawyer and Commerce
Secretary Howard Lutnick recently argued that the CHIPS Act expressly authorizes the government’s Intel stake, but this
is clearly false. Instead, these laws say the government can offer grants,
loans, and other subsidies to target companies, and some of them contain broad
language—e.g., “mitigation agreements” for transactions reviewed by the Committee on Foreign Investment in the United
States (CFIUS) or “payments” and “other transactions” under the CHIPS Act—into
which one could argue that equity arrangements fall. Yet none of these
laws is new—the Defense Production Act that created CFIUS dates back decades;
the Advanced Technology Vehicles Manufacturing (ATVM) loan program program
started in 2008; the Industrial Base Fund began in 2011; CHIPS was enacted in
2021; and the Office of Strategic Capital in 2022—and no president has ever
used them to acquire direct ownership interests like the ones Trump keeps
taking. (A single ATVM loan to Tesla in 2010 gave the government the right to
eventually exercise warrants to buy Tesla stock between 2018 and 2023, but the
warrants were terminated when Tesla repaid the loan in 2013.)
In other words, numerous presidents of both parties did
not read these laws as a broad license to indefinitely hold stock in numerous
private companies. Only Trump did.
As Georgetown’s Peter Harrell explained last year, the administration’s best legal
argument here is simply that the language of these laws is vague and does not expressly
forbid taking a golden share, equity stake, or other slice of the corporate
pie, and a target firm could always just walk away if it didn’t like the
government’s terms. Yet this argument fails for several reasons.
For starters, this is Washington we’re talking
about, and there’s already evidence in several cases that these companies
couldn’t just walk away from the equity deals (i.e., demands) they were
presented. As I noted in the Post, in fact, the Intel deal and others
appear to have been coerced by the Trump administration or “conditioned on the granting of a permit, subsidy or other government privilege.” When the federal government wants a
slice of a company whose business depends on something Uncle Sam has, saying no
isn’t really an option. And it’s foolish (at best) to pretend otherwise.
There’s also clear evidence that Congress knows how to
say “equity” when it wants equity, just like it knows how to say—and does
say—“grants” or “loans” in these very same laws. In CHIPS, for example, Sens.
Bernie Sanders and Elizabeth Warren proposed an amendment forcing subsidy recipients to hand
over equity, but it never passed. This year, Republican-led committees in the House and Senate have advanced legislation to authorize the Pentagon
to make government equity investments with certain limitations, but those
aren’t yet law, either. On the other hand, the Troubled Asset Relief Program
expressly required the Treasury Department to obtain warrants (or
senior debt) from the institutions it bought assets from, and the CARES Act barred Treasury from lending to eligible large businesses
without receiving warrants or equity. (Both laws were also enacted during
crises, of course.)
In a forthcoming essay for the Restoring Free Enterprise
project, Cato legal expert Molly Nixon examines this statutory language in detail,
finding that none of the laws behind today's equity stakes contain anything
like it. That matters—or, at least, it should.
The Trump administration also knows about equity
authority—until it doesn’t. When Trump’s Venezuela oil deal was announced, for
example, a spokesman for the Pentagon’s Office of Strategic Capital initially said that the office doesn’t take equity stakes
in private companies. A few days later, another U.S. official claimed, without evidence, that Congress had given OSC exactly that
power. Semafor, meanwhile, reports that Congress previously had declined Pentagon
requests for equity authority, and over at Lawfare, Benjamin Press elaborates on the
administration’s selective memory in this case (emphasis mine):
At the outset of
the second Trump administration, the executive branch evidently believed that
the department lacked clear authority to take equity stakes, and the Office of
Management and Budget requested language in the National Defense
Authorization Act (NDAA) for Fiscal Year 2026 that would have granted the
Defense Department the authority to do so. Nevertheless, no such language was
added to the NDAA—or any other law. In other words, the only thing that
could have changed between the beginning of the Trump administration, when the
White House evidently believed that the Defense Department lacked clear
authority, and mid-2025, when the department began making its investments, is
its interpretation of existing authorities.
The administration’s new “interpretation,” meanwhile,
appears to be distressingly thin. As Semafor reported last month, a June 2025 memo from
the Office of Management and Budget claimed that a $400 million investment in
MP Minerals was legal simply because it was “necessary to avoid an imminent
threat to human life and government property.” The opinion also cited the
Defense Production Act, a 2017 defense authorization, Article II of the
Constitution, and—I kid you not—the “venerable tradition of presidential
obligations in advance of appropriation” stretching back to 1792. (None of
these things, of course, actually authorize equity stakes.) Former Pentagon
officials briefed by Semafor said they were “skeptical” of OMB’s legal
reasoning. “[I’m] surprised that the current team has discovered the authority
to do this under the Defense Production Act,” one former OSC official told the
outlet, adding that “laws can be elastic, but elasticity snaps at some point.” Sigh.
These justifications, by the way, are the best of the
bunch. Some, such as the Commerce Department’s “participation
interest” deal with Westinghouse or the government’s cut of Nvidia and AMD
chip sales to China, don’t even bother with a statute. (Nvidia is now getting sued in Delaware on the grounds that the government is
“constitutionally barred from imposing duties or taxes on exports.”) Trump’s
Venezuela oil deal is even sketchier.
Finally, there are the obvious and troubling implications
of an executive branch declaring sweeping and unprecedented new powers simply
because Congress didn’t expressly bar such actions. As I explained in a new podcast accompanying the Restoring Free Enterprise
project rollout, that’s an argument for unlimited executive power, not just for
equity stakes, and it directly contradicts our constitutional system of
government and enumerated powers. Even folks who are decidedly not from
my libertarian side of the law, such as Georgetown’s Harrell and Biden-era
Assistant Secretary of Defense Laura Taylor-Kale, are uncomfortable with where this is all
heading.
So, how do we stop it?
That leads us to what might be the worst part of it all:
Without any clear legal framework for doing this stuff, there’s no clear
way to undo it or to stop more transactions in the future. As already
noted, the pace of these deals has accelerated in 2026, and Trump has literally
said that his standard for taking government equity stakes
is simply “when people need something.” Trump and his team will surely announce
more deals this year and next (another one popped up while I was typing this). And whoever wins in
2028, Republican or Democrat, will inherit both the portfolio and the unbridled
power to expand it. The economic and political consequences—private capital
increasingly flowing to the connected, a government with a direct financial
interest in a growing set of firms, crony losers flocking to D.C, for an equity
bailout, a president who increasingly uses stock deals to reward and punish
American companies, and plenty more—could be enormous.
Congress could pass a law to force divestment and
dismantle these (implied) powers, but that’s easier said than done. Some
Democrats are uncomfortable with the equity deals, but many others—and not just
Bernie Sanders and his fellow travelers—simply want more
transparency and structure around them. Meanwhile, the party campaigning
against “socialism” this fall is ironically the one advancing bills to authorize
equity investments rather than terminate them. There are welcome
exceptions—Sen. Jon Husted introduced a bill requiring covered stakes to be
liquidated, and Sens. Thom Tillis and Mike Rounds have criticized the deals—but they probably won’t be the rule as
long as Trump’s in office. Thus, securing a veto-proof majority for broad
divestment legislation will likely be a serious challenge for the foreseeable
future.
That leaves the courts, but the path here is also
difficult and murky. Most companies with government equity stakes have little
incentive to challenge a deal that inflates their stock prices, and the same
goes for their shareholders. Any such challenge, moreover, would risk upsetting
an all-powerful federal government and its, ahem, temperamental
president. The same risk applies to federal contractors who might challenge government contracts awarded to state-backed
firms on conflict-of-interest grounds.
These incentives likely explain why there’s been just one
shareholder lawsuit to the equity deals so far. There,
plaintiffs have challenged the Intel deal as a breach of its directors’
fiduciary duties (because they gave the government shares in exchange for
nothing). Many legal experts think it’ll be a tough case to win, and, even if
it is eventually successful, there are dozens of other deals that would
also need to be challenged.
Finally, Congress could sue the Trump administration,
similar to how the House of Representatives challenged—successfully in part, and unsuccessfully in
others—President Obama’s implementation of the Affordable Care Act. That case
required only a House majority, which Democrats will likely have next year. But
here, too, there are major uncertainties surrounding whether Democrats will
actually want to trim these new powers and whether a federal court would rule
in their favor, given courts’ deference and these laws’ ambiguities.
In short, the same government that took these
unprecedented equity stakes without clear statutory permission has no clear
path for getting out. To restore both free enterprise and the rule of law,
however, it’s imperative that we chart one.
