Intel and Trump Administrative Reach Historic Agreement

“Intel and Trump Administration Reach Historic Agreement to Accelerate American Technology and Manufacturing Leadership,” Intel Newsroom

SANTA CLARA, Calif.– Intel Corporation today announced an agreement with the Trump Administration to support the continued expansion of American technology and manufacturing leadership. Under terms of the agreement, the United States government will make an $8.9 billion investment in Intel common stock, reflecting the confidence the Administration has in Intel to advance key national priorities and the critically important role the company plays in expanding the domestic semiconductor industry.

The government’s equity stake will be funded by the remaining $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program. Intel will continue to deliver on its Secure Enclave obligations and reaffirmed its commitment to delivering trusted and secure semiconductors to the U.S. Department of Defense. The $8.9 billion investment is in addition to the $2.2 billion in CHIPS grants Intel has received to date, making for a total investment of $11.1 billion.

This is what the LA Times had to Say:

The idea of federal government investments in public corporation stock has never died. It walks among us like a zombie today. The Trump administration talks about taking a 10% ownership stake in the chipmaker Intel and thinks about creating a sovereign wealth fund akin to those established by Saudi Arabia, Singapore, Norway and other countries.

What does history tell us about the virtues of this idea for the United States: There are not any virtues.

Such funds “usually reflect the quality of governance of the states that sponsor them,” observed Steven Feldstein and Jodi Vittori of the Carnegie Endowment for International Peace in April. Adding . . .

“Considering the Trump administration’s self-dealing and erosion of accountability, there is an acute risk that the U.S. SWF could become a source of graft to reward Trump’s friends, coerce political support for his priorities and bring personal enrichment.”

Leaving aside the quality of governance in Trump’s White House or legislators’ fears of “socialism,” the idea of federal investment in public companies has never found lasting favor on Capitol Hill. It has been almost impossible for lawmakers to overcome the touchy economic, political and philosophical issues.

A federal fund with the authority to purchase corporate stock would be one of the largest and most potent investors in the market. As I wrote in 2005, when the idea of allowing Social Security to invest its trust fund in equities was under consideration again, the potential for conflicts of interest is inescapable.

The government might be a major shareholder in a corporation it was prosecuting for criminal activity. The government might end up on one side of an international issue as a member of a coalition of nations, and on the opposite side as a shareholder.

In itself, Trump is like a child who has learned to ride a two-wheeler. He is full of himself in this achievement. Sometime in the future he is going to slip. Take for an example, the taking of the World Cup Soccer Trophy. The winners were left with an imitation for their Club. Resurrecting a recent idea . . .

A federal fund with the authority to purchase corporate stock would be one of the largest and most potent investors in the market. Writing in 2005 Michael Hiltzik, the idea of allowing Social Security to invest its trust fund in equities was under consideration again. However, the potential for conflicts of interest is inescapable.

The government might be a major shareholder in a corporation it was prosecuting for criminal activity. The government might end up on one side of an international issue as a member of a coalition of nations, and on the opposite side as a shareholder.

Its financial interests might stand in opposition to its social interests: In his 1999 State of the Union message, for example, President Clinton simultaneously threatened to sue the tobacco industry over its threat to public health, and advocated allowing Social Security to invest in all equities — tobacco included.

In 1935, Congress had addressed the conundrum by mandating that the Social Security Administration invest its reserves only in U.S. Treasury securities, a rule that exists to this day.

Social Security’s would-be reformers periodically revive proposals to shift some of the program’s trust fund — which held more than $2.7 trillion in treasuries at the end of last year — into equities, pointing to their superior long-term returns compared with bonds. But those efforts have never come to fruition.

The federal government taking an equity stake in a public company wouldn’t be unprecedented. In 2009, the Obama administration acquired a 60.8% ownership of General Motors in return for almost $50 billion in bailout funds. The government also acquired a smaller stake in Chrysler, which was subsequently sold to Fiat.

The government sold the last of its GM holdings in 2013, booking a direct loss of about $10.5 billion. But its bailout has been deemed a success, given that it saved as many as 1.9 million jobs at GM, Chrysler and their suppliers.

The auto bailouts were emergency initiatives. They were to stave off what was shaping up as the auto industry’s imminent collapse. Obama made clear that these were temporary measures and the government would sell off its stockholdings as soon as that was practicable. The government abjured any control over GM’s day-to-day operations. However, it did orchestrate the exit of GM Chief Executive Rick Wagoner, oversaw the replacement of a majority of its board members, and imposed compensation limits on its top executives.

There is more to read in this piece. I am going to stop here though.

Still, it would be up to Congress to establish the fund and oversee its operations. Will the lawmakers accept their responsibility? If not, Trump’s idea is a dangerous one. “Giving a president who aspires to be a king a potent financial weapon with ill-defined purposes and methods,” Feldstein and Vittori write, “presents a grave risk to American democracy.”