Odd Lots Podcast Summary

Episode: Why the Trump Administration is Now Taking Equity Stakes in American Companies

Hosts: Joe Weisenthal & Tracy Alloway
Guest: Peter Harrell (Carnegie Endowment for International Peace, former Biden White House National Security Council)
Date: October 16, 2025

Episode Overview

This episode explores the Trump administration's unprecedented move to take direct equity stakes in large American companies—including Intel and MP Materials—rather than using traditional grants or loans. Joe, Tracy, and guest Peter Harrell dissect what this means for U.S. industrial policy, how it compares to past government interventions, implications for corporate governance, risks, legal questions, and how this evolving model echoes or diverges from China’s state-driven approach.

Key Discussion Points & Insights

1. The Shift to Equity Stakes: Breaking With U.S. Tradition

[01:49–03:48]

• Tracy highlights her long-time question: Why hasn't the US government taken equity in firms it helps?

  “It seems like this weird sort of half ground where you are investing in a company without asking anything in return.” — Tracy Alloway [02:08]

• Joe notes that while past government support (e.g. CHIPS Act) relied on grants/loans, the Trump administration now takes equity stakes—a significant shift.
• Tracy observes the ideological contradictions involved:

  “For a president who seems to like calling other people communists quite a lot, he sure does enjoy owning the means of production.” — Tracy Alloway [02:41]

2. Historical Perspective: U.S. Government Ownership

[06:50–09:31]

• Peter Harrell explains, historically, government ownership of private companies was tied to bailouts (e.g. 1930s, 1979 Chrysler, 2008 AIG/auto bailouts), always with the intent to exit quickly.
• The new model is different: “They seem to be seeing the US Government as a long term investor… to help strengthen the company and the sector and… give some upside to the US Government.” — Peter Harrell [08:44]

3. Mechanics of the Intel and MP Materials Deals

[09:31–12:29]

• Intel:
  • The previous $8B CHIPS grant required progress milestones; the Trump administration converted the unspent balance to cash (~$6B) for a 9.9% equity stake.
  • Intel is relieved from some milestone obligations; the U.S. gets the upside if the stock rises.
• MP Materials:
  • The Department of Defense contracts with MP for rare earth mining in California and Texas, resulting in a 15% government stake.
  • The DoD is now MP's largest shareholder; part of the deal is a guaranteed government order book.

4. Differences From Past Policies & Potential Motives

[13:11–14:42]

• The Trump administration's approach moves from milestone-based funding (“do X, get paid”) to a straightforward bet on commercial success.

  “It's more of an approach of we are going to bet on you as a company and hope that our bet on you helps you succeed over time.” — Peter Harrell [13:53]

• The US government aims to signal commitment and attract other investors/customers.

5. Fundamental Industry Risks

[15:16–16:57]

• Intel faces engineering catchup challenges (past missteps in iPhone chips and advanced lithography).

• Government support is meant to bolster investor and customer confidence, but this is a “high risk bet.”

• MP Materials’ profitability now depends on government guarantees: 100% of their output is bought by the government, with a guaranteed profit.

  “I actually kind of get why private investors are crowding into MP because it's sort of a no lose business proposition at this point.” — Peter Harrell [23:39]

6. Corporate Governance and Government’s Role

[25:17–27:53]

• With Intel, the government has 9.9% and agrees to vote with the board except in major control changes—giving the board assurance of government support, but raising questions about political influence.
• Peter worries about the lack of laws or protocols for how the government manages its investments and voting rights, leading to ad hoc arrangements.

7. Market Distortions, Picking Winners, and Competitive Risks

[19:46, 27:53–31:30]

• The US is now openly “picking winners,” betting heavily on firms like Intel and MP rather than letting the market select leaders.
• Other US (and foreign) companies in similar sectors are left out, potentially stifling innovation from newcomers or alternative approaches.
• Foreign governments and companies are wary—citing concerns that US government-backed companies could get privileged, lead to protectionism, or introduce new security risks.

8. Legal Basis for Equity Stakes

[21:10–22:27]

• There is no explicit legal framework in the CHIPS Act or elsewhere for equity stakes; the administration relies on the fact that the law doesn’t forbid it.

• No company (including Intel) is likely to challenge the arrangement in court, and there’s arguably no one else with standing.

  “Their legal theory is… the CHIPS act may not say we can take an equity stake, but it doesn't forbid us from taking an equity stake, so why not? … And who's going to sue us anyway?” — Peter Harrell [21:10]

9. Comparisons to China and European Precedents

[34:24–36:36]

• The US move towards state ownership resembles “state capitalism with American characteristics.”
• Differences: In China, provincial SOEs dominate, and the government bets on many companies to spur competition (e.g., in EVs); Europe in the 1970s had “flabby” state champions, with decidedly mixed results.
• The challenge: How to keep such a system competitive and innovative, rather than protective and sclerotic.

10. Future of the Policy: Expansion and Risks

[37:19–42:03]

• What started with a handful of strategic sectors (critical minerals, semiconductors) is broadening; new grant programs may include warrants/equity requirements.
• The risk: Policy is expanding before a strategic vision is fully developed.
• Limits: Amount of “dry powder” the government has depends on outstanding funds from CHIPS, other programs (~$10B?). Some deals may start running into company resistance if terms aren’t attractive.

11. Potential Tensions for Companies

[42:14–44:01]

• Companies like Intel now have to balance shareholder value with national strategic objectives.
• Provisions in the deals try to mute day-to-day political influence, but government as a major shareholder could pressure boards to prioritize public or national interests at the expense of profit.

Notable Quotes by Timestamps

• On ideological contradiction:

  "For a president who seems to like calling other people communists quite a lot, he sure does enjoy owning the means of production." — Tracy Alloway [02:41]

• On government as investor:

  "They seem to be seeing the US Government as a long term investor… to help strengthen the company and the sector and… give some upside to the US Government." — Peter Harrell [08:44]

• On the nature of the Intel deal:

  “It's more of an approach of we are going to bet on you as a company and hope that our bet on you helps you succeed over time.” — Peter Harrell [13:53]

• On the lack of legal precedent:

  “The CHIPS act may not say we can take an equity stake, but it doesn't forbid us from taking an equity stake, so why not?...and who's going to sue us anyway?” — Peter Harrell [21:10]

• On government picking winners:

  “The big risk with the intel deal is… the government picking a winner. Right. They are placing a huge bet on intel and not on TSMC and not on startup semiconductor companies that might actually be more innovative in this space.” — Peter Harrell [19:46]

• Comparison to state capitalism:

  "There is kind of an element here of… we're looking a little bit like state capitalism with American characteristics." — Peter Harrell [34:55]

Important Timestamps & Segments

• [01:49] Initial discussion on government equity stakes
• [06:50] Peter Harrell dives into historical precedents for US government ownership
• [09:31] Structure and implications of Intel & MP Materials deals
• [13:11] Shift from performance milestones to equity-based support
• [15:16] Risks and strategic missteps at Intel
• [23:39] Explaining MP’s “no-lose” government-backed position
• [25:17] Corporate governance and voting arrangements
• [34:24] Comparison to China and Europe’s approach to state involvement
• [37:19] Is this policy a temporary experiment or a structural shift?
• [42:14] The new potential tension inside companies: public good vs. profit

Memorable Moments

• Tracy's quip about Trump being a "means of production" enthusiast [02:41].
• Joe’s observation that the government is now a top shareholder visible on Bloomberg terminals [04:11].
• Peter’s explanation of how buying guaranteed output at a set price essentially creates a no-risk business—MP Materials is “a no lose business proposition” [23:39].
• The acknowledgment that US approach to industrial policy is starting to resemble Chinese-style state capitalism—but with key differences [34:55].

Summary Table: Intel & MP Materials Deals

| Company | Old Model | New Model | Government Stake | Obligations/Conditions | Major Risks/Unknowns |
|---------------|----------------|---------------------|------------------|-------------------------|----------------------------------|
| Intel | Milestone-based grants (CHIPS) | Upfront equity for cash, milestone obligations dropped | 9.9% | Board votes with government; anti-split poison pill | Engineering catch-up; customer confidence; picking winners risk |
| MP Materials | Grants/contracts (DoD) | Equity plus guaranteed purchase contracts | 15% | 100% government order, profit guaranteed | Market competitiveness vs. China; crowding out innovation |

Tone and Language

The conversation is dynamic, humorous at times (especially regarding the ironies of government policy), but grounded in the real-world complexities and high stakes of U.S. economic policy and state intervention. The hosts probe for both technical details and broader policy implications.

For First-Time Listeners

This episode offers an in-depth, jargon-light exploration of a shifting moment in American industrial policy. You’ll come away with a clearer understanding of:

• How and why the U.S. government now takes equity stakes in private companies
• The risks and potential rewards of this new approach
• How legal, economic, and competitive frameworks are evolving
• The tension between pursuing public purpose and shareholder value—plus candid, often witty, commentary from one of Wall Street’s sharpest podcast teams.

(Summary skips advertisements, opening/closing credits, and non-content portions.)