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00:00The Trump administration has not been shy about taking ownership interests and otherwise
00:04participating directly in businesses that we otherwise thought were in the private sector.
00:09Our colleague Michael McKee brings us up to speed on what's been done so far.
00:14My administration will offer GM and Chrysler a limited additional period of time.
00:20It isn't a new practice. The government took stakes in auto and insurance companies during
00:24the great financial crisis, but it is a shift. At that time, the idea was to provide funding
00:29backstop to keep the companies alive. Both General Motors and Chrysler were effectively
00:34insolvent, facing collapsing sales, frozen credit markets, and imminent bankruptcy.
00:39The U.S. ended up owning about 61 percent of GM and 10 percent of Chrysler.
00:45When they returned to health, the government sold its shares, in both cases at a loss.
00:50Today, the Trump administration is taking significant equity stakes in a number of
00:54American companies, 10 percent in chipmaker Intel, a 15 percent stake in rare earths firm
01:01MP Materials that came with a government guarantee on product prices and sales,
01:06shares in companies such as Lithium Americas and Trilogy Metals, a so-called golden share
01:12in Nippon Steel.
01:13This time, the goal isn't to prevent bankruptcies, but to make a profit and theoretically strengthen
01:21supply chains for American manufacturers. Administration officials insist national security
01:27is at stake. China, Russia, and other malevolent competitors cannot be allowed to get a strategic
01:33advantage in energy, defense production, and AI. The government backing can certainly help.
01:39MP Materials shares rose 224 percent last year. Critics say the government should not be picking
01:46winners and losers or influencing outcomes in the private sector. The government's goals may not
01:52align with the companies and lead to misallocation of capital. Ownership may reduce competition and
01:58innovation. State capitalism is a slippery slope away from free markets.
02:04It's not as if the U.S. government has never taken ownership interest in private companies before.
02:09But this time is different.
02:11I think a number of things are different. First of all, is simply the number of situations.
02:17He's done everything from a golden share in U.S. steel to stock in Intel to what you might call
02:24an export tax on ships to China. It's just all over the place. There doesn't seem to be any
02:29particular rhyme or reason to it.
02:32Steve Ratner is chairman and CEO of Willett Advisors, which invests the personal and philanthropic
02:38assets of Bloomberg founder and majority shareholder Michael Bloomberg. Ratner served as the point
02:43person for President Obama for restructuring the U.S. auto industry during the great financial crisis.
02:50When I was in the government and we thought about taking stock in Chrysler and General Motors,
02:54we went through a whole process of what we called the U.S. government a shareholder and how would
02:59this work and what would we do and what were the guardrails and a lot of thought went into it.
03:03This just seems to be the opposite. And so it's a hodgepodge of things and it feels as much the
03:07president is just doing this because he can. He kind of keeps forgetting he's not in the private
03:11sector anymore and he sees money on the table and he just goes and tries to get it.
03:16We took the interest in the auto companies not because we wanted to but because we had to.
03:20I'll never forget when we went to the White House and basically said the only way we can save General
03:24Motors is to in effect take nationalize. It takes 60 percent of the equity. There was a lot of pushback,
03:30as you would imagine. And eventually everyone realized it was the only choice. So it was a last
03:35resort, not a first resort. Adding to the ad hoc nature of the administration's intervention
03:40is it's targeting individual companies rather than entire sectors. Sarah Bowerly Dansman is
03:47associate professor of international studies at Indiana and a senior fellow at the Atlantic Council's
03:53Geoeconomics Center. We're a market based economy. And the idea is that we want markets to pick
04:01winners, not governments. And what we're seeing in the current administration is much more willingness
04:08to pick particular winners. And the Trump administration has used the device of taking
04:15interest in order to overcome political resistance to deals that it believes will be good for the
04:20economy overall, like when it took a so-called golden share in U.S. Steel. I do think the case
04:26of U.S. Steel is a little bit different. It was a very controversial merger. I personally thought it
04:32was perfectly fine. Steel is not a national security commodity these days. You can buy steel anywhere in
04:38the world. The people would love to sell it to you. But it was politically a very tough one. And that
04:42one I would actually give the White House some credit that it was a clever way to get past the
04:47political opposition. It does not involve any ownership. I doubt they will ever exercise it. So yeah, I'd put
04:53that in a different bucket than saying that NVIDIA has to pay an effect a tax on sending chips to China.
05:00Whatever the justification, when the government becomes an owner, even a partial owner, in private
05:06business, it necessarily changes market dynamics, injecting factors beyond simply supply and demand
05:12and economic performance. The concern is that the more that the U.S. kind of pushes in this direction
05:20of picking specific winners and therefore losers in industries, so that it distorts markets, right?
05:27We, as a market-based economy, we have a long track record of seeing that when market actors are the
05:35ones that are generating and evaluating information and then making capital allocation decisions on the
05:42basis of commercial preferences and commercial interests that we tend to see over the long run, that that leads
05:50to more innovation, more wealth, more economic development as a whole. And the concern is that the more that
05:58the government gets involved in individual business decisions, the more we are kind of breaking that kind of
06:07market-based understanding of how information is generated in an economy and how companies and how investors
06:15make decisions. And that is an important distinction because when the government is taking direct states
06:23in companies, the concern is that now that company is going to be pressured to not always make the best
06:32business decisions on the basis of kind of commercial concerns, but now also political concerns.
06:41The free market purists would say that the government should never get involved as an owner in American business.
06:47But does the performance of China in advancing rapidly in important sectors argue for some move away from purely private ownership?
06:55If you talk to anybody in China, they would tell you that the state owned enterprises are almost universally less
07:00well run than the purely private companies. On the other hand, when Xi Jinping says our strategic priority is to
07:06develop a chips business, everybody marches toward developing a chips business and lo and behold, they make enormous progress.
07:13And so it's a very tough balancing act. I think on balance, my view would be better to do less than more or none rather than some,
07:22because I think the chances of getting it right for a government are relatively low.
07:28Does the experience with China so far actually almost require the United States to revisit the balance between the government and the private sector?
07:37I think that China is a very different country with a different political culture. It's organized in different ways.
07:45When you have so many workers who are integrating into a formal economy and through formal work and factory work with very long hours,
07:55it's very hard to see how that translates into the type of economy that would work in the U.S. and that citizens in the U.S. would actually feel good about.
08:07So I think that we want to be careful to not become China in our kind of quest to ensure that we're able to compete in the global economy in which China is doing very well right now.
08:21That said, there are specific areas of the economy that the Chinese model and in particular concerns over Chinese oversupply need more than just an uncoordinated market response to that.
08:40Whether it's semiconductors or steel or rare earth minerals, the Trump administration has justified its actions most often on the ground of national security needs.
08:50What role, if any, does national security play in this? Does that make it a more persuasive, if not compelling case for a government to have an ownership interest?
08:59Well, of course, it first of all makes the politics of taking stakes like this more tenable because national security concerns have bipartisan support.
09:12Congress should be part of the discussion around, you know, how much are we going to allocate in terms of funding to support these kinds of interventions into specific companies?
09:25How are we going to decide what are the strategic priorities? How are we going to ensure that the process through which companies are determined to be eligible for these kinds of programs is done in a way that is not about corruption and graft?
09:44We've looked around the world over the years and said a lot of countries are corrupt because of what the relationships are between private interests and government interests in various industries.
09:57What are the risks here, even if the appearance of corruption as these investments are made in companies that often have some connection to the Trump family?
10:06I think we're past the point of appearance of corruption. I think we're fully in corruption. I think this administration, and I don't mean to sound like a partisan, but I've never seen anything like it in my entire life.
10:18You know, people have said, for example, that Lyndon Johnson sort of tilted the board in favor of getting a bunch of television licenses in Texas that made him wealthy.
10:26OK, maybe he did. Maybe he didn't. But that was then. This is now. That was one thing. This is like everything. Whether you want to talk about meme coins, whether you want to talk about rare earth minerals, whether you want to talk about real estate developments in the Middle East, whether you want to talk about Jared Kushner raising five billion dollars of which virtually all of it, 99 percent of it came from the Middle East.
10:49This this this administration knows no bounds. Setting aside the potential morality of it. What does it do to the economy?
10:56I mean, we've thought for a long time that actually a free market economy served us well in terms of growth, in terms of jobs, in terms of standards of living.
11:04What are the threats potentially to the very foundations of our economy? Well, let's put it in a few different buckets.
11:11First of all, I think the corruption that we just talked about, as distasteful as it is, and I find it reprehensible, it's small potatoes in the great scheme of an economy.
11:19That's 20 plus trillion dollars. I mean, right. Let's be serious. I think the government taking some of these equity interests or putting these like taxes, if you want to call them that, on things also relatively small potatoes in the great scheme of things.
11:32I think the most worrisome thing, which may not fall exactly into the corruption bucket, is the fact that companies feel like this is an administration that will reward its friends and punish its enemies.
11:44The CEO of Exxon said the other day, for example, that Venezuela was uninvestable. Seems like an obvious statement to me.
11:50The president immediately said, well, I'm not going to pick Exxon to be my partner of choice in Venezuela if we actually get hold of any of this oil.
11:57And so companies, and I hear this from CEOs all the time, are terrified about what they say, what they do, and trying to figure out how to avoid antagonizing a president who has made retribution a fulcrum part of this administration.
12:10So I think that's the real danger here.
12:12So I think that's the real danger here.
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