Readers' Choices: Uncle Sam as an Active Investor

Readers' Choices: Uncle Sam as an Active Investor

The nine most terrifying words in the English language are: 'I'm from the Government, and I'm here to help.'

This was one of the most famous phrases in the history of economic and political thought, uttered by former US President Ronald Reagan in 1986.

It was not a political joke, but a summary of an economic doctrine that the United States had adopted for decades, based on the idea that markets are more efficient than governments, and that the state's role should be limited to protecting competition and enforcing the law.

It consequently indicates that the government's role should by no means be based on owning companies, directing investment, or picking winners and losers in the market.

Thanks to this philosophy, Washington exported to the world the model of free-market capitalism as the ideal path for growth and innovation, but history holds a striking paradox.

The state that long warned against government intervention in markets has, over the past two decades, become an increasingly influential economic player; it rescued financial institutions and took stakes in them, and acquired significant shares in industrial companies.

It also provided billions of dollars to support promising sectors such as semiconductors, energy, and strategic minerals, and arrangements emerged granting it special rights in some companies, the latest of which may be OpenAI.

This step, in the view of dear Argaam readers, represents a shift in the state's role from watchdog and regulator to shareholder, amid collapsing confidence in the government's ability to protect competition.

Has the United States abandoned the capitalism it preached, or is it reshaping it in a new form dictated by competition with China and national security considerations? Or is it inherently moving toward the Chinese model?

Departure from Classical Capitalism

- Adam Smith, in his book 'The Wealth of Nations' (1776), laid the conceptual foundations of market capitalism, and described using the metaphor of the 'invisible hand' how selfish individuals, pursuing their personal gains, 'are led by an invisible hand to an end that was not part of their intention,' namely the public interest.

- According to Smith and Milton Friedman's concepts, the government's role is limited and procedural: protecting property rights and enforcing contracts (rule of law), ensuring competition, and providing public goods (basic infrastructure and defense), while avoiding direct ownership.

- The transition from classical American capitalism to modern American capitalism was not a single step, but an accumulation of events in which crises, geopolitics, and technology repeatedly contributed to expanding the state's economic influence.

History of Government Interventions in the Economy

Period

Intervention Features

1945-1970

Industrial Policy in the Cold War

- The Department of Defense led industrial policy in aviation and microelectronics sectors.

- Establishment of NASA in 1958.

- Spending about $30 billion on the space race.

1970-1979

Interventions During Crises

- Loan guarantee for Lockheed Corporation (1971).

- Rescue of Penn Central.

- Rescue of Franklin National Bank.

1989

Savings and Loan Crisis (S&L Crisis)

- Enactment of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

- Liquidation of the Resolution Trust Corporation (RTC) (or restructuring) of over 1,000 financial institutions.

- Taxpayers bore between $132 and $160 billion.

2008

Global Financial Crisis

- Enactment of the Troubled Asset Relief Program (TARP) worth $700 billion.

- Rescue of AIG with a package totaling $182 billion.

- Placement of Fannie Mae and Freddie Mac under government conservatorship.

2009

Auto Industry Rescue

- Restructuring of General Motors.

- The US government owned 61% of the company's shares.

- The government's final loss amounted to $10.5 billion.

2020

Economic Stimulus During the COVID-19 Pandemic

- Enactment of the CARES Act worth $2.2 trillion.

- Federal Reserve lending programs with financing capacity reaching $4.5 trillion.

2022

Shift Toward Industrial Policy

- CHIPS and Science Act worth $52.7 billion.

- Inflation Reduction Act to support clean energy.

- Infrastructure Investment and Jobs Act worth $1.2 trillion.

2025

Era of Government as Active Investor

- Ownership of 10% of Intel.

- Government obtained golden shares in US Steel.

- Investment of $400 million in MP Materials.

- Proposal to own 5% of OpenAI.

- Issuance of an executive order to create a sovereign wealth fund.

Uncle Sam as an Active Investor

- The second term of the Trump administration witnessed a qualitatively different style of intervention, and according to the Council on Foreign Relations, in the nine months following January 2025 (the presidential inauguration), the government allocated more than $20.9 billion through 16 deals.

- The government acquired ownership stakes in individual companies, an unprecedented practice outside crisis periods since World War II, including companies such as Intel, US Steel, MP Materials, Lithium Americas, Trilogy Metals, and others.

- Finally, OpenAI proposed granting the government a 5% stake valued at approximately $42.6 billion.

Case Studies of Trump Administration Interventions

Case

Reasons for Intervention

Intervention Mechanism

Reactions

Intel

- The only US company conducting advanced research, development, and manufacturing in semiconductors.

- It experienced a decline in competitiveness against TSMC and Samsung.

- Producing advanced chips domestically is critical to avoid reliance on Taiwan (which produces 90% of advanced technology chips) amid China's threats to annex the island.

- During the Biden administration, the US Commerce Department awarded Intel direct funding under the CHIPS Act worth $7.86 billion.

- Additionally, eligibility for loans and a 25% investment tax credit to support Intel's $100 billion investment plan.

- Under Trump, Intel and the US administration reached an agreement for an investment of $8.9 billion, bringing total government investment to $11.1 billion.

- The administration converted the CHIPS Act grants into a 10% ownership stake, the first time the federal government has taken an ownership stake in a leading semiconductor company.

- Investors expressed skepticism about the governance implications.

- Long-term results remain unclear; Intel's production remains behind schedule, and the legal terms regarding the ownership stake are unresolved.

US Steel

- The proposed acquisition of US Steel by Japan's Nippon Steel for $14.9 billion led to a national security review.

- President Biden blocked the deal in January 2025.

- Trump reversed his decision in June 2025, allowing the acquisition on condition of an agreement with the Treasury Department, including a 'golden share' granting the government veto power over certain company decisions.

- The golden share represents a new tool, neither ordinary share ownership nor regulatory oversight.

- It grants the federal government ongoing management rights over the foreign privately-owned company.

- The golden share mechanism caused political uncertainty regarding corporate governance.

OpenAI

(Potential)