Tad DeHaven
Congressional Republicans have long posed as defenders of free markets. But for the past year, they’ve said little and done nothing about the Trump administration’s acquisition of ownership stakes in private companies. Now, some Republicans want to use the Defense Production Act, or DPA, to give the executive branch explicit statutory authority to make this market-undermining practice permanent.
Since Trump returned to office, the federal government has acquired ownership stakes, or the right to purchase shares, in a dozen companies. Many of those deals have been concentrated in critical minerals and related supply chains, but the broader pattern is unmistakable. The administration is using equity, warrants, and other ownership-like instruments to push federal power deeper into private enterprise.
These moves have been announced or pursued without clear, government-wide statutory authority. Aside from occasional hearings in which Democrats raised pointed questions, Republicans have shown little interest in serious oversight, and the administration has shown no interest in providing substantive information on the deals’ terms and rationales. It’s hard to believe congressional Republicans would be so deferential were this a Democratic administration.
This began with Trump wanting a sovereign wealth fund early in his second term, but the White House soon realized the president wouldn’t have complete control, since Congress would have to create it. So, dutiful administration officials set about improvising a pseudo-investment fund under the executive branch’s control. But having failed to assert itself as a coequal branch of the federal government, Republicans appear ready to shift from complacency to complicity.
The present concern is the House’s Defense Production Act reauthorization bill. As amended in committee, it would effectively create a framework for executive branch equity investments.
The bill would allow a member of the Defense Production Act Committee to make an equity investment once the DPA Fund manager determines that the company cannot obtain additional private equity on commercially reasonable terms. It would make the Treasury Secretary the fund manager, cap aggregate government ownership at less than 15 percent of a company’s equity, raise the DPA Fund cap from $750 million to $2 billion, and require deal documentation and reporting.
Establishing parameters and accountability is all well and good, but the problem begins and ends with creating the statutory architecture for a standing executive equity portfolio in the first place. Take the requirement that private equity must be unavailable on commercially reasonable terms before a DPA official may take a partial ownership interest in a company. For example, the Small Business Administration has a similar “credit elsewhere” requirement for its 7(a) loan program. Yet, the Government Accountability Office has been reporting for years that the agency has failed to ensure compliance.
Some Republicans aren’t even trying to hide their intention to carry the administration’s water. In September, Sen. Jim Banks (R‑IN) filed an amendment to the FY2026 National Defense Authorization Act that would have given the DoD’s Office of Strategic Capital explicit authority to acquire equity and would have redefined capital assistance to include equity, options, warrants, and similar instruments. In a February Senate Armed Services Committee hearing, Sen. Roger Wicker (R‑MS) acknowledged “little law currently exists” regarding equity stakes but said he believes they “make good sense in many cases.”
Interestingly, some of the clearest market-based criticism of government equity stakes has come from Democrats. At the same hearing, Sen. Jack Reed (D‑RI) asked, “How can other domestic companies remain competitive when DoD invests so heavily in one company and provides that company a competitive advantage?” Sen. Martin Heinrich and two House Democrats stated in a letter to administration officials that, “By privileging select corporations through direct ownership—essentially picking winners and losers—the government may undermine broader market competition and the development of innovative technologies or mineral or material substitutions.”
Would these same Republicans and Democrats be taking these positions if a Democrat were in the White House? Well, Capitol Hill is where principles go to die. Regardless, whether motivated by political opportunism or a sincere desire to do the right thing, what matters is that the Pandora’s Box the Trump administration opened, should be closed by Congress.
The Senate Banking Committee has not publicly committed to moving its own DPA reauthorization bill. But if it does, the bill should make clear that the executive branch cannot acquire equity stakes, warrants, or similar rights in private firms under the DPA. Congress should then use the next defense authorization bill, or another vehicle, to make the same point for Pentagon industrial base authorities and the Office of Strategic Capital.