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Why the U.S. Government Shouldn’t Own Equity Stakes in Public Companies
Every time Washington writes a giant check to a “strategic” industry, someone asks: If taxpayers are footing the bill, shouldn’t taxpayers own part of the company?
It sounds good over coffee. But from a pure market-capitalist standpoint, government equity stakes are a bad idea. They distort competition, mute market signals, and turn corporations into policy tools. Intel is the latest example — and a perfect case study for why Uncle Sam should stay out of the shareholder registry.
1. Market Discipline Stops Working
Capital markets punish inefficiency. If a company mismanages capital, its stock price falls, cost of capital rises, and pressure mounts to course-correct — or face a takeover.
When the government steps in as a shareholder, that discipline gets muddied:
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Management may prioritize political relationships over shareholder returns.
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Underperforming companies can be kept alive for political optics.
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Investors stop trusting price signals, knowing policy can override fundamentals.
That’s not capitalism — that’s selective backstopping.
2. Government “Picking Winners” Tilts the Playing Field
Subsidies like the CHIPS Act are one thing — they create incentives while leaving ownership private. Equity stakes go further, turning the federal government into a co-owner.
This introduces:
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Moral hazard: Companies assume Washington will bail them out again.
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Distorted competition: Rivals may be seen as “riskier” investments simply because they lack government backing.
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Political risk: Future administrations may pressure firms to pursue uneconomic projects or plant facilities in vote-rich districts.
Competition — the lifeblood of capitalism — gets replaced by favoritism.
3. Private Capital Gets Crowded Out
Public markets are designed to allocate capital efficiently. When the government shows up with a virtually unlimited balance sheet, it competes with pension funds, index investors, and retail traders — not on merit, but on political priority.
The result:
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Required returns fall artificially.
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Management teams face weaker incentives to deliver shareholder value.
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Stock prices reflect government involvement, not true supply and demand.
4. Corporate Governance Becomes Political
Even a modest stake gives Washington a seat — formal or informal — at the table. That changes decision-making:
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Capital allocation may be judged on national-security optics, not ROIC.
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Fabs and plants could be sited based on electoral maps instead of cost efficiency.
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CEO pay, buybacks, or dividends could become campaign talking points.
This politicization of governance blurs accountability and erodes the clear rules that markets depend on.
5. Exiting the Stake Is Always Messy
Even if a stake makes sense in a crisis, unwinding it rarely goes smoothly:
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Selling pressure: A government exit can flood the market with shares, hitting prices for private investors.
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Timing distortion: Officials may hold too long (to avoid criticism) or sell too soon (to claim a “win”), neither of which reflects market logic.
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Executive gamesmanship: Companies may time earnings or announcements to influence government exit decisions, which means strategy gets driven by politics, not fundamentals.
The long tail of government ownership keeps markets second-guessing when and how the exit will come — which undermines investor confidence.
The Better Path: Policy Without Ownership
If the goal is national security, innovation, or supply chain resilience, there are cleaner tools that keep markets intact:
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Targeted tax credits and grants to incentivize domestic manufacturing.
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Direct procurement contracts to guarantee demand.
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R&D partnerships to accelerate key technologies.
These mechanisms achieve strategic goals without politicizing the cap table.
My Take: Keep Capitalism Clean
Public markets are supposed to send unfiltered price signals. When the federal government becomes a shareholder, those signals get cloudy, capital misallocates, and competition gets distorted.
Bottom line: support strategic industries through transparent policy — not through taxpayer-funded equity positions that turn the S&P 500 into a state-managed portfolio.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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