Take Equity Stakes for Public Purposes

For the past year and a half, the Trump administration has been engaged in an ad hoc form of industrial policymaking, focused on what appears to be a more permanent form of past administrations’ temporary public equity investments. Public equity stakes in private corporations could bring about a major change to the current dynamics of corporate governance and thus the productive potential of US innovative enterprises. In an industrial policy program oriented toward the necessary energy transition, public equity stakes could play a positive role in strengthening labor rights and bringing a public interest perspective in corporate governance in industries like solar and wind. But for them to play that transformative role, the US must get over the twin pathologies of using such stakes only in moments of crises and relinquishing them as quickly as possible (thus giving up any opportunities for capacity building) or using them for short-sighted reasons and perhaps personal gain.

The US Experience—Timely, Temporary, Targeted . . . or Trumpy?

The 2008 financial crisis was a moment of extreme systemic risk to the financial system and the broader economy.¹ During the crisis and the recession in its aftermath, the federal government—under both the Bush and Obama administrations—took equity stakes in financial institutions and troubled auto companies.² The Emergency Economic Stabilization Act of 2008 (EESA) Section 113 established the Troubled Asset Relief Program (TARP) and empowered the Treasury secretary to purchase corporate equity in the interest of “stabiliz[ing] the financial system and restor[ing] confidence.”

TARP made the federal government a significant shareholder in AIG, Citigroup, General Motors, Chrysler, and GMAC.³ The $700 billion TARP asset purchase program included $125 billion of public equity stakes, though the initial Capital Purchase Program included “no specific requirements regarding how banks that received the government equity infusion should use it.”⁴ The deals were negotiated ad hoc by members of the Obama administration who had previously worked as dealmakers in the financial sector.⁵ This dealmaking approach to the crisis meant that different institutions were dealt with differently, and there was no consistent approach to what it meant for the government to take an equity stake—how it would behave as a shareholder.⁶

The Trump administration has embraced its own form of industrial policymaking. Through a series of bespoke corporate deals, the administration acquired equity stakes in Intel, Lithium Americas, and Trilogy Metals. In June 2025 it secured a perpetual “golden share” in US Steel that grants the president veto power over plant closures and production decisions. In July that year, the Department of Defense became the single largest shareholder in the only rare earths mine in the United States, MP Materials, guaranteeing the company a minimum price and a guaranteed buyer for a decade.⁷ The administration has also extracted profit-sharing agreements from Nvidia and AMD, requiring them to pay 15 percent of their China chip sales revenues to the government. The dealmaking has taken place through executive action, bypassing Congress entirely and, in the case of Intel, dispensing with the taxpayer safeguards in the Biden administration’s CHIPS Act.⁸

In an industrial policy program oriented toward the necessary energy transition, public equity stakes could play a positive role in strengthening labor rights and bringing a public interest perspective in corporate governance in industries like solar and wind.

The stated goal of these deals is to ensure that production in key sectors like steel and rare earth metals stays or grows in the United States. For example, the US Steel golden share enabled Japanese company Nippon Steel to complete its purchase of US Steel but gave the Trump administration continued power in the new company to ensure that production remains in the United States. A core issue is that the deals reflect “Trump’s strongman tendencies: He has claimed for himself concentrated power to oversee and influence corporate decision-making.”⁹ The Trump administration’s actions make clear the urgency of defining best practices for public equity stakes.

Designing Public Equity Stakes in the Public Interest

In thinking through how to do equity stakes better in 2029 and beyond, we do not need to design from scratch. Many countries have more robust and transparent approaches to public equity stakes. European governments have taken equity stakes in their emergency interventions: In Germany, the federal government took a 25 percent stake in Lufthansa as part of its pandemic response.¹⁰ The French government spent 4 billion euros to bail out Air France, but the stake included climate-oriented conditions (though the French government did not have the enforcement mechanisms necessary to ensure full compliance).¹¹ Golden shares—a type of public equity stake with special governance authority even when the government is not the majority shareholder—have been used by European governments to privatize previously public entities.¹² For example, golden shares enabled the UK government to keep essentially veto power over core entity decisions, like mergers and acquisitions, as a hedge against foreign government control, even though the shares were set up in the context of problematic privatization. But while global examples of equity stakes, state holding companies, and even sovereign wealth funds can provide useful insights, the US corporate governance regime, corporate and financial laws, and state investment capacity are uniquely challenging and mean that we cannot simply import a European approach to industrial policy.

US labor unions have a long history of using investment and governance rights in companies to good use (though this money is not public money). Coauthors and I have discussed the little-known history of pension fund investment in affordable housing in the United States:¹³ Labor pension funds in New York and San Francisco enabled the growth of co-op housing in these cities, and the AFL-CIO Housing Investment Trust has been investing in affordable housing for half a decade. Public pension funds are a public financial asset, and elsewhere I have proposed the creation of a public asset manager to channel public pension funds toward useful industrial policy goals while supporting the long-term retirement security of the US public-sector workforce.¹⁴

In a forthcoming article,I outline the design choices that policymakers should consider when adopting public equity stakes.¹⁵ Just as private companies have a wide range of options in how they structure and sell equity to private financial institutions, there are options for designing public equity stakes. I do not suggest that there is one best design for all public equity stakes, but rather lay out the choice points to encourage further discussion of this industrial policy tool. For example, public equity stakes could be structured such that the federal government receives a variable financial return on an investment; could enable involvement in governance, including the ability to veto certain kinds of company actions; or could be accompanied by both economic and governance rights. Establishing the stake also requires deciding: What kinds of economic benefits should the stake earn, and where should those benefits go?

Managing Returns in Public Equity Stakes

One policy design choice is about the flow of finance into a company and how to manage potential government returns. The goal of public equity stakes is not to replicate the dynamics of shareholder primacy for the public sector—that is, with the shareholder focused solely on asset appreciation as often and as quickly as possible. With participation rights, the public equity holder can engage in board-level decision-making over dividends (income payments made to holders of shares) and other corporate financial decisions. Preferred stock held by the government can have differential dividend rights so that the government stake does not earn dividends in the same way as other shareholders. For example, during the financial crisis, preferred stock issued by AIG included the provision that dividends were payable at various specified rates and times.¹⁶

One option for dividends is to structure the public equity stake like any other stake, so that the government earns the capital gains from stock price appreciation and the income from authorized dividends. The government would then also take the same level of risk of loss as any other shareholder. The government would realize capital gains if it converted shares to common stock and sold them, or if the company repurchased them. Of course, when and how the government sells shares should be determined not by asset appreciation but by whether it is in the public interest to continue to hold the equity stake.

Governing Public Equity Stakes

Another policy design choice is about governance: Public equity stakes could enable involvement in governance, including the ability to veto certain company actions. This raises further policy design questions about how the government should engage as a shareholder: How should the public interest affect how the federal government votes? What part of the government infrastructure should hold and manage public equity stakes?

In previous bailouts, public equity stakes took the form of both voting and nonvoting shares. To meet the goals of a proactive industrial policy, public equity stakes should be voting shares and should enable shareholders to participate. A federal statute could specify that the duties of care and loyalty—the legally binding fiduciary duties that all directors have—run to the public interest when a director is representing a public equity stake. Boards set corporate priorities, including how to allocate corporate funds between uses to improve productivity, like investing in a well-paid workforce and research and development versus increasing executive compensation and authorizing stock buyback programs. Publicly held equity would give the public interest a role in board discussions that can meaningfully impact the productive potential of such businesses.¹⁷

Conclusion

General Motors (GM) gives us one counterfactual to think concretely about the effects of public equity stakes. If the government had taken a public equity stake when it bailed out GM during the financial crisis, and kept the share since then, the government could have stayed involved as an active shareholder and promoted the public interest in the electric vehicle transition. The federal government became the majority shareholder in GM during the collapse (all bailouts to GM totaled $51 billion), but despite its enormous commitment to the company and its employees, it sold the shares at a loss of $11 billion. By 2019, GM announced major closures despite robust profits.¹⁸

If the federal government had held on to its stake throughout the decade, it could have had a seat at the table for such discussions. GM received federal investment through the IRA to spur the transition to electric vehicles. Yet despite historic gains by the UAW in the 2023 strike, GM announced that it would spend $10 billion on stock buybacks in November 2023 to bolster its share price while reducing overall investment in electric vehicles. A public equity stake, managed by a competent public asset manager with a mandate to operate in the public interest, could have ensured that these public funds spent on industrial policy supported the long-term public interest of a sustainable and equitable economy.