The administration of U.S. President Donald Trump is considering taking equity stakes in leading American defense contractors such as Lockheed Martin (LMT), RTX Corp. (RTX), and Northrop Grumman (NOC).
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U.S. Commerce Secretary Howard Lutnick said in a media interview that the U.S. government has an interest in taking stakes in defense contractors that equip America’s military. The comments come days after the U.S. government acquired a 10% equity stake in chipmaker Intel (INTC) for nearly $9 billion.
Lutnick added that Lockheed Martin, the largest defense contractor, is “basically an arm of the U.S. government” as it derives most of its revenue from federal contracts. No official announcements have been made about a government stake in private defense companies, and neither the contractors nor the Pentagon have commented on the matter.
Socialism?
Following the Intel stake, President Trump has indicated that he wants the U.S. government to take stakes in many other private companies and sectors of the economy, saying he’ll do deals like the one for Intel “all day long.”
However, the 10% stake in Intel has also touched off a debate about whether the Trump administration is engaging in state-sponsored socialism and taking an approach that is too hands-on when it comes to the private sector and financial markets. The Intel stake has drawn particular criticism from conservatives, who warn that Trump’s actions go against free-market principles and pose risks for the U.S. economy.
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