Why the federal government could take a stake in Intel

Read the Full Transcript

• Karoline Leavitt, White House Press Secretary:

  The president wants to put America's needs first, both from a national security and economic perspective. And it's a creative idea that has never been done before to ensure that we're both reshoring these critical supply chains, while also gaining something of it for the American taxpayer.

• Amna Nawaz:

  That was White House Press Secretary Karoline Leavitt explaining why the president is weighing taking a 10 percent stake in computer chipmaker Intel. If approved, it would mark one of the largest U.S. government interventions in a private company since the auto bailout of 2008.

  It's the latest in a series of actions by the administration to take direct financial interest in American businesses.

  Joining me now to discuss this is Peter Harrell from the Carnegie Endowment for International Peace. He's a former White House economic adviser in the Biden administration.

  Peter, welcome to the "News Hour." Thanks for joining us.

  Peter Harrell, Carnegie Endowment for International Peace: Thanks for having me on.

• Amna Nawaz:

  So, before we get to the bigger picture here, I just want to ask you about Intel specifically. If

  this deal goes through, the U.S. becomes the largest shareholder in Intel. In your view, is it a good idea for the government to take this move, to essentially pick and put a thumb on the scale among the many chipmakers in America?

• Peter Harrell:

  Well, I think it would be fair to count me as skeptical that this is the right way either to save Intel or to help build U.S. semiconductor manufacturing.

  I think there is bipartisan support. We worked on it when I was in the Biden administration to going back to Trump's first term. There is bipartisan support in Washington for the idea that we need to be building more leading-edge semiconductor chips here in the United States. That's why we have had the CHIPS program to provide incentives for reshoring semiconductor manufacturing going back for five or six years now.

  What's different is whether taking a 10 percent stake in the company is really the most effective way to do that. I don't really see how taking 10 percent of Intel is either going to help turn Intel around or help this reshoring agenda.

• Amna Nawaz:

  Are there questions around the legality of this move as well? I mean, back during the financial crisis of 2008, it was Congress that authorized specific bailouts for specific auto companies and banks. That's not the case this time. Is this legal for the president to do?

• Peter Harrell:

  No, I think there are questions about legally how they are going to structure this.

  So, if we look back, back in 2022, so three or four years ago now, Congress appropriated money for the CHIPS Act. The CHIPS Act had actually preceded getting money. Congress appropriated money. And then the Commerce Department went through a period of giving grants, which are clearly authorized by the CHIPS Act, to a range of companies, including Intel, including a company called TSMC, which is a Taiwanese company, including Samsung and others, to give those companies incentives to build semiconductors here in the U.S.

  And the reason that the government didn't take ownership in those companies then was really twofold. First, there's a question about whether it's legal. But, second, these are companies — these are not — this is not a bailout situation. These are companies that had been making chips very profitably overseas, and the government wants them to do it here.

  And had the government said, we're going to take equity in you if you come to the United States, the companies just would have said, thanks, but no thanks. We're fine manufacturing in Taiwan and Singapore and Korea and places like that. So I don't think that taking equity is really about — very helpful to getting the companies to onshore.

  Now, Intel is a little bit different because Intel over the last couple of years has had some serious technological problems, some serious business problems. Again, we still have to get through, is this really legal? And I think it would be helpful for the Trump administration to spell out its legal rationale, because it was definitely not originally contemplated in the CHIPS Act.

• Amna Nawaz:

  So put this into some larger context for us here. If this deal goes through, and that is still an if, it would just be the latest example of the Trump administration essentially taking a cut from different American companies.

  They're sharing in profits from Nvidia and AMD sales of computer chips to China. It's taken a share in U.S. Steel as part of a deal that would approve its merger with Nippon Steel. Bigger picture here, Peter, what do you see going on?

• Peter Harrell:

  I mean, this is very different from what we have seen in the U.S. over at least the sort of 80 years since the end of World War II.

  As you alluded to, there is some history in the context of financial crises or other kinds of crises the government taking some stake in companies as part of a bailout. We saw that during the financial crisis. We also saw it some during the COVID pandemic in 2020, where some of the COVID relief the government enacted was tied to the government getting some stakes in companies that were getting bailed out.

  But these have traditionally been short term stakes, the government saying, we will take a stake to get you through the tough times and then we're going to sell it off. This is much more of a scenario where the president is saying he wants the government to own stakes, not just in companies that are failing, but in a whole bunch of companies on a kind of open-ended basis, very different from the way the U.S. has operated on our economic model over the last 80 years.

  And I think it's going to raise a bunch of questions about, are the — is the government really going to be the right shareholder to help these companies succeed? Is the government going to start showing favoritism to these companies over companies that it doesn't own? What are the kind of political requirements that are going to be put on companies that the government is taking an ownership in?

  Because this is just not a business model that has been the way the U.S. government and the private sector have interacted in kind of the modern era that we have all lived through.

• Amna Nawaz:

  Peter Harrell from the Carnegie Endowment for International Peace, thank you so much for joining us.

• Peter Harrell:

  Thanks for having me.