Precedent

WASHINGTON — An extraordinary new policy from the Defense Department that equates basic reporting methods to criminal activity has prompted a revolt among Pentagon journalists that could leave the nation’s largest agency and the world’s largest military without a press corps.

The new policy, from Defense Secretary Pete Hegseth, is a dramatic departure from historic standards at the department, which previously required credentialed reporters to sign a simple, single-page document laying out safety protocols.

Replacing that document is a 21-page agreement that warns reporters against “soliciting” information, including unclassified material, without the Pentagon’s official authorization, characterizing individuals who do so as a “security risk.”

The policy would force journalists and media organizations to refrain from publishing any material that is not approved by the military — a clear violation of 1st Amendment protections to free speech, lawyers for media outlets said.

Major news organizations including the New York Times, Washington Post and Wall Street Journal, as well as right-leaning outlets such as Newsmax and the Washington Times, have refused to sign the document, with only one far-right outlet — the cable channel One American News — agreeing to do so.

The Los Angeles Times also will not agree to the policy, said Terry Tang, the paper’s executive editor.

In a rare joint statement, ABC, CBS, CNN, Fox News and NBC said that the policy “is without precedent and threatens core journalistic protections.”

“We will continue to cover the U.S. military as each of our organizations has done for many decades, upholding the principles of a free and independent press,” the news outlets said.

But Hegseth, who has aggressively pursued leaks and sources of unfavorable news stories since the start of his turbulent tenure as secretary, has doubled down in recent days, posting emojis on social media waving goodbye as media organizations have issued statements condemning the policy. Journalists were given a deadline of 2 p.m. PDT on Tuesday to either sign the document or relinquish their credentials.

It is unclear whether it will be viable for the Pentagon to maintain the policy, leaving the secretary without a traveling press corps to highlight his official duties or public events. And it is also uncertain whether President Trump approves of the extreme measure.

At a White House event Tuesday, Hegseth said that the policy was “common sense” and that he was “proud” of it. He said credentials should not be given to reporters who will try to get officials “to break the law by giving them classified information.”

Asked last month whether the Pentagon should control what reporters gather and write, Trump said “no.”

“I don’t think so,” Trump said, adding: “Nothing stops reporters.”

But Trump said Tuesday that he understands why Hegseth is pushing for the new policy.

“I think he finds the press to be very destructive in terms of world peace and maybe security for our nation,” Trump said. “The press is very dishonest.”

The widespread revolt has generated a show of solidarity from the White House and State Department correspondents associations, which characterized the Pentagon policy in a joint statement Monday as an attack on freedom of the press.

“Access inside the Pentagon has never been about convenience to reporters,” the statement reads. “The public has a right to know how the government is conducting the people’s business. Unfettered reporting on the U.S. military and its civilian leadership provides a service to those in uniform, veterans, their families and all Americans.”

Beyond the restrictions on media outlets, the Pentagon has taken a series of steps this year to try and identify officials who are deemed disloyal or who provide information to reporters.

In April, the Pentagon dismissed three top officials after an investigation into potential leaks related to military operational plans. That same month, Hegseth’s team began subjecting officials to random polygraph tests, a practice that was temporarily halted after the White House intervened, according to the Washington Post.

Then, in October, the Pentagon drafted plans to renew the use of polygraphs and to require thousands of personnel to sign strict nondisclosure agreements that would “prohibit the release of non-public information without approval or through a defined process.” The nondisclosure agreements include language that is similar to what reporters are being asked to sign by Tuesday.

Notably, many of Hegseth’s plans to target leaks have been leaked to news outlets, probably contributing to the Defense secretary’s suspicion about whom he can trust.

The timing of his efforts are also noteworthy, as they gained traction after he personally shared sensitive details about forthcoming strikes in Yemen in a private Signal group chat that mistakenly included a reporter from the Atlantic. Hegseth also shared information about the attacks in a separate Signal chat that included his wife, a former Fox News producer who is not a Defense Department employee.

Hegseth denied that any classified information was shared in the chat. Yet the situation led to an internal review of whether the disclosures were in violation of Defense Department policies.

The Pentagon has taken an even more aggressive approach to restricting reporters’ access than the White House, which months ago took control over press operations from the White House Correspondents Assn. — an independent group that had organized the White House press corps for decades.

Still, the White House has refrained from implementing changes to the briefing room seating chart, evicting outlets from workspaces within the White House complex or revoking press passes, after facing a legal challenge over an attempt to bar one major outlet — the Associated Press — from covering some presidential events at the beginning of Trump’s second term.

Trump, meanwhile, has continued to single out individual outlets he dislikes. On Tuesday, for example, the president refused to take questions from ABC News because he said he did not like how a news anchor had treated Vice President JD Vance.

“You’re ABC Fake News,” Trump said at a public appearance in the White House. “I don’t take questions from ABC Fake News!”

The U.S. Supreme Court is seen in Washington, D.C., on June 26, 2024. On Monday, the high court agreed to reconsider a 90-year precedent on removing independent regulators as Trump’s firing of FTC commissioner is allowed to move forward. File Photo by Bonnie Cash/UPI. | License Photo

Sept. 22 (UPI) — The U.S. Supreme Court agreed Monday to revisit a 90-year precedent, preventing presidents from removing independent regulators without just cause. The high court, which is scheduled to hear the case in December, will allow President Donald Trump‘s firing of Federal Trade Commissioner Rebecca Slaughter to move forward.

The case centers on Trump’s attempt to remove Slaughter, who has been with the FTC since 2018. While a decision is not expected until next summer, the court order allows Trump to fire Slaughter despite dissents from the court’s liberal judges.

“Our emergency docket should never be used, as it has been this year, to permit what our own precedent bars,” wrote Justice Elena Kagan, who was also joined by Justices Sonia Sotomayor and Ketanji Brown Jackson.

“Still more, it should not be used, as it also has been, to transfer government authority from Congress to the president, and thus to reshape the nation’s separation of powers,” Jackson added.

Earlier this month, Chief Justice John Roberts issued a brief administrative stay to an order by a district court that found Trump’s firing of the democratic FTC commissioner was illegal.

Attorney General Pam Bondi applauded Monday’s decision, saying it “secures a significant Supreme Court victory, protecting President Trump’s executive authority.”

“In a 6-3 decision, the Court stayed a lower court ruling which prevented the president from firing a member of the FTC’s board,” Bondi wrote Monday in a post on X. “This helps affirm our argument that the president, not a lower court judge, has hiring and firing power over executive officials.”

Trump fired Slaughter and another Democratic FTC commissioner, Alvaro Bedoya, in March. Slaughter sued Trump of illegally firing her without just cause, despite congressional protections.

“It is of imperative importance that any doubts concerning the constitutionality of traditional independent agencies be resolved promptly,” Slaughter’s lawyers wrote in court.

The Supreme Court’s 1935 decision, Humphrey’s Executor v. United States, upheld the FTC’s protections from removal as constitutional.

The Supreme Court has also allowed Trump to fire National Labor Relations Board member Gwynn Wilcox and Merit Systems Protection Board member Cathy Harris.

In the seven months since President Donald Trump’s inauguration, Wall Street’s major stock indexes have been taken on quite the ride.

The president’s unveiling of his tariff and trade policy on April 2 spawned the fifth-biggest two-day percentage decline in the benchmark S&P 500 (^GSPC 1.52%) in 75 years, as well as hurled the Nasdaq Composite (^IXIC 1.88%) into a full-fledged (but ultimately short-lived) bear market.

This sharp downturn was followed by Donald Trump announcing a 90-day pause on higher “reciprocal tariff rates” on April 9. The S&P 500, Nasdaq Composite, and ageless Dow Jones Industrial Average (^DJI 1.89%) responded by logging their largest single-session point increases in history with this announcement and have been in a seemingly unstoppable rally ever since.

But tariffs represent just one of the ways the Trump administration can potentially influence equities on Wall Street.

According to reports and recent statements made by a member of Trump’s cabinet, the federal government is pondering equity stakes in some of the world’s leading semiconductor companies, including Intel (INTC 5.64%), Taiwan Semiconductor Manufacturing (TSM 2.58%) (commonly known as “TSMC”), Micron Technology (MU 1.82%), and Samsung Electronics (SSNL.F 9.01%). While the rationale behind this idea might be intriguing on paper, it runs the risk of setting a dangerous precedent on Wall Street.

Commerce Secretary Howard Lutnick proposes converting CHIPS Act grants into equity

Before diving further into the proposed details, some background is sorely needed.

Three years ago, in August 2022, President Joe Biden signed the CHIPS and Science Act (commonly known as the “CHIPS Act”) into law. This law authorizes grants from the federal government to encourage the domestic manufacture of semiconductor chips, as well as to promote biotechnology and clean-energy technology innovation within the U.S. More than $52 billion was set aside by the CHIPS Act to support the construction and/or expansion of chip fabrication plants in the U.S., as well as advanced semiconductor research and development.

During President Trump’s State of the Union address to a joint session of Congress in March, he referred to the CHIPS Act as a “horrible, horrible thing,” and encouraged lawmakers at the time to defund the program. But his tune may have changed, courtesy of U.S. Secretary of Commerce Howard Lutnick.

In a recent interview with CNBC, Lutnick laid out something of a take-it-or-leave-it style proposal that would convert CHIPS Act grants into stock equity for the federal government. Said Lutnick:

The Biden administration literally was giving Intel for free, and giving TSMC money for free, and all these companies just giving them money for free. Donald Trump turns that into saying, “Hey, we want equity for the money. If we’re going to give you money, we want a piece of the action.”

Lutnick clarified his statements by noting that these equity stakes wouldn’t provide the U.S. government with any voting power in these businesses. Instead, it would be all about the American people getting a stake in the businesses U.S. funds are supporting.

Trump has reportedly favored the idea of the U.S. government being given equity stakes in exchange for CHIPS Act funds, with Sen. Bernie Sanders (Ind.-VT) also voicing his support for such a move. “Taxpayers should not be providing billons of dollars in corporate welfare to large, profitable corporations like Intel without getting anything in return,” extolled Sanders.

If this proposal were to move forward, the Trump administration would take up to a 10% stake in Intel, valued at roughly $10.9 billion. Multibillion-dollar stakes would also be made in TSMC, Micron, and Samsung.

Government ownership of stocks can be a slippery slope

Though there’s a logical argument to be found in the Trump administration’s proposal to transform these grants into equity stakes, there are also reasons for concern.

Looking to the past as a predictor of the future, there have been previous instances where the federal government took equity stakes in public companies. However, these prior occurrences correlate with periods of historic economic instability.

For instance, the Troubled Asset Relief Program (TARP) gave the federal government the green light to take equity stakes in struggling financial institutions during the Great Recession. Additionally, select airline companies issued stock warrants to the U.S. Treasury during the height of the COVID-19 pandemic in 2020 and 2021 as partial compensation for the financial assistance they received. Equity stakes on a for-profit basis, as proposed by Lutnick, would be a new and potentially dangerous precedent.

Although the Commerce Secretary told viewers these would be nonvoting equity stakes, the Trump administration nevertheless passes the laws and fiscal policy that can directly impact chip manufacturers. While the federal government might not be voting on executive compensation packages, it’ll have a direct and undeniable influence on the stock(s) it owns. This is effectively the same debate of whether members of Congress should be able to own individual stocks while passing laws that directly impact said stocks… just taken to another level.

For example, a solid argument can be made that President Donald Trump’s tariff and trade policy is far more powerful than a 10% voting share in Intel, or a single-digit percentage voting share in TSMC, Micron, or Samsung. Pardon the necessary pun, but Trump has previously used chip companies, including Nvidia, as bargaining chips to negotiate trade deals. There would be nothing to stop the president or members of his administration from using these bargaining tools to influence corporate strategy and decision-making.

Furthermore, adjusting the funding strategy for the CHIPS Act three years after its passage might encourage chip fabricators to keep their distance from the U.S. government. While subsidies of $6.6 billion, $6.2 billion, and $4.75 billion were awarded to TSMC, Micron, and Samsung, respectively, in 2024, none of these three companies necessarily need this funding to build/expand their chip fabrication presence on U.S. soil. If they had known that an equity stipulation was a possibility, they may not have agreed to a dime in funding.

Even Intel, which has struggled mightily under the weight of increasing competition and the high costs of organically building out its foundry division, may not have opted for government funding if it would have resulted in a forced equity stake. Over the trailing-12-month period, Intel has generated more than $10 billion in cash flow from its operations.

Though discussions are ongoing and nothing is set in stone, as of this writing in the late evening of Aug. 20, the Donald Trump administration potentially becoming shareholders of some of Wall Street’s leading semiconductor stocks likely wouldn’t be a development to cheer.