What the U.S. Government Is Doing With Its Stakes in Companies

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0:30Robbie Gramer:The U.S. government is now an activist investor. How is the business community reacting? Plus, Secretary of State Marco Rubio is in Rome trying to smooth things over with the Pope and Italy's leadership.

0:42Maggie Severns:A lot of Italian officials, lawmakers, even those in the Vatican, see Rubio as Trump's Mr. Fix-It.

0:49Robbie Gramer:And French prosecutors seeking criminal charges for Elon Musk summon him to Paris. It's Thursday, May 7th. I'm Alex Osileff for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. We begin this evening's show with a key insight into how people are spending their money, thanks to the latest earnings from the world's biggest burger chain. McDonald's has been doubling down on value meals and other low-cost menu items. That's helping it bring people in. Its first-quarter revenue and profit beat Wall Street's forecast. In the U.S., same-store sales rose 3.9 percent.

1:28Robbie Gramer:Some other chains like Shake Shack, Wingstop, and Papa John's have reported disappointing sales in recent weeks. Rising gas prices and other costs have made consumers cut back, and restaurants are going all out to attract them. And McDonald's plans to keep pushing deals. Stocks slipped today, pulling back from recent records for the Nasdaq and S &P. The Dow led the losses and closed down 0.6 percent. Whirlpool stock tumbled after the company slashed its earnings guidance. Shake Shack shares slid 28 % after the burger chain swung to a loss in its latest quarter. But national security satellite company Hawkeye 360 soared after its IPO.

2:05Robbie Gramer:It closed up 31%, a sign of investor demand for defense-related companies.

2:13Robbie Gramer:There's free market capitalism, there's state capitalism, and now there's Trump capitalism. The president has been involved in American business in unorthodox ways. The Trump administration has announced direct investment stakes in at least 10 companies. That includes Intel.

2:29Maggie Severns:The U.S. government will take a 10 percent stake in Intel.

2:33Robbie Gramer:U.S. Steel. The U.S. will have a golden share in U.S. Steel. And mining companies.

2:38Maggie Severns:The White House taking a 10 percent stake in Triton-Gimato.

2:41Robbie Gramer:While other arrangements like the recent one with Spirit Airlines have fallen apart. That reportedly would have given the government up to a 90 percent stake in the company. For more on those deals and what they mean for the Trump administration, I'm joined now by WSJ reporter Maggie Severns. Maggie, how different is President Trump's approach to these kinds of deals than in the past throughout U.S. history?

3:04Maggie Severns:There are examples from history like the New Deal era where the government was very involved in building infrastructure and more involved in private business. And then in the 70s, 80s, we had this swing towards more laissez-faire capitalism and the idea that the government should really be hands off, right? So this is a real departure from several decades that preceded us when it comes to the government starting to say we want to be more hands on even when it comes to the specific companies. So we don't have term sheets for these deals. We don't know the details of them. In some cases, the government has said that it would have some kind of power to influence company decisions.

3:38Maggie Severns:In other cases, we don't know.

3:40Robbie Gramer:Last week, the president said the U.S. investment in Intel alone had generated$30 billion in gains over the past 90 days. What has the government said it would do with potential profits?

3:50Maggie Severns:The profit only exists for the most part if you sell the stock, right? He said that the government's made so much money off of Intel stock because the stock is up. But that's only if we sold our share in Intel. And the government hasn't really articulated what plans might be. There's not an exit strategy. They haven't said, you know, here's when we would sell or why we would sell. They also haven't said what they would do with dividends. If you get dividends, are you reinvesting them in the company? Are you taking that money and moving it to Treasury? Is it going somewhere else? We don't know.

4:18Robbie Gramer:How has the business community responded to the proliferation of these deals? Do business leaders want these overtures from President Trump or are they kind of wary of them?

4:29Maggie Severns:Some lobbyists have started to actually counsel CEOs if they're going in to meet with the president or top staff. They'll say, what happens if they want to take some kind of share in my company? and folks have been advised maybe change the subject or kind of, you know, do a smile and nod type thing. If you're running a company that's in big trouble, like, you know, Spirit Airlines was in talks that fell apart with the administration, you might want that money because it's a bailout and it could be a lifeline. You know, the concern from people is that the U.S. essentially winds up propping up companies that become too big or too important to U.S.

5:00Maggie Severns:taxpayers to fail. So a lot of that, I think we're gonna have to watch these play out and see.

5:05Robbie Gramer:That was Journal Reporter Maggie Severin. Thanks, Maggie. Thanks so much for having me. A White House spokesman said that the Trump administration is correcting previous administration's mistakes that led Americans to be dependent on imports of critical goods. French prosecutors are summoning Elon Musk to Paris. He's facing preliminary criminal charges in a sprawling investigation into his social media platform, X. The investigation began last year with allegations of a biased algorithm. It has grown to include charges of violating the secrecy of correspondence, dissemination of child pornography, and the creation of sexualized deepfake images.

5:42Robbie Gramer:Aix didn't immediately respond to a request for comment, but earlier this year, when French authorities raided the company's Paris offices, Aix called that a, quote, abusive act of law enforcement theater. Coming up, the diplomatic shifts that may make it easier for the Trump administration to move ships through the Strait of Hormuz. That's after the break.

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6:38Robbie Gramer:It's a beautiful spring day here in New York. The sun is shining, the trees and tulips are in bloom, which is a surefire sign that we are in the thick of the crucial spring home selling season. Today, we got the latest data point on why that season's looking not so sunny for people who want to buy a home. Freddie Mac says the average rate for a 30-year fixed mortgage hit 6.37 percent this week. up from 6.3 percent last week. It's the highest rate in a month. Journal housing reporter Nicole Friedman says that this is the worst possible timing for the housing market.

7:11Maggie Severns:We had the war in the Middle East, the turmoil with shipping and gas prices and inflation expectations, and rates have climbed again, and that's kind of stalled out that momentum. This is the spring home buying season, which is typically the busiest time of year for home sales. And a lot of families, they want to move over the summer between school years. So if they decide not to purchase in the spring, they might just wait a whole year. And so the expectation now is that this is going to be another slow spring and kind of not a recovery year for the housing market.

7:50Robbie Gramer:Turning to the war with Iran, the U.S. is still waiting on Tehran's response to a one-page framework to restart negotiations aimed at ending the conflict, which we told you about yesterday. Meanwhile, Saudi Arabia and Kuwait have removed a hurdle to President Trump's effort to move ships through the Strait of Hormuz, an operation that the Trump administration is now looking to restart as early as this week. That's possible because, as the journal has learned, Saudi Arabia and Kuwait have lifted restrictions on the U.S. military's use of their bases and airspace. The Iran war has put strain on a number of diplomatic relationships, including between President Trump and Pope Leo.

8:28Robbie Gramer:The pope has called for an end to the war, and Trump has been criticizing the pope for months. That's caused Italy's Prime Minister, Georgia Maloney, to distance herself from the president. Now the mission is relationship repair, and the administration sent Secretary of State Marco Rubio to do it. Rubio met with Pope Leo at the Vatican this morning. Journal-National Security reporter Robbie Grammer is in Rome covering Rubio's trip, and he says the Secretary of State has been tasked with a tough job.

8:55Maggie Severns:So far, all the signals coming out of the Vatican are that this meeting was cordial. He spent about three hours at the Vatican, where he met with both the Pope and the Pope's top diplomat. You know, a lot of Italian officials, lawmakers, even those in the Vatican, see Rubio as Trump's Mr. Fix-It. He's soothing trade nerves. He's telling officials exactly what they want to hear while still conveying what the president's priorities are. But at the end of the day, you're always one true social post away from a new diplomatic crisis if you are a leader in Europe.

9:29Robbie Gramer:And in other international news, a Chinese military court has convicted two former defense ministers of corruption. The men, both former generals, were sentenced to death with a two-year reprieve. Chinese leader Xi Jinping has led a years-long crackdown on the military's top brass. Today's verdicts were the most severe known punishments on disgraced generals that have come under Xi. And in a British court, a U.K. immigration official and a Hong Kong trade official were found guilty of helping the Chinese state spy on dissidents in Britain. It's one of the first convictions related to Chinese espionage in British history.

10:02Robbie Gramer:and the case shines a light on the lengths that the Chinese state goes to to keep tabs on critics and dissidents abroad. The Chinese embassy has previously denounced the arrests of the two men as a, quote, malicious fabrication. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Bansi and Danny Lewis with supervising producer Tali Arbel. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

11:00Maggie Severns:Transcription by CastingWords slash takeontheweek to subscribe now.