Trump’s $10 billion TikTok ‘brokerage fee’ is just the tip of the iceberg

On Friday, the Wall Street Journal reported that investors in the brand-new entity created to oversee content moderation on TikTok will reportedly pay a $10 billion fee — or 70 percent of the company’s value — to the U.S. Treasury as payment for the Trump administration’s role in brokering the pact. 

Not only is this pay-to-play arrangement with the federal government unprecedented; it also smacks of possible corruption. Investment bankers typically receive less than 1 percent for the same “service.” President Trump is once again pushing the law where nobody dared go before and doing so with impunity. The implications for democracy and the rule of law are profound.

The deal arises from a 2024 statute mandating TikTok’s Chinese owner, ByteDance, either shut down its U.S. operations or sell to an American-based company. Lawmakers were concerned that a company tied to the Chinese government collecting the data of roughly 135 million American users posed national security concerns. After the divestment deadline passed, Trump issued an executive order directing the attorney general not to enforce the law and unilaterally extended the statutory deadline for compliance.

Investors in the new entity, which is called TikTok USDS Joint Venture LLC, include the software giant Oracle, the private equity firm Silver Lake and the Abu Dhabi-based artificial intelligence company MGX.

The group is led by Larry Ellison, chairman and founder of Oracle — one of the world’s richest men, who hosted a $100,000 per-head fundraiser for Trump in 2020. His son, David Ellison, became chairman and CEO of Paramount Skydance following the Trump-approved $8 billion merger of its predecessor Skydance Media and Paramount, owner of CBS News. Ellison later recruited Bari Weiss, founder of the conservative news site The Free Press, to run the network, which has since taken pro-Trump actions that ignited controversy, including killing a “60 Minutes” segment on Trump’s detention and deportation policies. 

A CNBC report reveals the Trump administration has taken equity stakes in at least 10 companies, including 10 percent of the chipmaker Intel and a 5 percent stake in minerals startup Lithium Americas, agreeing to defer repayment of $182 million in debt that Lithium Americas owes the federal government — and thus the taxpayers — on a $2.5 billion loan. 

The administration is now also a 10 percent shareholder in another startup called Trilogy Metals, which wants to extract copper and other minerals from a 211-mile road in Alaska. Trump approved the necessary permits along with making a $35.6 million investment of federal money in exchange for part ownership and an option to buy another 7.5 percent. A similar deal went to USA Rare Earth — taxpayer dollars in exchange for an 8-16 percent stake in that company, which aims to open a “rare earth” mine in Texas and manufacture magnets in Oklahoma. 

The Trump administration has set itself up for possible ownership in a private nuclear reactor developer and a $65 billion defense company that makes rocket motors used in missiles, as well. Additionally, its stake in U.S. Steel as a condition for approving its acquisition by Nippon Steel means that Trump can now veto company decisions to close or sell plants, block company name changes and deny attempts to move its headquarters from Pittsburgh.

Although there’s a history of the federal government propping up private equity, it’s typically been on a temporary basis to resolve economic crises, as with the 2008 bailout of Chrysler. And unlike the recent Trump deals, that action was specifically authorized by Congress and did not involve any direct ownership of the auto manufacturer. 

So how is Trump getting away with this? 

It turns out that there is no law on the books that allows him to use federal money to take equity stakes in private companies as a condition to securing necessary federal approvals, but there’s no law clearly banning it either — probably because Congress never had to think about it. Prior presidents apparently didn’t think about employing Trump’s tactics, either, for a host of possible reasons.

If the government owns a significant stake in one company, conflicts of interest abound. It could favor its company over competitors. Or worse, it could use its leverage to impose political mandates that increase an Oval Officer holder’s power at the expense of shareholders and taxpayers. 

Federal stakes in private industry could also distort the free markets, which have long been a cornerstone of conservative politics, while dampening innovation. With the federal government behind the biggest players in an industry, why would anyone else try to enter the field? Meanwhile, taxpayers bear the risk of failure — without the buy-in from Congress, which is supposed to control the purse strings and make the laws.

This is yet another maneuver to consolidate power in one place: Donald J. Trump. Companies that directly answer to Trump-as-shareholder — which include media conglomerates, tech platforms and significant environmental players — will now think twice about criticizing him publicly or supporting his perceived political opponents. 

Although an anti-corruption group promptly sued the Trump administration over the TikTok deal, courts can only do so much for democracy. If Congress continues to fail voters, they must send incompetent members packing. The Constitution’s survival depends on it.

Kimberly Wehle is a professor at the University of Baltimore School of Law and author of “How to Read the Constitution — and Why,” as well as “What You Need to Know About Voting — and Why” and “How to Think Like a Lawyer — and Why.”

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