(Bloomberg) — Donald Trump pledged to create “the greatest sovereign wealth fund of them all.” His advisers think one way to do it is a government agency they bet can help mobilize hundreds of billions from Wall Street.
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Plans discussed for the US International Development Finance Corp. include how it could use investments to deliver on Trump’s ambitions for greater US influence over Greenland and Panama. Backers say the agency, which stands to get as much as $120 billion in capital of its own, will be able to trigger far larger geopolitically driven overseas commitments by some of America’s most powerful institutional investors.
Advisers also see the DFC as a tool to remake how Washington delivers foreign aid and as a way to invest in strategic projects like data centers. It can also help secure supply chains for critical minerals and other resources, work that has begun under the Biden administration.
The prospect of a more powerful DFC has set off a competition to lead it, according to people close to the process.
Candidates include a former top executive at Bridgewater Associates and a former Republican congressman, the people said. Interviews have already taken place at Trump’s Palm Beach estate, they said.
The incoming administration wants the agency to become a much more effective instrument to deploy US economic power, according to former officials, people close to the transition and candidates for the top job at DFC. That power would be amplified by bringing along investments into strategic corners of the world by major institutional players like BlackRock Inc.
Among those driving the conversation about using the DFC both more like a sovereign fund and as a tool to radically change America’s approach to foreign aid are Elon Musk and Stephen Feinberg, the billionaire co-founder of Cerberus Capital Management, who Trump has nominated as deputy defense secretary, according to people close to the transition. Musk did not respond to a request for comment while a Cerberus spokesman did not comment.
The Trump transition didn’t respond to a request for comment.
A relative minnow in traditional Washington power games, the DFC was created by Congress during the first Trump administration as a tool for the US to counter China’s Belt and Road Initiative and other efforts to build influence in the developing world.
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Since then, it has drawn growing interest from Wall Street and bipartisan support as a way for the US to finance and invest in strategic projects overseas.
The DFC already has a portfolio of $49 billion in commitments, $12.1 billion of which came in fiscal 2024 alone. Among the likely changes under Trump is a shift away from investments in climate-related and other traditional development projects in favor of a harder-nosed focus on strategic mining and other resource deals, according to people close to the planning.
Bipartisan plans in Congress call for its lending capacity to be doubled to $120 billion and for it to be given a broader mandate to invest not only in low-income countries but in any nations of geopolitical interest.
According to people familiar with the discussions, Trump advisers are also examining whether to increase DFC’s resources by using funding from the Pentagon or USAID, the much larger institution overseeing traditional foreign aid.
With a staff of only around 700 people, the DFC isn’t big enough to have drawn public attention from Trump. But people close to the transition said the president-elect has been involved in conversations over using it as a vehicle to invest in mines and other projects and to work closely with the Pentagon’s Defense Logistics Agency to build up reserves of critical minerals.
The leading candidates to head the DFC include David Bohigian, a former senior manager at Bridgewater Associates, George King III, a Florida investment banker, and Ted Yoho, a former Florida congressman who co-sponsored the law that created the DFC, according to people close to the Trump transition and people familiar with the discussions.
Yoho said in an interview that the DFC needs an expanded mandate to invest beyond the low-income countries it is limited to now. Even if Trump isn’t able to realize his hopes of creating a sovereign wealth fund, he said, the DFC could take up at least the investment role.
“Maybe he’ll use it to buy the Panama Canal,” Yoho joked. He quickly added that he actually supports Trump’s ideas to buy either Greenland or the canal. “It sounds crazy. But if he can pull that off on either one of those, or both of them, that would be as significant as buying Alaska or the Louisiana Purchase.”
Other candidates to head the DFC include Sean Cairncross, a lawyer who led the Millennium Challenge Corporation during the first Trump administration, and Ray Washburne, a Texas real estate investor who led the DFC’s more modest predecessor agency, the Overseas Private Investment Corporation, the people said.
Yoho confirmed that he’s interviewed for the job. Bohigian and King declined to comment and Cairncross and Washburne didn’t respond to requests for comment.
Sovereign wealth funds have traditionally been used by countries to invest export revenues for the benefit of their citizens. But those who talk about the DFC as a possible alternative to a US wealth fund see a tool of geopolitical influence.
Setting up an American equivalent would require action by Congress. Traditionally, sovereign funds are financed by revenues from natural resources and other exports and therefore the products of countries that have current account surpluses unlike the US, though states like Alaska and Texas operate equivalents.
Among the ideas that Trump and his transition team have discussed is using DFC to fund purchases of assets important to national security, like copper mines and critical minerals stockpiles, according to the people familiar with the discussions.
The transition team has pitched the idea of giving the DFC or the US Export-Import Bank the same powers as the Defense Logistics Agency, which manages stockpiles of raw materials critical to national security, but on a bigger scale. The DFC, they say, could act as the decision maker and be funded partly out of the Pentagon budget to bid against China and other competitors for assets like mines. The plan is said to be backed by Trump’s incoming national security adviser, China hawk Michael Waltz. A spokesman for Waltz did not respond to requests for comment.
Details of the plan are still in flux, but the conversations reveal the unorthodox approach Trump and his transition team are willing to take as they mull how to combat China in the race for everything from lithium to lasers to mines.
Even if those ambitions don’t come to fruition, other people close to the Trump team say, the DFC can become a much more aggressive investor and national security tool.
“The DFC has to function almost like a private equity fund. This is how the sovereign funds throughout the world work,” said Mauricio Claver-Carone, a transition adviser named by Trump as special envoy to Latin America who was involved in the DFC’s creation while at the Treasury Department in the first Trump term. “It needs to be focused on strategic assets, strategic US interests throughout the world. And by the way, these deals should be bankable and provide a return to the American taxpayer.”
DFC has bipartisan support for reauthorization when its current spending mandate expires in October. Bills circulating in Congress would double its current $60 billion investment cap and address an accounting ruling that has stymied its ability to take equity stakes in projects.
The incoming administration backs removing that constraint on equity investments, with doing so seen as critical to boosting DFC’s reach. But lifting it may still face opposition from conservatives in Congress.
Robert Mosbacher, the Texas energy executive who led the DFC’s predecessor under President George W. Bush, said he backed using the agency more like a sovereign wealth fund. But doing that would also mean being willing to embrace more risk.
“The more risk they take, the more private capital they will mobilize,” Mosbacher said.
–With assistance from Nick Wadhams, Loukia Gyftopoulou, Michelle Jamrisko and Courtney McBride.
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