Deal Team Six: The Pentagon Goes Full Wall Street

the department of war is investing in an 'economic defense unit' that will make strategic deals with american defense companies. yes, they'll get paid like bankers, and yes, that's the point.

The Department of War needs deal guys — and now, it’s going to get them.

As Semafor reports, the Pentagon is now headhunting bankers from top firms like Goldman Sachs and JPMorgan to create an “Economic Defense Unit,” an in-house team that will make strategic investments in American defense companies to help them build the weapons our Department of War actually needs.

After an astute young man on X dubbed the project “Deal Team Six,” the commentariat was quick to pass judgement on the leaked recruiting deck.

“They are making corruption a job perk,” protested one “nonprofit cofounder,” while The New York Times reminded us that “Officials in and around the Trump administration have continually blurred the lines between public service and individual profit seeking.”

But the Economic Defense Unit, aka “Deal Team Six,” is actually pretty important. Especially now.

Most Americans have no idea how few of our exquisite missiles or Mach-speeding fighter jets we can actually produce… nor are they aware of the complexity of the deals involved in making our Department of War actually work.

‘Deal Guy’-Occupied Government

For the past 30 years, the American military has run off five major defense contractors, or “primes.” These contractors guzzle one out of every three dollars we spend on defense. The top players almost never change and have little incentive to compete; they effectively have a monopoly.

This is fine in peacetime, but when we’re at war? It can be catastrophic.

Here’s an example: America has a problem developing enough missiles. There are really only two government contractors that produce rocket motors, and neither one is incentivized to compete to produce more. So, in peacetime, we produce a marginal amount of the solid rocket motors required to power our missiles; during a war, we can’t suddenly produce more.

To fix this, we need to do some deals.

In January, the Pentagon invested $1 billion in helping a major defense company scale up its rocket motor production capabilities (it purchased convertible equity in a new company, a spin-off of an existing contractor). That’s one example of what Deal Team Six will continue to do: identify supply chain issues (look how fast we’re running out of missile defense interceptors in Iran!), find the companies trying to solve them, and give them money to do so.

Importantly, the Pentagon already makes direct equity investments in military contractors. For years it’s offered loans to defense companies and, in some cases, helped connect them with private financiers via the Office of Strategic Capital.

But Deal Team Six is structurally different than what’s been done in the past: instead of the Pentagon’s historic politburo of career civil servants owning these deals, now we’ve got a single leader taking responsibility for every major defense area.

To give you a sense of how badly we need this kind of structural reform: In 2024, the Pentagon’s team that managed purchasing F-35 stealth fighters was 2,200 people! As a result, that year, every F-35 was delivered late by an average of 238 days… while Lockheed received hundreds of millions of dollars in “incentive fees.”

It appears the Pentagon will now give individual deal guys the same responsibility as that team of 2,200.

Deal Team Five

This isn’t the first time the federal government has spun up a “deal team” to solve its problems.

Under Biden, the Commerce Department created a CHIPS Program Office (co-headed by a private equity deal guy) which hired investment bankers to give government grants to private companies, convince companies to invest in America, and help private sector innovators locate proper financing. (One example is the Commerce Department’s 2024 investment in Intel’s new Arizona semiconductor fab.)

The Trump administration is still doing this. The US Investment Accelerator, formerly headed up by tech banking legend Michael Grimes (of Morgan Stanley and Tesla IPO fame), has struck deals with Intel and Micron to help solve America’s manufacturing issues.

Now, it seems, the Trump administration is taking the model that worked at Commerce and bringing it over to the Department of War.

The White Pill

Deal Team Six could be exactly what the Pentagon needs.

The DoW has a ~$850b budget. Finally, we’re hiring deal guys who are professionals at spending… to actually spend American taxpayer money well.

The Times complains that salaries for these guys could stretch up to $600,000, comparable to Wall Street compensation. But, look: If you want our best talent to work for the government, that’s what it’s going to cost. And? We’re projected to spend $2 trillion on our F-35 program during its lifetime — I think we can afford to pay market rate for our Pentagon financiers.

Especially while we’re literally at war.

America has the best weaponry in the world, but we can’t build it fast enough. And financiers have a unique type of killer instinct. Maybe they’re the secret weapon we need in order to, as a wise man once said, “bring lethality back to the warfighter.”

—Ryan Hassan

(http://www.autoadmit.com/thread.php?thread_id=5847840&forum_id=2Reputation#49757156)

Hmmm

(http://www.autoadmit.com/thread.php?thread_id=5847840&forum_id=2Reputation#49757158)