Noting the urgent need to break China’s chokehold on the global supply of lucrative advisory retainers, Commerce Secretary Howard Lutnick confirmed Tuesday that a $1.6 billion taxpayer commitment to a tiny domestic magnet maker is operating exactly as intended.
The federal subsidy for USA Rare Earth Inc. was announced just days before bankers at Cantor Fitzgerald—the financial services firm Lutnick recently handed over to his sons—successfully raised an additional $1.5 billion in private capital for the exact same company. Wall Street analysts noted the parallel deals provided a much-needed tailwind for the investment bank, generating millions in placement fees without the hassle of discovering a viable commercial product.
For years, America has relied on foreign adversaries to generate our underwriting revenue," said Marcus Baines, Deputy Director of Shareholder Value at the Commerce Department. "By routing $1.6 billion in federal funds through a startup that has yet to produce a single commercial magnet, we ensure those transaction fees stay right here at home, specifically in the Lutnick family trust.
Democratic lawmakers have raised concerns over the parallel deals, questioning whether USA Rare Earth actually possesses the technology to refine critical minerals. However, market strategists widely praised the startup’s leadership for right-sizing their operations, noting that extracting $3.1 billion directly from the federal government and private equity is vastly more efficient than attempting to extract neodymium from the ground.
Following the successful close of the USA Rare Earth raise, several domestic lithium mining outfits abandoned their physical drill sites entirely after realizing their operational burn rate could be eliminated by simply hiring a cabinet secretary’s nephew.