A new Pentagon unit being built to court Wall Street and pitch roughly $200 billion in private equity deals across the defense industry is drawing criticism from congressional Democrats, who are demanding communications, deal records, and conflict-of-interest policies tied to the operation.
In a letter sent Wednesday to Defense Secretary Pete Hegseth, Sens. Elizabeth Warren, D-Mass., and Richard Blumenthal, D-Conn., along with Rep. Ro Khanna, D-Calif., warned that letting buyout firms deeper into the defense industrial base risks putting key contractors on precarious financial footing and exposing classified work to undisclosed foreign investors.
“Private equity’s involvement in our nation’s defense infrastructure poses significant risks to our national security and taxpayers,” they wrote in the letter shared first with Semafor.
In March, Semafor reported that the Pentagon is building a 30-person team of investment bankers — recruited from Goldman Sachs, Morgan Stanley, and other top firms — to invest $200 billion over three years in defense companies. The “Economic Defense Unit” would pitch private-equity firms on deals critical to national security, provide advice, and arrange loans.
Recruits are being promised “unmatched access to top-level government officials and privileged information flow — whatever you need, you can get,” according to the presentation prepared by the Pentagon’s headhunting firm, Heidrick & Struggles. The group will report to two former colleagues of Deputy Secretary of Defense Stephen Feinberg, the billionaire co-founder of Cerberus, who has been infusing military procurement with a by-the-numbers private investing lens.
The three Democratic lawmakers requested documentation of every communication between the Department of Defense and Wall Street banks about the Economic Defense Unit, correspondence with Heidrick & Struggles, full term sheets for any deals the unit has already touched, and a description of conflict-of-interest guardrails for ex-bankers now inside the Pentagon. They are also seeking messages Feinberg has exchanged with Cerberus employees since his confirmation last year.