The Pentagon handed Cerberus alumni a $200 billion lending machine. The federal government doubled its salary ceiling to get them through the door.
The Office of Strategic Capital, which lent nothing before 2025, has committed $5 billion in direct loans this year and signed term sheets for an additional $14 billion. Director David Lorch, previously of Cerberus Capital Management, said the office plans to lend more than $200 billion over the coming years across more than 30 sectors — from missile production to telecom networks, covering any company whose business is “considered important to national security.” Deputy Defense Secretary Steve Feinberg, who previously headed Cerberus, oversees the operation.
The office has grown from five dealmakers to 35 and plans to hire 40 more from private-equity firms, private-credit firms, and investment banks, recruited through Heidrick & Struggles. Some MBA students at Stanford and the University of Pennsylvania have been persuaded to pause their studies to take government assignments.
President Trump in May signed an executive order authorizing the federal government to pay up to 400 key officials as much as $400,000 a year. Some OSC positions now pay up to $438,000. The standard Senior Executive Service pay range tops out at roughly $207,500 before locality adjustments. The executive order did not raise the SES ceiling. It created a parallel salary structure — a separate pay band for a separate class of hire, calibrated to what the private sector was paying.
Lorch described the hires as people who “took seven-figure pay cuts.” The pay cut is measured against what private-equity and investment-banking professionals earn. It is not measured against what any other federal employee earns. The salary was set to the private-sector market. The market is the one these professionals came from and will return to. The sacrifice is the gap between what Wall Street pays and what the federal government pays after it doubled its own ceiling to approximate Wall Street. That is not a sacrifice. It is a price the government set to access deal-making talent at a compensation level the standard federal pay structure was never designed to reach.
The lending structure compounds what the salary question introduces. The OSC makes direct loans, not grants. Loans are expected to be repaid, which means they score at lower cost in the federal budget than outright spending. But the taxpayer carries the downside. The federal funding backstop lets the OSC take on more risk than a conventional lender. The Trump administration this year asked Congress for an additional $20 billion for the lending office, inside a proposed $1.5 trillion military budget, as the CBO projects a $1.9 trillion deficit. The $20 billion request is small relative to the deficit. The lending authority it backstops — $200 billion across 30-plus sectors — is not.
The scope of lending is a fiscal choice disguised as a security imperative. The OSC’s mandate extends to any company whose business is “considered important to national security” — a standard broad enough to encompass mining, refining, and critical-minerals processing alongside munitions and rocket motors. The office has offered $500 million to Phoenix Tailings and $725 million to Energy Fuels. The Pentagon’s separate Economic Defense Unit has taken equity stakes in MP Materials and L3Harris’s missile business. Equity investments in publicly traded companies, made with taxpayer capital, managed by revolving-door professionals, using what the administration calls a “Wall Street playbook” — this is industrial policy. Calling it defense lending does not change what the balance sheet records.
The “Wall Street playbook” phrase does work the numbers do not. It frames the operation as modernization — private-sector expertise applied to a slow-moving bureaucracy. The expertise is real. But the framing omits the structural feature that makes Wall Street a Wall Street: the people who structure the deals capture the upside and socialize the downside. In private equity, the general partner earns management fees and carried interest while limited partners bear the loss. At the OSC, the dealmakers earn $400,000 in federal salary while the taxpayer bears the downside. The alignment is structurally identical. The limited partner is the public.
A defense lending office operating at this scale with standard federal compensation, transparent deal-term disclosure, GAO audit authority, and full Congressional authorization would be a different institution. It would still need transactional expertise; it would obtain that expertise at the pay scales every other federal lending institution manages. The choice to create a parallel salary structure, recruit through Heidrick & Struggles rather than USAJobs, and staff the operation with alumni of the firms whose sectors it funds is a choice about whose interests the office serves. It is not a choice complexity demanded.
The score is the score. The revolving door does not become public service because the office it spins through has “Strategic Capital” on the door.