Finance (Formerly Financial Services) Sept. 11, 2025

Strengthening Domestic and International Financial Capability to Support U.S. National Security Objectives

The finance industry is a large and intricate system of institutions and services (including banks, investment firms, and financial technology companies) that manage money, handle risk, and power economic activity. It is a cornerstone of the U.S. economy, facilitating capital formation, driving innovation, supporting job creation, and enabling economic growth across all sectors. The U.S. finance industry is also critical to national security because it allows the country to mobilize economic resources, fund defense initiatives, and exert geopolitical influence through financial mechanisms. This complex industry is undergoing rapid transformation, driven by technological disruption, market fragmentation and consolidation, interest rate sensitivity, the growing importance of nonbank financial institutions, and an evolving paradigm of assessing risks with an increasing focus on geopolitical and national security issues. These trends create vulnerabilities that demand examination of specific areas where disruption and strategic risk are concentrated.

Finance (Formerly Financial Services) May 31, 2024

U.S. Finance Industry & National Security: A Source of Both Strength and Vulnerability

This paper examines the intersection of the U.S. financial industry and national security in the context of Great Power Competition, especially with the rise of China (PRC). It highlights three key areas: capital markets, financial innovation, and financial statecraft. The PRC's economic strategies challenge U.S. dominance, while domestic issues like political polarization and economic inequality threaten internal stability. The U.S. capital markets, crucial for economic strength and national security, face challenges due to shifts towards private capital and changes in market dynamics. The paper calls for a more strategic approach by the Department of Defense (DoD) in using financial tools to advance national security, particularly through economic statecraft. It also advocates for regulatory reforms to address vulnerabilities in capital markets, like cybersecurity risks, and urges stronger public-private sector collaboration. To maintain global leadership, the U.S. must adapt its economic strategies to safeguard national interests and navigate evolving geopolitical dynamics. The paper provides a roadmap for integrating economic power with national security to ensure U.S. resilience amid global competition.

Finance (formerly Financial Services): May 30, 2023

Limitations of the U.S. Finance Industry in an Increasingly Multipolar World

The United States’ (U.S.) finance industry is a mosaic of highly regulated entities that generate trillions in revenue. Those revenues ripple across the U.S. and the global economies and become the foundation for capital investments into infrastructure, education, social welfare, and national defense. The United States occupies a unique position in the world order due, in large measure, to its robust financial markets and the singular attributes of the U.S. dollar. U.S. financial strength enables the pursuit of domestic and global objectives by leveraging the four primary instruments of power – diplomatic, informational, military, and economic.

Finance (Formerly Financial Services) May 30, 2022

Optimizing the Financing of Innovation to Accelerate National Security Capabilities

The U.S. finance industry is robust and well-resourced, offering a range of commercial and consumer banking, lending, and investment services to individuals and institutions across the country and the globe. Innovation within the finance industry is usually financed by risk capital firms seeking innovation with the potential for commercial success and high returns on investment. Financing innovation is considered a high-risk endeavor due to high startup failure rates, unproven technology, and the challenges of scaling to market production. Finding and applying innovation funding for potential defense market products is even more difficult, given the single buyer in the form of the DoD, the consolidated nature of the private defense industry, and the draw of higher, faster returns in the commercial sector. These factors limit private investment in national security-oriented start-ups. They also resulted in a divergence between the high technology capabilities in the commercial marketplace and the outmoded technology often found within the DoD and the broader U.S. Government (USG). To correct this imbalance, the DoD must take the following actions: increase and expand the investment tools within the innovation ecosystem, scale innovation ecosystem products to operations, and support America’s continued innovation advantage to be more relevant, complementary, and agile.

Finance (Formerly Financial Services) Sept. 25, 2018

Finance

The preamble to the US Constitution enumerates the purpose of our government: to “establish Justice, insure [sic] domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.”1 The Eisenhower School Industry Study program explores the US industrial base’s ability to provide resources for the common defense. As one of twenty studied industry sectors, the Financial Services Industry (FSI) not only contributes directly to the health of the US economy, it also provides credit and liquidity to finance the defense industrial base. Three views capture why the FSI remains critical to the United States’ national security. First, as the 2017 National Security Strategy (NSS) establishes, “Economic security is national security.” A safe and resilient FSI underpins a secure and prosperous economy. Accordingly, the FSI is designated vital critical infrastructure key to US economic security. Thomas Jefferson articulated a second, competing point of view, “banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” Or more simply, the FSI poses a fundamental danger to the nation. The third point of view, that of Alexander Hamilton, highlights the FSI’s value to a nation’s future greatness: “And thus by contributing to enlarge the mass of industrious and commercial enterprise, banks become nurseries of national wealth…” Although seemingly divergent, these views all share a common theme, the criticality of the FSI to national security. Not only is FSI directly linked to today’s national security, it both poses an inherent danger while also being fundamental and essential to the nation’s growth, development and prosperity. The purpose of this study is to develop policy recommendations through which the financial services industry can more securely support and make a greater contribution to national security.

Finance (formerly Financial Services) Dec. 30, 2017

Financial Services

The Financial Services Industry (FSI) is designated as a “critical infrastructure” of the United States, directly affecting national interests and impacting national security. Now is the time to adjust course across the regulatory oversight system, react to a major change in the FSI international market with Brexit, and enhance our resiliency against future threats to FSI cybersecurity vulnerabilities. The U.S. FSI makes a strong, sustainable contribution to national security and economic prosperity. Nonetheless, the government can do more to mitigate the unintended consequences of Dodd-Frank, including the overly complex domestic regulatory structure; potential Brexit impacts; and emerging cybersecurity challenges.