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  • Make America Sober Again: how Trump’s tariffs are wreaking havoc on your favorite booze

    A glass of bourbon casting a shadow in the shape of a downward arrow
     

    Natasha Breen/Getty, Tyler Le/BI

    Fawn Weaver has never been able to run her business without worrying about tariffs. She launched her Tennessee whiskey brand, Uncle Nearest, in 2017, right before the European Union slapped tariffs on American whiskeys and bourbons as part of a back-and-forth trade war with Donald Trump in 2018. That means Weaver’s international sales strategy has been affected, basically, since “day one,” she says. And because Uncle Nearest was a new kid on the block, the company didn’t really have much wiggle room on prices.

    “We couldn’t pass on those tariffs to the consumer,” she says. “We had to absorb them, and there was absolutely no way we could absorb them.”

    When Europe suspended whiskey tariffs in 2021, Weaver wasn’t home-free, either. She knew the suspension might not be permanent, especially if Trump landed back in the White House. So when he won in November, Uncle Nearest pulled international sales from their annual earnings forecast in anticipation of a return to the trade war.

    “We had to make a decision to not focus as much on international until the trade war was over,” she says. “Well, it’s not been over.”

    And return the trade war has: The EU is threatening to implement a 50% tariff on American whiskeys. And now, there’s a new and surprising trade foe: Canada. The United States’ neighbors to the north aren’t putting tariffs on US-made bourbon in response to Trump’s various economic threats; they’re simply making it impossible to buy.

    “They pulled us off the shelf right along with Jack Daniels,” Weaver says.

    The reignition of the international brown liquor battle is another headache for an industry already reeling. After multiple years of solid growth in the 2010s and a pandemic-driven boom in 2020, domestic US whiskey sales have been on the decline, while international sales have flattened. Data from IWSR, an analytics firm focused on the alcohol industry, found that sales volume of US whiskeys fell by 1.2% in 2023, and another 2% in 2024. Globally, sales were flat in 2023 and are on track to decline in 2024. (American whiskeys include bourbon, Tennessee, and rye. The distinctions are key since all bourbons are whiskeys, but not all whiskeys are bourbon. If it’s American or Irish, it’s whiskey, with the “e.” If it’s from Scotland, England, Japan, or most other places, it’s spelled whisky.)

    For customers, this could mean some of their favorite craft brands might struggle and even fold if they can’t get on enough shelves in America or abroad. Ironically, though, the bourbon industry’s tariff-related headaches may wind up being a plus for American drinkers in the near term — distilleries could wind up with a ton of inventory they can’t sell overseas and push more volumes and varieties onto the US market. That could mean prices on American booze come down in the near term, though some analysts say distributors could just charge more on everything, wherever it’s made.

    There’s no denying the industry is facing troubles, but Weaver chafes at the idea of calling what’s happening a bourbon “bust.” Uncle Nearest is growing as a brand, and there are still plenty of whiskey drinkers out there, at home and abroad. Instead, what’s happening is more of a normalization, and one she thinks more people should have seen coming.

    “Everyone was so caught up in this ‘boom,’ no one was forecasting for the correction,” she says. Whatever the case, Trump’s latest moves are a sobering moment for an industry that can no longer deny its growing pains.

    The modern whiskey trend in America dates back to the “Mad Men” era of the 1950s and ’60s, explained Marten Lodewijks, the president of IWSR US. It’s popularity started tapering off in the ’70s — people tend not to want to drink what their parents drank. In the ’80s and ’90s, whiskey really struggled, which was a curse and a blessing, because it got to sit and age until it picked up in popularity once again in the 2000s, around when the show “Mad Men” came out.

    “Those were sort of the glory days for Scotch whisky,” Lodewijks said. “The bourbon industry was a little bit later to the party, but obviously they weren’t blind to what was happening. And so they rose with the tide as well.”

    Over the past decade or so, bourbon has really taken off, too. Much like Scotch, bourbon makers have focused on premiumization — improving the quality and raising the price point. Where it was once seen as a product for drunks, it’s now considered fancy. Because bourbon ages for less time than Scotch and has laxer rules around it in areas such as ingredients, distillers can be more dynamic in their approach, too. “You can sort of take more chances,” Lodewijks said. “You don’t have to wait 12 years to figure out whether or not your innovation is a complete miss or a potential success.”

    So all of these distilleries and investors and everyone got a little bit ahead of themselves.

    Per the Kentucky Distillers’ Association, an industry group, Kentucky produced 3.2 million barrels of whiskey in 2024 and has a record 14.3 million barrels aging. Multiple new producers and brands have popped up, bourbon collecting has risen in popularity, and some consumers have been willing and able to spend big on high-end bottles.

    The COVID-19 pandemic put these trends on overdrive. People were sitting at home bored with money to spend, and they were spending more of it on alcohol.

    “There was a massive runup during COVID,” said Tzvi Wiesel, a longtime whiskey investor and trader and the CEO of Baxus, a spirits trading platform. “So all of these distilleries and investors and everyone got a little bit ahead of themselves, and they’re like, ‘Oh, there’s going to be this level of demand and growth is going to continue forever.’”

    Private investors got in on the action, pouring money into distilleries and upping production. “They built the capacity to make a million new barrels a year,” Wiesel said. The problem was, there wasn’t actually a sustainable place for that demand and growth.

    The influx of money chasing the increased demand led to what’s become a market flush with product that has nowhere to go.

    “The hedge funds and the private equity players, they’ve gone out and bought barrels, but they don’t have a brand to go along with it,” said Trey Zoeller, the founder and chief strategist at Jefferson’s Bourbon. “When bourbon was very scarce, that might’ve been a good investment. Now, there’s not nearly as many buyers for that as there were when there’s such scarcity.”

    Despite hopes for a new normal, bourbon has long been a cyclical industry. Optimists expected the upward trajectory kicked off by the pandemic to continue, but the market’s come back down to earth.

    On the one hand, demand is clearly decelerating. By 2022, Americans had returned to their normal drinking habits — when you’re back in the office, pouring an old-fashioned at 2 in the afternoon is a real no-no. Amid inflation and dwindling pandemic-driven savings, there’s also been a squeeze on consumers’ wallets. Alcohol is a discretionary item, meaning it’s a want, not a need, and when budgets are tight, people tend to lay off. There are structural factors in play as well. Gen Z is drinking less. Cannabis may be taking some market share from booze. GLP-1s such as Ozempic appear to curb alcohol cravings. Those are “probably having an impact on the margins,” said Nadine Sarwat, an analyst who covers the beverage and cannabis industries at Bernstein, though it’s not clear they’re huge factors — most 24-year-olds (of any generation) are not high-end whiskey drinkers.

    On the supply side, the decline in consumer interest is happening at a time when there’s a glut of whiskey available. Because bourbon has to age for at least a couple of years — most are kept for four to six years — producers have to anticipate demand years in advance. It’s become increasingly clear that a lot of producers overshot their estimates. There’s a ton of bourbon sitting in barrels with no bottles to pour it into or brands that want to buy it. (Some brands distill their own whiskeys; some buy it from larger distilleries on contract; some do both and even blend different barrels together.) While distillers can sit on barrels for a while, there are limits, depending on the product. Most bourbon has about a 10-year age limit before it turns. Many investors are on a tighter timeline ito get their returns, meaning they have to cut prices on barrels to move them on the market.

    This is just wild, the pricing on it and how much that has just crashed.

    “What I was paying for four-year-old Kentucky bourbon three years ago, I can now get 10-year-old Kentucky bourbon cheaper,” said Blake Riber, who runs the craft spirits platform Seelbach’s and blogs about the whiskey industry at Bourbonr. “This is just wild, the pricing on it and how much that has just crashed in, call it, 12 months.”

    Some producers have started to recognize the writing on the wall and scaled back, such as the distilled spirits maker MGP and the alcohol conglomerates Diageo and Brown-Forman.

    “The challenge that they’re all going to be facing over the next few years is, what do I do with all of the extra liquid in order to either let it age more or are there other outlets that I can use?” Lodewijks said. That may mean more flavored whiskeys or more whiskey-based ready-to-drink cocktails — whatever gets it poured before it goes bad.

    The tariffs, of course, are throwing a wrench in an already difficult situation. As part of Trump’s trade war, the EU is mulling ending the suspension of its tariffs on American whiskeys in early April. And this time, the bloc could set the levies at 50%, double the 25% from the president’s first term. Trump, in turn, has threatened a 200% tariff on wines, Champagnes, and other alcoholic products out of France and the rest of Europe.

    It’s not entirely clear what it would mean for the American bourbon industry if the EU tariffs take effect. Given the recent glut and change in domestic appetites, growing sales outside America has been a key release valve for producers. Bernstein’s Sarwat estimates that tariffs would result in a 10% hit to operating income for Brown-Forman, which owns brands such as Jack Daniel’s and Woodford Reserve.

    “Because US volumes have been really sluggish over the last couple of years, the international market has always been a real positive for increased penetration, and so any further challenges in that market does not help,” she said.

    Lodewijks said the EU’s original 25% tariff led to about a 20% decline in whiskey sales to Europe, but that doesn’t necessarily mean we know what a 50% tariff would do. “There’s a point at which more and more consumers aren’t willing to spend or spend the money that it would take to buy the product. So I’m not saying necessarily it’ll be more than 40%, but likely, it would be more,” he said.

    The broad point of Trump’s trade war — with Europe, China, whoever — is ostensibly to encourage companies to make more goods in the US. But in spaces such as alcohol, it’s not so simple. Tequila has to come from Mexico. Scotch is always from Scotland. American whiskey companies would love to sell more to people at home, but American drinkers are not picking up what they’re putting down. If tariffs go into effect on alcohol products coming into the US, people won’t necessarily switch over to domestically made bourbon. If you’re predominantly a wine drinker, you may not be jonesing to swap that for Wild Turkey overnight. And for the industry and Americans who do drink brown liquor, the tit-for-tat battle may not be a win either.

    Last time around, American bourbon and whiskey companies ate a lot of the cost of tariffs instead of increasing prices. But not everyone in the space has such a luxury, especially the smaller guys who’ve already been pushed around by the bigger guys. They’re trying to fight for shelf space wherever they can get it and are still trying to recover from the 2018 tariff bout.

    “After the tariffs, everything fell off a cliff, and it has not recovered at all,” said Becky Harris, the former president of the American Craft Spirits Association and the founder of Catoctin Creek distillery. “The big producers do recover. They recover why? Because they have massive amounts of money, they can splash back into the market.”

    That means some small producers may go under if they cannot find a place to sell their products. Given the industry’s competitiveness, they could also try to increase prices, though that may be tough. The bigger manufacturers and distributors have broad portfolios of products that encompass different types of alcohol from different parts of the world. If they see a price increase on imports to the US for one of their product lines, say, a European wine or Mexican tequila, they may increase prices on American-made products, too, either because they have to or just because they can.

    “It’s very likely that under the cover of tariffs, domestic products will also go up in price,” Lodewijks said.

    You can’t just roll back a tariff and expect loyalty to return overnight.

    While some analysts and industry professionals told me the supply glut could lead to producers dropping their prices in the short term in an attempt to move their booze, Tom Fischer, who runs BourbonBlog.com, said the long-term news may not be as encouraging.

    “If distilleries lose sales in Europe due to higher prices from EU tariffs, those same American distilleries may raise domestic prices to offset lost revenue,” he said. “This has been shown to happen in the past with other goods, so we hope that bourbon won’t be the next casualty.”

    Trump’s trade war has the potential to hit the industry in more tangential places, too. Riber noted that not much glass manufacturing happens in the US, and he’s starting to hear concerns from bourbon brands about potential tariffs on glass imports and needing to raise prices to make up for it. “At some point, that’s going to have to get passed on,” he said. Wiesel brought up the increased need for warehouse space as bourbon piles up that can’t be sold. “Distilleries are going to have to invest a ton into the actual physical infrastructure to hold onto all of these barrels that they own that are maturing for longer because they don’t have a place to sell them,” he said.

    And then there’s Canada, which the president has picked a somewhat confusing fight with. He’s threatened 25% tariffs on imports from Canada, has said he wants to make it the 51st state, and has taken an overall aggressive approach to the country. It’s sparked a sense of patriotism in Canada — along with boycotts on American-made products, including bourbon.

    “Canada is just pulling American products. They’re essentially sending notes to their suppliers saying, ‘Hey, no, I don’t have anything against you, but my customers are not buying American right now. They’re angry,’” Harris said. “And they said, ‘Even when the tariffs are gone, this is going to take a while, so don’t hold your breath.’”

    Fischer expressed similar concerns about the potential European tariffs. “A 50% tariff risks pricing us out of key markets, and once those consumers shift, they may not come back,” he said. “You can’t just roll back a tariff and expect loyalty to return overnight. This is long-term damage.”

    Weaver, from Uncle Nearest, is still optimistic about the future. Bourbon is one of America’s most important exports “in terms of symbolism,” she said, and if you look at bourbon’s history, “we’ve always had these times when people are drinking less of it, but then it comes roaring back.” She gets that the president is doing what he thinks he needs to do to negotiate trade agreements. In the meantime, it might be nice if he gave the industry a bit of a PR boost.

    “The best thing he could do is literally say, ‘Hey, America, this is going to be in our best interest,’ because this is clearly what he believes, ‘but while we’re working this out, we really need you to double down on bourbon,’” she said.

    Maybe “Buy American” can become “Drink American,” even if the president himself doesn’t drink.

    Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.

    Read the original article on Business Insider

  • We uncovered Meta’s ‘block lists.’ It turns out a lot more companies have them, too.

    A row of x's coming up on a frustrated business man

    Ryan McVay/Getty, jayk7/Getty, Tyler Le/BI

    • Workers across industries report being unknowingly blacklisted from their former employers, sometimes for years.
    • Experts say block lists are legal but raise ethical concerns, as employees often have no way to appeal the decision.
    • Block lists often operate without oversight, leaving employees with no way to challenge their status.

    Earlier this month, Business Insider revealed that Meta maintains secret “block” lists preventing some former employees from being rehired. Since then, a flood of emails and messages to BI, as well as discussions across Reddit and LinkedIn suggests that this practice, while not illegal, is far more widespread than many job seekers realize.

    Workers from across corporate America shared eerily similar stories of applying for roles at former employers, only to be mysteriously ghosted by recruiters or quietly marked as “ineligible for rehire.” In many cases, the affected individuals claimed they had strong performance records and no history of workplace misconduct. All of them requested for their identities and the names of their workplaces to be kept anonymous to prevent retaliation from their former employers.

    “A special kind of cruelty”

    One former employee from the consulting industry who described their experience in an email to BI said that they found themselves on a block list after they quit because of workplace politics. This employee said that they found out they were on a list from the company’s HR department after applying to multiple roles since they left. “To make matters worse, [I] confirmed that it’s still happening even after eight years of leaving,” they wrote, adding that they were exploring legal options.

    A former employee of a major chip company who was part of a wave of layoffs in 2015 said they were told they were “banned for life” from working at the company despite a promotion and a raise right before the cut. “Why? No one seems to know,” they said, “and it seems likely that I will never know.”

    Another former employee of the same chip company told BI that their manager put them on a list after they left due to disagreements. When managers, including ones this person had known for years, tried to rehire them over the years, they wouldn’t be able to. “At one point, I checked with HR, and they confirmed to me that I was on a list,” they said. “But told me that a manager could overturn the decision, but that never happened.”

    At some companies, human resources have designated alternate names for the “block” list. An engineer who worked for a large publicly traded internet company based in Silicon Valley from 2010 to 2014 told BI that these block lists existed at the company, too, but with a different categorization. “I got strong performance reviews for multiple consecutive performance cycles,” they said. “But when I resigned, I was put on a ‘non-regretted attrition’ list.”

    Another former manager who worked at the same company from 2009 through 2016 in multiple countries said that a label called “non-regretted attrition” when an employee quit would essentially block them from being rehired. “The only people deciding which category someone who left fell into was HR and the direct manager,” they said. “On the flip side, if you were ‘regretted attrition,’ you would be fast-tracked for interviews and at least guaranteed a recruiter screen.”

    Other emails and messages to Business Insider came from frustrated ex-workers from Meta. Three former Meta employees who were laid off along with thousands of other workers in 2022 told BI that multiple hiring managers who had tried to rehire them were told by HR that these former employees were on “do not hire” lists and could not be hired back. “All of those opportunities ended in mysterious dead ends,” one of them wrote. “It felt like a special kind of cruelty.”

    One said previous managers at the company ran “into roadblocks” after having recruiters reach out to rehire them. “In my conversation with someone from HR, I was told there is a ‘do not engage’ flag against my name in their system despite having good performance ratings during my time at Meta,” they told BI.

    A Meta spokesperson previously told BI that the company had “clear criteria for when someone is marked ineligible for rehire that are applied to all departing employees, and there are checks and balances in the process so that a single manager cannot unilaterally tag someone ineligible without support.”

    The company also said that its decision to bar an ex-employee from rehire is based on a multitude of factors: “We determine, at the time of separation, the reason for the employee’s departure — policy violation, performance termination, voluntary resignation etc. — and that, along with the last rating prior to separation and any other recent performance signals, determines whether an employee is eligible for rehire or not.”

    Block lists across all industries

    A nurse with 38 years of experience claimed that even hospitals around the country keep block lists after unsuccessfully trying to get rehired at previous workplaces and hearing from HR that they weren’t eligible “If a manager has a beef against an employee, they can easily keep them from being hired again,” they said. “It is, more often than not, punitive, and there is nothing you can do about it.”

    On Reddit, dozens of people talked about how commonplace the practice seems to be. One user shared how their company’s internal block list functioned: “If you leave for a competitor, you’re automatically flagged as ‘do not rehire.’ There’s no discussion, no appeal — just an invisible wall you don’t even know exists until you try coming back.”

    “Companies do input whether you are eligible for rehire in their human capital management (HCM) system,” career coach Marlo Lyons told BI. “If they put ‘not eligible for rehire,’ which many fired employees are, then you would not be rehired no matter how you’ve changed or grown and no matter if you applied to a different department. [It] does raise questions about how these decisions are made and whether employees have any recourse.”

    A “large-scale, systematic approach”

    On LinkedIn, more than a hundred people weighed in on a post by Laszlo Bock, a former Google HR head, who was surprised by Meta’s block lists that BI reported about. “I’ve never heard of anything like this,” Bock wrote on the platform. “I’ve sometimes heard an exec say, ‘Don’t ever re-hire this person,’ but never seen a large-scale, systematic approach like this.”

    Karen Liska, an attorney and Director of People Operations at SafeSend, wrote in a comment on Bock’s post that some companies used such lists as “a risk mitigation strategy” but added that there could be issues with their implementation. “Like any other tool in a large org that is meant to help keep systems functioning, it can be used for protective purposes or other legitimate business reasons, or it can be used improperly as part of retaliation or to maintain discriminatory practices,” Liska wrote. She questioned whether these lists should have expiration dates “to give people a chance to learn and grow or for the security/revenge risk to cool off.”

    Rehiring former employees can be a business risk, Liska told BI in an interview. They might need performance interventions, or resume past negative behaviours like poor attendance. “An ‘ineligible for rehire’ list helps protect against these risks by ensuring that regardless of turnover in HR or leadership, there is a source of knowledge within the business about which former employees may not be viable future candidates,” she said.

    If someone is fired or laid off, being ineligible for rehire should be communicated, Liska said. And companies should have a policy for re-evaluating the reasons someone is placed on a list to begin with to leave a potential opening in the future when there isn’t a significant legal risk. “Perhaps a different manager, or a different line of work, or just gaining more experience could make all the difference and turn an underperforming or unhappy former employee into a productive and happy returning employee,” she said.

    Liska believes it’s time to have an industry-wide conversation about this practice. “Simply saying ‘don’t have these lists at all’ without a viable alternative ignores the difficulties of managing large companies at scale.” she said.

    For employees, the existence of block lists introduces yet another layer of uncertainty in an already ruthless job market. While companies argue that blocking certain employees is a matter of business strategy or risk management, critics say the practice disproportionately harms workers who may have left on neutral terms.

    In today’s hyper-competitive job market, the question isn’t just whether you’ll be welcomed back — it’s whether the door was silently locked behind you the moment you walked out.

    Katherine Tangalakis-Lippert contributed reporting.

    If you’re a current or former Meta employee or have an insight to share about the company, contact Pranav Dixit from a nonwork device securely on Signal at +1-408-905-9124 or email him at pranavdixit@protonmail.com.

    Read the original article on Business Insider

  • America’s homebuyers have a huge new bargaining chip

    A house in a shopping cart with a slashed price tag
     

    OsakaWayne Studios/Getty, jayk7/Getty, Mark Kolpakov/Getty, Charles Gullung/Getty, wasan prunglampoo/Getty, Tyler Le/BI

    Arnab Dutta, a 40-year-old living in the Bay Area, tried buying a home a couple of years ago with the help of a traditional real estate agent. It didn’t go well.

    Dutta’s arrangement with his agent was the same one Americans have used for decades: The agent agreed to guide him through the process — showing him homes, writing offers, and wrangling stacks of paperwork — in exchange for the standard cut of the final sale price, between 2% and 3%. The commission, likely tens of thousands of dollars, wouldn’t come straight out of Dutta’s pocket; sellers are the ones who fork over the cash to agents on both sides of the deal after it closes. But Dutta would be indirectly paying for his agent, since the buyer is the reason the seller has any money to hand out, and the agent’s threadbare advice made him feel like he wasn’t getting much bang for his buck. The whole commission thing didn’t sit right with him, either. He didn’t see why his agent, who was supposed to represent his interests, should make more money if the price went up, the opposite of Dutta’s ideal outcome. After he lost out on several homes, his search stalled out.

    Dutta wasn’t alone in his dissatisfaction with the traditional agent setup. He didn’t know it at the time, but the rules that reinforced this relationship for decades were about to change. Last March, the National Association of Realtors, a powerful industry group that represents some 1.5 million agents around the country, agreed to settle a series of multibillion-dollar lawsuits that claimed this roundabout way of paying agents — and the NAR rules undergirding this system — had forced people to pay unfairly high commissions. The deal included new rules for paying agents, which many real estate experts predicted would nudge buyers and sellers to start negotiating over commission rates and bring costs down.

    The results a year later have been underwhelming: There’s little evidence that the settlement has put a dent in average nationwide commission rates, and those looking to preserve the old way of doing things have devised workarounds to ensure agents still collect their typical cut. But while many people are still doing things more or less the old way, some are taking advantage of the updated rules to usher in a brave new world of homebuying. They’re owners of discount brokerages charging far less than the typical commission, entrepreneurs spinning up new real estate tech, and a small but growing number of savvy consumers flexing their negotiating power to save tens of thousands of dollars on their agents’ fees. They’re all betting that one day they’ll no longer be outliers.

    When Dutta resumed the hunt late last year, he tried a different tack. He enlisted the services of TurboHome, a brokerage founded after the NAR settlement whose agents work for a flat fee of between $5,000 and $15,000. Most real estate agents are independent contractors, reliant on hefty commission checks to make up for the lack of a steady salary. But agents at TurboHome are employed by the company — trading the uneven lump sums for consistent pay. The company, which raised $3.85 million in seed funding late last year, uses software tools to speed up mundane tasks like analyzing property disclosures and finding sales of comparable homes. Its tech frees up agents to focus on the finer details of the process while also taking on more clients at a time to make up for the smaller fees they collect on each deal.

    Dutta agreed to pay the flat fee of $10,000 out of pocket, which turned out to be a useful bargaining chip in his negotiations with sellers. He didn’t have to ask sellers to cover his agent’s fee, which allowed them to pocket the sizable chunk of the deal that they would have otherwise had to fork over to his representation. In the pricey Bay Area, where the typical home trades for north of $1 million, that meant savings of $25,000 or more. When one of Dutta’s offers eventually won out, it wasn’t because he proposed the largest dollar figure; his agent, Donny Suh, tells me other prospective buyers came in higher. But without having to pay out a commission for Suh, the seller stood to net the most money from Dutta’s offer. He closed on the three-bedroom home in February.

    The success has left Dutta with some what-ifs from his prior home search. He recalls one house for which he was outbid by just $5,000.

    “If we had this sort of tool in our hands at that time,” he tells me, “we wouldn’t have lost.”

    The battle over commissions — who pays, how much they pay, and when the money changes hands — comes down to information.

    It all starts with the multiple listing services — local databases where most homes are advertised for sale. They may sound like unsexy infrastructure, but they’ve played a key role in propping up the typical agent commission. There are more than 500 of these databases around the country, and the vast majority are operated by local Realtor associations that follow rules handed down by the NAR. While the national organization didn’t set commissions and says they’ve always been negotiable, it did set up rules that helped maintain the status quo. In the presettlement days, a seller who listed their home on the MLS had to fill out a little box saying how much they’d be willing to pay the buyer’s agent. Since buyers already had enough up-front costs to worry about, everyone assumed that deals would go more smoothly if the suddenly cash-flush seller just paid out both sides. This setup allowed buyers to basically ignore how much their agent was getting paid — in fact, buyers’ agents used to tell clients their services were free until a different legal battle ended that practice in 2020. It also meant that sellers almost always stuck to the industry standard of 2.5% or 3% of the final price for each agent, either because they didn’t know any different or because offering less could risk being passed over by buyers’ agents, who might “steer” their clients away from properties with lower-than-average commissions.

    In the lawsuits against the NAR, the sellers who sued the organization alleged that this whole system was an elaborate scheme to pull the wool over regular people’s eyes and force them to pay unfairly high commissions. Given that the median home price in the US is about $419,000, a 6% commission, split between two agents, would mean shelling out more than $25,000. While the plaintiffs pushed for commissions to be “decoupled,” with buyers and sellers paying their own agents separately, the $418 million settlement last year didn’t go quite that far. But it did offer enough changes to throw the real estate world into flux.

    There are these sort of savvier buyers out there, particularly in the high-cost markets, that are looking for any advantage that they can get.

    The first change is that sellers and their agents can no longer offer buyer-agent commissions through the MLS. In theory, this should get rid of that steering problem — if sellers aren’t offering a commission, buyers’ agents can’t direct their clients away from the homes with less than the customary fee. But there’s a huge loophole here: Sellers can advertise a buyer-agent commission pretty much anywhere else — on the broker’s website, over the phone, on sites like Zillow or Redfin. If a buyer’s agent wants to see how much they’ll make off a home, it’s easy for them to check. Given this workaround, many sellers are still offering to pay the standard commission, which makes sense in today’s slow housing market. Given the low number of homes changing hands, people are wary of doing anything that could muck up a deal.

    Buyers, on the other hand, face more paperwork as a result of the settlement. Before an agent so much as opens a door for a buyer these days, they’ll have to get them to sign an agreement stating the terms of their relationship, including compensation. These forms, known as buyer-representation agreements, have historically been introduced much later in the process, if they were used at all. And they vary widely by brokerage and agent — some agreements are simple one-sheeters to tour a few homes, while others lock buyers into exclusive arrangements for months. It’s the difference between seeing someone casually and getting married on the first date.

    For now, at least, the combination of a slow market, general inertia, and lagging consumer awareness has kept the status quo relatively intact. A study by the real estate brokerage Redfin found that the typical buyer-agent commission was 2.36% in the fourth quarter of the year, down from 2.43% in the first quarter of 2024, when the settlement was announced, and unchanged from the third quarter, when the rules went into effect. But again, it’s still pretty early, and many industry insiders expect the changes to eventually start knocking down commissions as agents are forced to compete on price.

    “I think our projection still hasn’t changed much, which is, over time, that will still come down,” Joe Rath, the head of industry relations for Redfin, says. “That downward pressure still exists.”

    So how, exactly, could buyers and sellers start coming out ahead? A big step is simple consumer education. The real estate firm Clever surveyed 1,000 homeowners and prospective buyers and found that even after the new rules went into effect, 40% of respondents said they either didn’t understand the implications or hadn’t even heard of the lawsuits.

    Old habits die hard, especially when there’s so much confusion around these changes. And critics of the settlement say it’s actually opened up new pitfalls for buyers. Before, the MLS at least showed you what almost every home was offering in commissions — now that kind of information has been scattered or isn’t publicly available at all, which makes it harder to tell whether “steering” is happening. And some of the representation agreements floating around could end up locking buyers into exclusive relationships with incompetent agents.

    “All these deceptive practices have been basically turned underground,” Tanya Monestier, a law professor at the University at Buffalo, tells me.

    But as consumers absorb these new rules and start to negotiate on commissions, both sides of the transaction stand to benefit. For sellers, the main advice boils down to this: Don’t offer an exact commission anywhere. Not on the MLS, of course, but also not on a broker’s website, via telephone, or a sign in the front yard, Stephen Brobeck, a senior fellow at the Consumer Policy Center, says. Instead, allow buyers to make offers on agent payment, just like they do for the home itself. One buyer might offer to pay 2.5% more than the asking price but ask for that extra 2.5% back in the form of a closing credit so they can pay their agent. Another buyer may offer the same dollar amount but ask for only 1.5% back to pay their agent’s commission. Yet another, like Dutta, may not ask for any money back. At the end of the day, sellers should care about their net proceeds — the amount that goes into their pocket once all the pesky fees are settled. They can say they’re open to working with buyers on their agent’s commission without backing themselves into a corner by suggesting an exact percentage.

    On the buyers’ side, saving money comes down to asking — you can request a lower commission from your own agent or, if you can’t afford to pay it out of pocket, ask for help from the seller in the form of a closing credit. “You can ask for stuff that’s not advertised and still get it,” Leo Pareja, the CEO of the real estate brokerage eXp Realty, tells me. Buyers make special requests all the time, like asking for a repair or for the pool table in the basement to come with the house. A credit to cover your agent’s commissions shouldn’t be any different.

    You can ask for stuff that’s not advertised and still get it.

    Most sellers these days are still offering to pay a commission to the buyer’s agent, as they did before the settlement’s changes. But buyers who’ve negotiated a lower commission with their own agent could use that to make their offers more attractive in the eyes of a seller.

    “I think what has changed is that there are these sort of savvier buyers out there, particularly in the high-cost markets, that are looking for any advantage that they can get,” Ben Bear, the founder and CEO of TurboHome, says. The company mostly operates in California but has recently expanded to Texas and Washington.

    Long before they start eyeing homes, buyers should also do some due diligence on their prospective agents. Studies have found that the vast majority of buyers still want a professional to guide them through their purchase, which makes sense — it’s a massive transaction that most people will complete only a few times in their life. Some agents may be able to articulate exactly why they’re worth every penny of the traditional commission. But there are a lot of agents out there vying for your business, and others may be willing to deviate from the standard commission to win more clients. One recently created portal, known as Fetch Agent, allows buyers to search for agents that match a set of parameters, like years of experience, location expertise, and even how much they charge in commission. In a world where buyer-agent commissions are no longer an afterthought but a key part of sale negotiations, it makes sense to shop around for an agent before shopping for a house.

    “What we offer is the ability to transparently see what an agent would be open to when it comes to a work arrangement,” Beau Correll, the founder of Fetch Agent, tells me. That kind of transparency — knowing exactly what you’re getting from an agent and how much you’ll be paying for them — is the kind of thing that could spur more agents to compete on price, which would bring down costs for consumers.

    The rollout of the new rules has undoubtedly been a mess — even now, a year after the settlement was unveiled, there are many different interpretations of what is and isn’t allowed. But the idea that both buyers and sellers should think about commissions — and maybe even negotiate to get a better deal — is a remarkable reversal from the old way of doing things.

    “I would’ve liked it to go further,” Brobeck tells me. “But it represents progress.”

    James Rodriguez is a senior reporter on Business Insider’s Discourse team.

    Read the original article on Business Insider

  • Here’s how members of Congress actually get rich

    Photo collage of Marco Rubio and Elizabeth Warren with money
    You’ve probably heard some wild claims about politicians’ wealth. Here’s how they really make money.

    Julia Beverly/Getty, alexsl/Getty, Kevin Dietsch/Getty, Tyler Le/BI

    • You may have seen some wild claims about politicians’ high net worth.
    • Most of it’s not true, though there are a handful of ways that lawmakers can make an extra buck.
    • It’s also pretty easy to verify claims about members of Congress’s net worth yourself.

    If you spend a significant amount of time online, particularly on Elon Musk’s X, you may have come across some jaw-dropping information about American politicians’ wealth.

    There’s a good chance it’s not true.

    Whether it’s falsely inflated salaries, charges of illicit sources of income, or estimated net worths seemingly pulled out of thin air, false information about the personal wealth of American leaders is seemingly all over the place online.

    The claims are sometimes so outrageous that lawmakers feel compelled to respond, as Democratic Reps. Alexandria Ocasio-Cortez of New York and Jasmine Crockett of Texas have.

    Some of this false information has been promoted by Musk himself, who recently expressed interest in raising the salaries of members of Congress — based on the notion that they’re enriching themselves by steering money toward non-governmental organizations in which they’re involved.

    The DOGE leader recently reshared a post making false or unverified claims about various top lawmakers, including former House Speaker Nancy Pelosi, former Senate Minority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, and Sen. Elizabeth Warren of Massachusetts.

    “It’s not like these politicians started companies or were NBA All-Stars, so where did they get all the money?” Musk wrote. “Does anyone know?”

    Occasionally, members of Congress do engage in outright corruption, with the most recent example being Sen. Bob Menendez of New Jersey.

    But by and large, members of Congress don’t have a ton of avenues to enrich themselves, thanks to ethics rules.

    There’s one key way that lawmakers make extra cash

    Under ethics rules, members of the House and Senate are generally barred from earning more than roughly $30,000 in outside income from other jobs.

    Some make use of that: Marco Rubio, now the Secretary of State, earned more than $20,000 a year teaching college courses when he was a senator, disclosures show. Many do not.

    But some lawmakers do manage to find a way to make extra money while serving — one that’s perfectly legal and not subject to the outside income limit: book deals.

    This is especially true in the Senate, where lawmakers are more well-known, and thus more likely to sell lots of books.

    Take Warren as an example. In 2023, she made more than $36,200 from book royalties. The year before, she made even more — over $443,000.

    The Massachusetts senator is an especially prolific author, drawing royalties from a combination of political memoirs she’s written since becoming a politician. The books include “The Two-Income Trap,” which she wrote as a professor, and even textbooks that she helped write in the 1980s.

    In 2023, eight senators made more than $100,000 from book agreements. That includes Democrats like Sen. Raphael Warnock of Georgia and Tim Kaine of Virginia, along with Republicans like Sen. Ted Cruz of Texas and Sen. Josh Hawley of Missouri.

    Book proceeds are by far the most common way for lawmakers to generate significant amounts of income while in office.

    Sometimes, writing books can allow lawmakers to dramatically improve their financial situations. Rubio, for example, has said that writing a book allowed him to pay off his student loans.

    Becoming landlords is another way for property-owning members of Congress to make money.

    For lawmakers who are already independently wealthy, there’s also a way to pad that: stock ownership. That’s more controversial, given that lawmakers may have access to non-public information.

    Business Insider’s “Conflicted Congress” project found in 2021 that many members of Congress fail to report their trades in a timely fashion, and that conflicts of interest abound.

    But making money from the stock market isn’t entirely straightforward either: The market rises and falls, and even lawmakers can make bad bets.

    You can verify all of this for yourself

    If you see a post stating that a rank-and-file member of Congress has an annual salary other than $174,000, there’s a good chance that it’s fake.

    That’s the salary that virtually all members of Congress have been paid since 2009 — lawmakers have blocked any increase every single year since then.

    Congressional leaders make a bit more than that. The speaker of the House — currently Rep. Mike Johnson — makes $223,500 a year. Every other top party leader makes $193,400.

    If you come across a post claiming a lawmaker makes an exorbitant amount of money, it’s probably worth fact-checking.

    The good news is that anyone can do it themselves.

    Every year, members of the House and Senate file reports disclosing their assets, sources of income, and debts. The same is true of Trump administration nominees and candidates running for federal offices.

    The Senate maintains an online portal for searching this information, as does the House. For the executive branch, there’s a portal managed by the US Office of Government Ethics.

    So is Chuck Schumer worth $75 million, and Warren $76 million, as the post that Musk reshared alleges?

    No.

    According to 2023 disclosures, Schumer is worth roughly $2.3 million, while Warren — who’s also publicly released her tax returns — is worth a little more than $9 million.

    Read the original article on Business Insider

  • Former lithium startup workers filed a lawsuit over ‘toxic’ chemicals. The company claimed they spilled trade secrets — and sued back.

    Photo collage of Scientific imagery with Lilac lawsuit documents
     Lilac Solutions sued ex-workers over trade secrets violations.

    Jose Luis Pelaez Inc/Getty, Yevhen Borysov/Getty, Iana Kunitsa/Getty, Hinterhaus Productions/Getty, Tyler Le/BI

    • Ex-workers of a lithium tech startup have sued the company, alleging toxic chemical exposure.
    • Lilac Solutions, a company bankrolled by Bill Gates, countersued for trade secret violations.
    • An attorney for the ex-employees said Lilac’s suit is a “pressure tactic to scare” his clients.

    Four ex-employees of a lithium startup bankrolled by Bill Gates’ climate investment firm have sued the company, accusing it of “recklessly” exposing them to toxic chemicals that left them sick and injured.

    The former workers at Lilac Solutions say in a 60-page lawsuit they were fired after they repeatedly sounded the alarm to upper management about their “overexposure” to hazardous dust and fumes inside a poorly ventilated Oakland, California, warehouse.

    Lilac hit back against the ex-employees with its own lawsuit in late January, alleging the ex-workers “intentionally misappropriated” the startup’s trade secrets through their public court filings.

    The company, which has said it raised more than $165 million in funding led by Gates’ climate investment firm Breakthrough Energy Ventures, developed new technology to extract lithium, a crucial material in electric car batteries.

    Gates is not personally affiliated with the lithium company. His investment firm is not named in the ex-workers’ lawsuit.

    A previous Business Insider review found companies are using trade secrets law as a legal strategy against workers who have accused them of wrongdoing.

    Nick Yasman, an attorney with West Coast Trial Lawyers who represents the former employees, told BI that Lilac’s countersuit is a “pressure tactic to scare” his clients into backing down, and called the suit “utterly unmeritorious.

    A Lilac spokesperson, though, told BI that “the allegations against the company are completely without merit.”

    “Lilac Solutions will vigorously defend itself and its employees in this lawsuit, and we are confident that the legal process will vindicate us from these baseless allegations,” the spokesperson said. “Our focus remains on delivering industry-leading technology that unlocks faster, cheaper and cleaner lithium production to meet growing industry demand.”

    Lilac ‘sacrificed human health,’ lawsuit says

    The former employees’ lawsuit against Lilac alleges that the company “sacrificed human health and safety in pursuit of its goals.”

    Plaintiffs Michael Mitchell, Khiry Crawford, Tyler Echevarria, and Anthony McCune worked out of Lilac’s Oakland processing plant, assisting in the manufacturing of tiny ceramic ion exchange “beads” used in the company’s process to extract lithium from brine, the lawsuit, filed in late November in California’s Alameda County Superior Court, says.

    The beads or ion exchange material, referenced in court papers as “IXM,” “was comprised of many different toxic and hazardous chemical compounds,” says the lawsuit, which highlights a specific chemical compound, only identified as “Compound A,” containing “a toxic chemical” only referred to as “Chemical 1.”

    “While Compound A can be a benign material at small exposure levels, significant exposure to Compound A can lead to high levels of Chemical 1 in the human bloodstream,” the lawsuit says. “High enough concentrations of Chemical 1 in the bloodstream can lead to Chemical 1 poisoning, which is a toxic condition caused by overexposure or chronic exposure to Chemical 1.”

    The plaintiffs allege Lilac stored its stock of “Compound A” in torn bags that were “carelessly” piled on the warehouse floor, allowing particles to escape into the air.

    Test results eventually confirmed that the ex-employees were “actively being exposed to toxic and dangerously high levels of Chemical 1 every work day,” the lawsuit says.

    Prior to their employment at Lilac, the lawsuit says the plaintiffs were physically healthy. Yet when they were at the company and after they left, they experienced symptoms including severe respiratory pains, coughing, difficulty breathing, abnormal gastric pains, loss of balance, nervous system tremors, uncontrollable shaking in their hands and limbs, severe insomnia, anxiety, and depression, their lawyers allege in the complaint.

    The plaintiffs say that throughout their employment with Lilac from 2021 to 2024, they were “regularly warned by colleagues about the danger of the materials they worked with,” but were provided with “extremely minimal and grossly insufficient personal protective equipment.”

    The ex-workers say in the complaint their physical injuries were “substantially caused by LILAC’s willful concealment of the identities of many toxic chemicals,” as well as arsenic.

    The former employees allege that their desks and workspaces were “constantly” covered in chemical dust and engulfed by fumes and that the “toxicity was inescapable.”

    As early as 2021 and through January 2024, the employees complained to management about the “grossly insufficient” ventilation system in the warehouse, the lawsuit says.

    “Despite Plaintiffs complaints, LILAC took no measures to increase ventilation and air purity within its warehouse until January 2024, after Plaintiffs were terminated,” it says.

    On January 16, 2024, the workers were notified of their terminations and told it was the result of a “reduction in force,” the lawsuit says.

    The lawsuit argues that the plaintiffs’ complaints about workplace health and safety and “whistleblower complaints” about Lilac’s “noncompliance with state and local health and safety codes and regulations, substantially caused and contributed” to the company’s decision to end their employment.

    The lawsuit alleges California labor code violations, whistleblower retaliation, negligence, and discrimination.

    “It’s a whistleblower retaliation case where the people who complained the most were the same ones who were fired,” Yasman told BI.

    After their firings, the plaintiffs filed complaints of retaliation against Lilac with California’s Labor Commissioner’s Office and complaints with the state’s Division of Occupational Safety and Health, resulting in OSHA issuing Lilac four citations, the lawsuit says.

    Lilac alleges the ex-workers breached confidentiality agreements

    Lilac filed its countersuit against the ex-employees on January 31, calling it ” a case of clear and intentional misappropriation of trade secrets” in court papers.

    The former workers, Lilac’s lawsuit says, “gained access to Lilac’s trade secret information relating to the chemicals and processes Lilac uses to manufacture certain ceramic beads.”

    It’s a process that “none of its competitors do, know how to do” or were aware that Lilac does, the lawsuit says.

    The lawsuit, which also alleges breach of contract, says the ex-employees were made aware that the chemicals and processes used to manufacture the so-called “IX beads” were “highly confidential and that they were not permitted to be disclosed to anyone outside of Lilac.”

    Lilac alleges that the company “has been and continues to be irreparably harmed” as a result of the ex-workers’ “misappropriation of its trade secrets.”

    Its lawsuit says a draft of the former workers’ legal complaint included repeated references to “Chemical 1,” which the company describes in the court papers as “the most important chemical in the manufacturing of the IX Beads.”

    Yasman, during an interview with BI, argued that the trade secrets Lilac has alleged can be found on the company’s own website or in publicly filed patents.

    The attorney and his team have filed a special motion to strike the case under California’s anti-SLAPP law that’s designed to curb meritless lawsuits and protect free speech rights.

    Read the original article on Business Insider

  • ‘Thirsty for Elon’: Local politicians across America are copying the DOGE playbook

    A photo collage of an explosion of money, DOGE, and budget cuts
     

    Klawe Rzeczy for BI

    Here a DOGE, there a DOGE, everywhere a DOGE.

    Republican and libertarian leaders in at least 18 states, counties, and towns across America are dreaming up their own versions of the headline-grabbing federal initiative — and more could follow.

    The push is happening through executive orders and legislative action as governors, state lawmakers, and business executives promise to root out what they view as waste and fraud within state governments. And they’ve adopted quirky names, including the GOAT committee in Wisconsin and FLOGE in Florida. One state even has a BullDOGEr on the case.

    Assemblyman Alex Sauickie of New Jersey, a Republican who sponsored a DOGE bill in his state, said efficiency in spending was king. “We’re going to have to make those decisions and say, ‘Hey, we can’t be funding minor league ballparks or tennis courts or dominoes clubs with taxpayer money,’” he said. The state auditor would lead the group, alongside 20 members of the public.

    Democratic leaders are more circumspect. Those who spoke with Business Insider view the DOGE clones as attempts by the right to appeal to President Donald Trump and Elon Musk, who is viewed as DOGE’s de facto face. And many expressed fear over the prospect of losing funding at both the federal level and the state level.

    Democratic Rep. Anna Eskamani of the Florida House of Representatives said: “We are seeing conservative politicians just be thirsty for Elon Musk.”

    Oklahoma, Iowa, North Carolina, oh my

    In Oklahoma, Republican Gov. Kevin Stitt announced the launch of DOGE-OK early last month during his State of the State address.

    “Once there was this national push for DOGE, the governor wanted to make sure that we’ve turned over all the rocks that need to be turned over in our state government,” Abegail Cave, Stitt’s communications director, told BI.

    Republican Gov. Kim Reynolds of Iowa, meanwhile, signed an executive order last month to create a state DOGE. Emily Schmitt, a business executive tapped to lead the effort, didn’t offer up many details, since efforts are still in the early days — a common theme among many of the officials who spoke with BI. But she said it planned to prioritize efficient spending and technology like artificial intelligence.

    Over 1,000 miles away in North Carolina, Republican Rep. Keith Kidwell of the state’s House of Representatives said that his mini-DOGE could examine how to restructure agencies like the Department of Motor Vehicles or modernize computer systems — as long as there’s a return on investment for taxpayers. Kidwell has even adopted a nickname to show his support: the BullDOGEr, a wink at his reputation as Bulldog of the House.

    “I’m not trying to go on a witch hunt,” Kidwell said. “I’m going on a tax hunt.”

    ‘Imitation is the sincerest form of flattery’

    Experts said that they largely viewed these initiatives as efforts to mimic what’s happening in Washington.

    “Imitation is the sincerest form of flattery,” said Richard Briffault, a law professor at Columbia University who studies state and local governments. He said that many of the states looking to establish mini-DOGEs already have long-serving Republican governors — Reynolds, for instance, has been governor since 2017 — and red legislatures.

    “Why can’t these issues be addressed through the usual executive oversight?” he said. “It does have a kind of gimmicky feel to it.”

    Alicia Andrews, the chair of Oklahoma’s Democratic Party, pointed to Stitt’s six years as governor in a majority-Republican state. “If there’s wasteful spending, it happened on his watch,” she said. And North Carolina’s House Democratic leader, Robert Reives, told BI that residents had been complaining about the DMV for years.

    Stitt and Reynolds say their tenures are a selling point. Stitt said he’d “been DOGE-ing in Oklahoma since January of 2019,” while Reynolds said her state was “doing DOGE before DOGE was a thing.” And when Gov. Ron DeSantis of Florida announced the creation of a Florida DOGE task force, he said: “We were DOGE before DOGE was cool.”

    Still, many officials said that they wouldn’t have proposed mini-DOGEs if it weren’t for Musk and Trump.

    Without a federal DOGE, “there would be no cry from the public to create one in South Carolina,” Republican Sen. Larry Grooms of the South Carolina Senate, a cosponsor of his state’s DOGE bill, said.

    “It’s not unusual for states to mimic good ideas at the federal level,” Republican Assemblyman Christopher DePhillips, another sponsor of New Jersey’s DOGE bill, said. And while he expressed worry that some of the “dysfunctional” elements of the federal DOGE effort might tarnish his bill, others were more than happy with the connection.

    Republican Rep. Tiffany Esposito of Florida’s House of Representatives, who introduced a separate state DOGE — or FLOGE — said that she’d be thrilled if Musk called her.

    “I would like to talk about a lot of things with Elon,” she said. He’s “arguably the most successful person in our country,” she added.

    A county and town DOGE

    In Wisconsin, Republican state Rep. Amanda Nedweski chairs a DOGE-inspired initiative called the Assembly Committee on Government Operations, Accountability, and Transparency — or GOAT.

    Nedweski said that the federal DOGE may inspire even more downstream copycats. “Now even at the school district level, there’s a public demand for: ‘We need a school district DOGE,’” she said.

    Take Weston Wamp, the mayor of Hamilton County, Tennessee, who created a DOGE-inspired task force made up of six people he appointed, including himself. He said they’d meet regularly to discuss and make recommendations around ways to cut costs — cataloging chronically empty job positions, for example, or using property assets better. He described it as “most akin to a spring cleaning.”

    Mayor Aron Lam of Keenesburg, a libertarian, established a local DOGE advisory committee in his small Colorado town at the suggestion of party leadership. It’s made up of three people who applied, with input from the town manager and treasurer, and plans to provide recommendations on how to save taxpayer dollars and make the town more efficient.

    In the past few weeks, Lam told BI, almost 60 people from towns nationwide had reached out to him about establishing their own mini-DOGEs.

    “The efforts that Elon Musk started, and that President Trump really supported and started to implement that at the federal level,” he said, were “certainly inspirational.”

    A double whammy

    Matt Grossmann, a political science professor at Michigan State University, said that the mini-DOGEs’ focus on cost cutting could backfire. “No one’s for waste, fraud, and abuse,” he said. “But obviously, one person’s waste is another person’s vital program.”

    Megan Ellyia Green, the president of the Board of Alderman in St. Louis, said that the possibility of losing both federal funding from DOGE and state funding from Missouri’s mini-DOGE initiative weighed on her. “We’re expecting everything except for, basically, police to be on the chopping block,” she said.

    For Sen. Mary Elizabeth Coleman of Missouri’s upper chamber, the Republican chair of the state’s DOGE group in the Senate, the money that could end up in taxpayers’ pockets is worth it.

    “When you do this kind of upheaval, you’re going to crack a few eggs,” she said.

    Have a tip? Contact reporter Nicole Einbinder via Signal at neinbinder.70 or via email at neinbinder@businessinsider.com. Use a personal email address and a nonwork device; here’s our guide to sharing information securely.

    Read the original article on Business Insider

  • 8 legal considerations to recession-proof your small business

    Photo collage of recession related imagery
    It’s best to understand your legal options in advance instead of scrambling during a market crash.

    Bet_Noire/Getty, Jim Lin/Getty, SusanWoodImages/Getty, Tyler Le/BI

    • Recession fears are back, but there are steps small business owners can take to prepare.
    • Experts recommend businesses get paperwork in order in case they need a quick loan or merger.
    • They also recommend checking contracts with landlords, contractors, and employees.

    Markets are flashing warning signs of a possible recession. It’s a good time to batten down the hatches.

    For business owners, there’s no “magic bullet that would completely protect you or make you recession-proof,” said Noel Roycroft, the deputy director of the Harvard Law School Transactional Law Clinics, which advises entrepreneurs and small businesses.

    But there are steps in the legal realm that businesses can take to prepare.

    Business Insider spoke with lawyers who advise small businesses and startups about what advice they’d give to prepare for an economic recession.

    Here’s what they said.

    1. Get your paperwork in order

    In the event of an economic downturn, business owners might want to consider getting a loan to help them through choppy waters, merging with another company, or selling their business to a larger one.

    In any of those circumstances, small businesses want to have all their ducks in a row for the due diligence process, said Roycroft, a former attorney at Ropes & Gray.

    Have you paid all your taxes yet? Are your filings up-to-date with all the relevant state and federal agencies? Do you have all your corporate records organized? Do you have copies of the executed versions of all your contracts? Have you read your company’s bylaws recently, and are you actually following them?

    Roycroft said it’s better to prepare before the storm starts rather than wait until something goes wrong before realizing the business is in bad shape from a legal perspective.

    “You’re playing cleanup at that point, and that’s no fun for anybody,” Roycroft said. “So the more you can kind of pay attention to those things now, the better.”

    Some states — like Massachusetts — automatically dissolve corporate entities if their paperwork isn’t up-to-date.

    “If you haven’t done that for three years, you might be administratively dissolved and they don’t even realize that’s happened,” she said. “And then they go to enter into a contract with somebody and there’s no actual legal entity in place anymore.”

    2. Put up the firewall between you and your business

    Proper corporate hygiene isn’t just important for loans and mergers — it’s also important for liability.

    For small businesses, a hazy line between corporate and the owner’s personal finances could cause trouble. Without a firewall, owners could become liable for debts in potential litigation or bankruptcy.

    “If people are worried about litigation risks from creditors or counterparties, making sure that you’re following these sorts of maintenance obligations shows that the business is separate from the owners and can help maintain that liability shield,” Roycroft said.

    3. Get your personal finances in order

    If a small business needs a loan and has few assets, the owner will often be asked for a personal guarantee, Roycroft said.

    For that reason, they should have their own financial life organized for lenders to analyze, she said.

    Roycroft warned that such an arrangement could be risky, especially during an economic downturn, because the owner could be required to pay back the loan.

    “If you were a corporation or an LLC and you enter into one of these loans, they can now seek to be paid back against your personal assets and not just the businesses,” she said.

    4. Consider trading debt for equity

    Aside from loans, small business owners could consider lightening their debt load by giving up equity to existing lenders.

    That arrangement could give the lender “skin in the game” and invigorate the business, said Jonathan Askin, a professor at Brooklyn Law School who oversees the Center for Urban Business Entrepreneurship.

    “You don’t have debts coming due, but you’ve got potential equity partners who want to see you succeed as much as possible,” Askin said of the arrangement.

    Some lenders — or even contractors who are owed money — might also accept deferred compensation during a recession, Askin said.

    “If we see light at the end of the recession tunnel, then anything you need to get over that hump through renegotiating and getting people to see your long-term vision, I think is helpful,” Askin said.

    5. Make sure you own your own intellectual property

    Small businesses often overlook the fine print of their agreements with independent contractors, Roycroft said.

    One common issue, she said, is that independent contractors or employees don’t transfer over the IP rights for whatever they created for the business.

    That could be a headache if the business is looking to merge with another. The contractor might have leverage of their own because they still have ownership of important IP for the business, Roycroft said.

    6. Check your lease

    For companies with brick-and-mortar businesses, rent is often the biggest expense.

    Roycroft suggested checking that small business owners check their lease agreement and make sure they understand their obligations and rights.

    “Making sure that you understand, ‘If I miss one rent payment, what can happen and what are the notice requirements in it? How do I notice the landlord? How does the landlord send notice to me?’” she said.

    There may be opportunities to renegotiate. While big corporate landlords tend to have more power than small businesses, no one wants to see a vacant storefront, she said.

    Askin also suggested negotiating rules about sub-tenants, which can ease rent liabilities.

    Landlords might also consider lowering rent for some equity, Askin said.

    “There may be landlords who see the long-term future of your venture and might want to have skin in the game, too,” Askin said. “Maybe they’d be interested in giving you a reduced rate for a piece of the business.”

    7. Use legal advisors who will save you money by using AI

    The age of artificial intelligence has introduced enormous efficiencies in the legal industry. Askin recommended using AI-driven tools and law firms that pass some of those decreased costs along to their clients.

    “As a business person, I would take advantage of as many free or pro-bono legal resources as possible,” Askin said. “I don’t think it’s safe to abandon human legal counsel, but there are ways to automate legal processes so you could use more efficient legal support services.”

    He also recommended business owners take a look at their processes and see if AI tools could automate certain functions.

    “If you’re not digging deep into AI, you’re behind the eight ball already,” Askin said.

    8. Understand your obligations to employees

    Recessions usually mean that businesses need to tighten their belts. Roycroft recommended brushing up on state and federal laws that govern how employees are treated. Are they at-will employees? Do they have a union contract? Do they require a certain amount of severance or notice for a layoff? Are furloughs an option?

    “God forbid you have to start letting people go, but that can happen in a recession,” Roycroft said.

    Read the original article on Business Insider

  • Wall Street is getting cut out of Trump 2.0

    Photo collage including President Trump and Steve Mnuchin with Wall Street related imagery

    Getty images; Tyler Le/BI

    Lately, on Twitter/X/whatever you want to call it these days, there’s been a noticeable uptick in nostalgia for Steven Mnuchin, the treasury secretary during President Donald Trump’s first term.

    “Come back Steve Mnuchin I miss you Steve Mnuchin,” one user wrote in early March. “Steve Mnuchin was the best Trump 1 cabinet member. It almost makes up for suicide squad,” wrote another. “Mnuchin was probably the most competent cabinet appointment of the last 3 administrations and I’m not sure it’s particularly close,” wrote another. “Mnuchin didn’t do anything mental and now he’s viewed with nostalgia,” wrote another.

    Mnuchin’s four years in the administration were busy: He shepherded through the tax cut bill in 2017, warning before the legislation’s passage that stocks would crash if it didn’t get the go-ahead. When COVID-19 swept in, he was instrumental in striking a deal with Congress to deliver economic relief. Throughout his tenure, he kept everybody calm about the debt ceiling. On a lighter note, he and his super-beautiful wife, Louise Linton, posed for photos with the sheet of dollar bills that got them compared to James Bond villains — an outrage that seems quaint in this day and age.

    In Trump 1.0, the New York City-born financier served as a sort of Wall Street whisperer in the White House. Mnuchin was the guy who reassured markets everything was going to be all right. He was one of the adults in the room, a serious person whose presence emanated seriously good outcomes, business-wise. (He’s so serious, in fact, that he’s always Steven, never Steve, and will correct people if they screw it up.)

    With the markets currently in meltdown mode, largely thanks to Trump, Mnuchin (or a Mnuchin type) is someone many on Wall Street would very much like to have back. They’d like a Mnuchin-esque Money Dad to come tuck them in at night and tell them not to worry about big bad tariffs or a potential recession hiding underneath the bed. In the absence of such a figure, investors are facing a Trump 2.0 who isn’t as concerned about their feelings — or, more importantly, holdings — as they’d hoped. He’s listening to Silicon Valley a lot more than he is Wall Street, to the extent he’s listening to anyone. Sure, Trump’s got a new Wall Street-attached treasury secretary, hedge funder Scott Bessent, but investors are still figuring out how to measure him. He just defended tariffs by saying cheap goods aren’t part of the American dream. In the internet’s collective imagination, Steven Mnuchin would never.

    Wall Street’s approach to Trump has long had an element of wishful thinking to it. Yes, the president likes to tell people their stocks are going to go up, and of course, the Republican Party’s bent toward low taxes and deregulation is something the business community favors. But the thing about Trump is that he says and believes a lot of things, and not all of his ideas are music to investors’ ears, especially lately.

    The Trump administration’s order of operations this time around may not be so favorable to the stock market or economy in the short term. He’s focused on tariffs and has been announcing, delaying, and reinstating them at a breakneck pace. When he was elected, many observers believed tariffs were largely going to be a negotiation tactic. Six weeks into his presidency, it’s becoming clear he means business, even if the exact details of said business remain TBD.

    “We’re in a different environment in Trump 2 than Trump 1, and I think one of the differences is that there’s more broad agreement on the use of protectionist policies, even by the so-called Wall Street voices,” Josh Lipsky, the senior director of the Atlantic Council’s GeoEconomics Center, said. “In the first administration, they didn’t even start talking about tariffs seriously until a year in.”

    What’s happening now is you’ve got animal spirits meeting up with the realities of policy on the ground.

    As markets have started to flash warning signs about the tariff whiplash, the Trump administration’s response has been a bit of a shrug. In his address to a joint session of Congress last week, the president acknowledged tariffs would cause a “little disturbance” but said, “We’re OK with that.” In a subsequent interview with Fox News, he wouldn’t close the door on a possible recession, saying, “I hate to predict things like that.” Bessent recently told CNBC that maybe the economy is “starting to roll a little bit” and predicted a “detox period” as the government slows its spending. After Trump’s recession hedge, Commerce Secretary Howard Lutnick said there won’t be a recession in America — but Lutnick’s also been tasked with trying to explain the daily flip-flops on tariffs, which seems to have undercut Wall Street’s faith in his pronouncements.

    Besides tariffs, Trump is looking to move fast on immigration and deportations, another check in the negative column for many businesses. The same goes for the chaos DOGE is creating. Oh, and did I mention there’s perhaps a government shutdown on the horizon?

    “What’s happening now is you’ve got animal spirits meeting up with the realities of policy on the ground,” Gregory Faranello, the head of US rates trading and strategy for AmeriVet Securities, said. “If you look at the total pool and bucket of everything that’s going on right now, it’s uncertainty.”

    The uncertainty probably won’t last forever, but right now, it’s got a lot of people on edge. The S&P 500 is down by 5% since the start of the year, and the Dow by 3%. Many smart people did not expect to be in “don’t-look-at-your-401(k)” territory this early in Trump’s second term, if at all.

    “Capricious policies are likely to freeze any kind of capital investment or business activity,” said Jack Ablin, the chief investment officer and founding partner of Cresset Capital. “And that’s problematic in an economy that appears to be slowing.”

    It’s not necessarily the case that Trump 2.0 doesn’t care at all about Wall Street; he just seems to care about a lot of other things more. The White House contends that while tariffs, for example, might be a pain in the near term, they’re necessary to revamp the economy over the long haul.

    Trump 2.0 is “much more holistic on what they’re looking at to define success,” Keith Lerner, chief market strategist at Truist Wealth, said. Bessent seems quite focused on the bond market and 10-year Treasurys, specifically, believing lower bond yields might help boost the housing market. He has characterized tariffs as a “one-time price adjustment” and brushed off concerns about inflation in his defense of the administration’s trade strategy.

    “I guess the question is, OK, holistically, you have a 7% decline in the stock market. From their perspective, that may be OK relative to these other things which are priorities for them and will make the US economy more competitive,” Lerner said. “The question that no one knows is what’s the pain threshold?”

    The problem with opening the door to a small recession or adjustment period is that once a downturn has begun, there’s no control over what happens.

    The assumption has long been that the markets would check Trump’s worst impulses (or a Mnuchin-like figure who would hammer home what’s going on in the markets). Right now, the checkpoint isn’t clear. Bessent seems to be aligned with the president’s protectionist stance, and Wall Street doesn’t find him to be a particularly soothing force.

    “The Street is not comfortable yet with Bessent and Lutnick, and that’s been an overhang and issue for the markets in the near term,” Dan Ives, an analyst at Wedbush Securities, said in an email.

    After the stock market’s meltdown on Monday, the White House released a statement from an unnamed official arguing that Wall Street fears aren’t necessarily reflective of what’s happening in the real economy. “Want to emphasize that we’re seeing a strong divergence between animal spirits of the stock market and what we’re actually seeing unfold from businesses and business leaders, and the latter is obviously more meaningful than the former on what’s in store for the economy in the medium to long term,” the official said.

    But many businesses are not having a good time trying to decipher all the policy uncertainty. The problem with opening the door to a small recession or adjustment period is that once a downturn has begun, there’s no control over what happens.

    “Recessions are their own beasts,” Kevin Gordon, a senior investment strategist at Charles Schwab, said. “They could take on a pretty strong position in terms of changing the trajectory of the economy. So it’s certainly something I’d say be careful what you wish for.”

    Despite the upheaval, Wall Street still has things to be excited about in the Trump administration — but the sugar high is wearing off a bit, and some less favorable realities are setting in.

    For one thing, some of the thrilling stuff the administration is expected to deliver is not that thrilling — namely, the tax bill. Many of the provisions in Trump’s 2017 tax bill are set to expire this year. Trump and the GOP-led Congress are highly likely to pass a new bill to extend most of them. For corporations and individuals, the extension is good in the sense that their tax bills won’t go up. But it’s not as great as it was in 2017 when they got a massive new cut. Keeping the 2017 law is “just extending the status quo,” Gordon said, “so there is no additional stimulus that comes from that.” It’s kind of like buying a second pair of the same pants you like because they fit well and are durable — they’re nice to have, but they don’t deliver the same little burst of endorphins you got when you discovered the first pair. And the tax cut legislation is still months away. In the meantime, investors are being hit with daily headlines about all the less-business-friendly stuff Trump wants to do. It’s like having to pay a bunch of medical bills while waiting for that pair of pants to get delivered.

    “I think the sequencing is definitely important,” Gordon said. “You’re front-loading all of the tariffs and immigration risks this time, and you don’t necessarily get the added juice from the fiscal side. I would argue you get none of it.”

    This belated Mnuchin mania is the manifestation of broader anxieties about the Trump administration and a recognition that this time really is different. Trump is moving faster and breaking things quicker. He feels like he has a mandate. He’s bringing more true believers with him. Remember that supposed “committee to save America” of people surrounding Trump to rein him in back in 2017? They are not invited to the party this time.

    Remember that supposed “committee to save America” of people surrounding Trump to rein him in back in 2017? They are not invited to the party this time.

    “Scott Bessent has Wall Street experience, but he doesn’t seem particularly comfortable in how he talks about what it is that the administration’s trying to achieve. What is the nonpartisan basis for it? What is the sort of substantive case?” said Skanda Amarnath, the executive director of Employ America, an economic advocacy group. “Everyone who’s currently picked is really indexing even further on loyalty, but that does come at the expense of being credible in an economic markets context.”

    To be sure, there’s some rose-colored glasses stuff going on with the way many people think of Trump 1.0, at least money-wise. The S&P 500 was up for most of his first term, but it wasn’t a smooth ride; the index ended 2018 down by 6.24%. The US had a mild manufacturing recession in 2019. Many people in Trump’s first administration were just as loyal to the president as those in the second administration. And ultimately, he was always the one in charge. It’s not like Steven Mnuchin or Gary Cohn or Rex Tillerson were running around willy-nilly doing whatever to make sure the Dow was up for the day.

    Like everyone in human history, Mnuchin’s record is mixed (and would get vastly different scores, depending on who you ask). He reportedly pushed for Trump to select Jerome Powell for Federal Reserve chair, whom many in finance and economics would agree was a sound choice. When the economy spiraled because of the pandemic, he was a key negotiator in getting legislative support across the finish line. He also advocated for a tax bill that added to the deficit and disproportionately benefited corporations and the wealthy. And you have to admit that posing with the sheet of dollars was a little gauche, even if anyone in their right mind would have done the same thing.

    “He was pragmatic,” Amarnath said. “He also had a certain credibility with the markets and political actors on the other side of the aisle”

    The good news, all you Mnuchin heads, is he may be gone, but not forgotten. Back in November, he told Reuters that while he wasn’t planning on joining the new Trump administration, he’s “happy to advise from the outside.” So, Steven, maybe call Scott.

    Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.

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