The Housing Bubble

The next wave of mortgage defaults…

More borrowers with good credit are defaulting on their home loans, and that’s going to make it even harder for the staggering housing market to recover.

http://money.cnn.com/2008/08/12/real_estate/prime_defaults_price_drops/index.htm

Bracing for Inflation…
Despite the recent softening of oil prices, the U.S. could be looking at double-digit inflation as early as 2009.

The relative price stability of the past 15 years is giving way to worsening inflation, despite the recent softening of oil prices. The Consumer Price Index for all items shows the inflation rate averaged 2.6% a year from 1992 through 2007 but has doubled since January, reaching an annual rate of 5.6% in July. By next year, the monthly figure could hit double digits, and the inflation rate for 2009 overall could triple 2007’s 2.85%.

I say this not only because I have looked at a broad range of statistics that point in this direction. I also run a private equity investment firm that owns companies in a number of industries—including restaurants, the manufacture of gardening tools, oil and gas exploration services, and distribution of entertainment products such as books and videos—that are already being forced to pass price increases on to the consumer.

http://www.businessweek.com/bwdaily/dnflash/content/aug2008/db20080815_021990.htm?chan=top+news_top+news+index_news+%2B+analysis

So now that Hurricane Fay looks like it will make a direct hit on Tampa, what do you think that will do to housing values (which have already cratered since 2005)?

Of course they’ll go down, but by how much? Is it possible that coastal Tampa condos will actually become worthless? Will it become impossible to get homeowner’s insurance on FL’s west coast?

smathis:

Not being smart here, OK? Moved to Fl in 04, and got hit by 4 hurricanes, Charley was a good boy, lost roof, no power 8 weeks, etc., and there is no way to tell if this storm will become a hurricane and where it will hit. However, Fay may, (rhymes if that’s her name, I forgot), and Fae (2 spellings) may hit Tampa too.

Most of the time, the three day NOAA projections end up being in error. However, you do raise a good point. If Florida gets hit by a Cat 3, 4, 5 this year, it could be the proverbial nail in the coffin.

ATE-UP

P.S. Ben I have been a lurker for about a year. Thank you for your outstanding blog. Also is Faster a lady or a guy????

“Inflation in San Diego outpaced the national average over the past year, fueled by price spikes in gasoline prices, according to data released yesterday by the U.S. Labor Department.”

http://tinyurl.com/62psfa

“There’s no putting a gloss on this,” said Dan Seiver, an economist at San Diego State University. “Those are really bad numbers, showing a lot of economic pain.”

“Seiver predicted that the inflation rate will decrease dramatically over the next several months, as gasoline prices continue to fall below the $4 mark.”

There were inflation problems before the surge in gas prices. Those aren’t going away soon even if gas prices fall some.

“The numbers in the next couple reports should look terrific,” he said. “With the falling price of gasoline, consumers will start feeling unusually good, kind of the way you feel when you stop hitting your head with a hammer. It’s not that your head is feeling great, but you’ve stopped hitting it, so you feel a lot better.”

I don’t feel unusually good if gas falls to a mere $4/gallon. Now if I were beating a certain SDSU “economist” over the head with a sledge hammer, I might feel exceptionally good.

The boorish need not apply.

http://www.bloomberg.com/apps/news?pid=20601109&sid=ah.H2xr8CZ.4&refer=home

“Aug. 15 (Bloomberg) — Jonathan Downey, the owner of the East Room club on the edge of London’s financial district, says bankers are the last people he wants as members.

“We don’t want the archetypal City idiot, waving his cash about at the bar and braying like a buffoon and annoying women,” said Downey, 42, whose club charges men an annual membership fee of 350 pounds ($655). Women pay 150 pounds.”

Now this attitude is what separates the city from the burbs where high income types are too often Tephlon gods.

Fairfax county Virginia reported an overall increase in jobs by 1100 so far this year (mostly in IT and professional services)?

This what happens when the lost jobs in construction go unreported?

Or were the construction jobs lost a while ago, and this is businesses moving back office stuff out of the district and into cheaper digs? Professional services could be lawyers and accountants, but it also could be $12 an hour temps…

Affordability will lead us to real estate recovery

http://www.news-press.com/apps/pbcs.dll/article?AID=/20080817/COLUMNISTS42/808170318/1014/business

Likewise, our market will catch fire again, and it will start the same way. Affordable real estate, particularly homes listed below $250,000, is our market’s kindling. Fortunately, Lee County is flush in this price range because 54 percent of our existing home inventory consists of homes priced below that amount. Think back. Affordability sparked our last real estate boom, and affordability will lead us to the next one.

So until it’s against the law, we will continue to hear and see news reports about Florida’s falling real estate prices. When this happens, don’t get upset; just visualize more kindling being added to the fire. Then, all that’s left for us to do is to pick up some weenies and a bag of marshmallows, because it will just be a matter of time before we’re cooking again.

So just sit back and enjoy the flame, as each new foreclosure can be considered another log on the affordabilty fire.

I went to the Montgomery County Agricultural Fair yesterday. What a hoot! I also spent some time getting supplies I needed to finish two unfinished maple night stands I bought off Craig’s List to use to hold desk supplies (and finally dump the really ugly IKEA drawers I have been using since law school).

A few observations:

Skilled sales people cannot make unessary products appealing. Especially when they are selling expensive kitchen wares.

If you are selling dip mixes, free samples are a good place to start, but you really should have an answer other than “it is spicy” when asked why one mix is called “Southern Maryland Dip.” Seriously, you couldn’t have just said that it goes well with crab cakes? No one ever asked the question before?

Even an unskilled sales person with a really appealing product may be successful. I bought two ounces of the most fabulous smelling herbal tea (hibiscus lime). All she had to do was put out little dishes of the stuff for people to sniff. It sold itself.

How can people not understand that a game where you hit something with a hammer to ring a bell that is completely electronic (no physical weight sliding up a pole) is rigged. Entirely rigged. Even a physical one can be rigged if they increase the coefficient of friction on the upper section of the pole, but a completely electronic one? Are you kidding me?

And finally, Home Depot has found a good quality of worker, at least at Gaithersburg and at least in the paint/finishes department. He knew all about his products, explained everything, told me what I needed and didn’t push me to get more than that. Perfect. Way better than the guy at Sears. And way better than the guy (possible owner or at least family of owner) at the independent unfinished furniture store I tried first. All the guy at the unfinished furniture store wanted to talk about was where I got the furniture - like he was offended I didn’t get it from him. Hey, buddy. If you don’t want to sell the finishes to people who don’t buy furniture from you, just say so. Don’t insult me. I can take my business elsewhere.

I had no problem staying away from the deep fried everything fair food. Seriously, it wasn’t even tempting - OK, sweet potato fries are a little tempting, but I resisted. I don’t really understand the phenomenon of the deep fried Oreos. Really, I don’t.

McCain and Obama suporters were fairly low key. Local politicians were remarkably absent. Giant Angora rabbits looke like mini-sheep. Pigs are very good sleepers. Showing steers has got to be difficult - they don’t seem to have the slightest desire to do what their handlers want them to do. Roosters are very very noisy. And, even kids that must spend most of their free time vegged out with a TV or over stimulated on video games will stand still for AGES watching a chick hatch. They were fascinated. Nice to know some things don’t change.

DEAN CALBREATH
Olympics showcase our biggest creditor

August 17, 2008

Over the past nine days, the world has been entranced by the Beijing Olympics.

For Americans, of course, the Olympics are more than a chance to see the world’s greatest swimmer grab another gold, or to debate when those “16-year-old” Chinese gymnasts were born.

The Olympics also allow us to get a better glimpse of our No. 1 creditor, the nation most responsible for financing our debts and allowing us to continue our irresponsible spending habits: China.

Best hope for a revitalized U.S. economy? Accomplishing this feat might also require dismantling the PPT, in order to eliminate the too-big-to-fail bailout subsidy which helps keep banking behemoths afloat. Is either of our current presidential candidates up to the task?

With losses growing, some push splitting up big banks
By Joe Bel Bruno
ASSOCIATED PRESS

August 17, 2008

NEW YORK – America’s biggest banks have suffered unprecedented losses from the ongoing credit crisis, and that’s made some investors question whether the big financial conglomerates should be broken up in order to survive.

Breakup advocates, who for months have been clamoring for Citigroup to be dismantled, got some validation of their viewpoint this past week. Europe’s UBS – created through the combination of Swiss Bank Corp. and Union Bank of Switzerland in 1997 – on Wednesday laid the groundwork to tear up its business model after another quarter of steep losses.

Best-laid plans
Poor communication, questionable transactions among the signs that it’s time to fire financial adviser
By Dave Carpenter
ASSOCIATED PRESS

August 17, 2008

Telephone calls began flooding in to financial planners early last month as the pain of June 30 account statements hit home.

For many clients who had relied on advisers to steer them through a turbulent market, steep drops in the value of their portfolios from as recently as a month earlier came as a double-digit shock.

“That’s when the phone calls start – when the market goes bad and they get a statement,” said Ed Gjertsen, a certified financial planner in Glenview, Ill.

I have a simple solution for this problem: Get the gubmint off the back of the housing market and let prices correct down to affordable levels. Renters will once again be able to afford to become owners, and we will be able to collectively enjoy all the vaunted benefits of the ownership society.

Of course, I realize prices are already falling, but I also see evidence the gubmint is working hard behind the scenes to slow the pace of correction (not to suggest that it seems to be working…). The retail market is still not rationally pricing in recent changes to the fundamental picture (foreclosure glut, credit crunch, recession, etc).

Apartment complex
As numbers of rental units rise, myriad problems can develop for owners
By Emmet Pierce
STAFF WRITER

August 17, 2008

As the slumping housing market erodes equity for many San Diego County homeowners, analysts say condominium communities face additional challenges as sales slow and renter populations grow.

A large influx of renters into these developments can raise concerns that include falling property values, difficulty in selling units and less favorable lending terms when the time comes to finance structural improvements.

Hat tip to the GSEs for this step in the right direction. Perhaps the War on Savers is ending?

NATION’S HOUSING
KENNETH HARNEY
Freddie and Fannie adjust their fees

August 17, 2008

WASHINGTON – The two biggest sources of mortgages for American home buyers plan to raise their base fees to counter what they see as continuing “adverse conditions” in the real estate marketplace.

At the same time, however, Fannie Mae and Freddie Mac – who currently fund over three-quarters of all new home loans – also plan to selectively reduce fees for certain applicants whose likelihood of default and foreclosure appear to be lower than the companies’ previous estimates.

“In our civilization, and under our republican form of government, intelligence is so highly honored that it is rewarded by exemption from the cares of office.”

Ambrose Bierce

If it is really a zero-interest (govt subsidized) loan, why are they calling the $7500 first-time-buyer purchase incentive a tax credit? True tax credits do not have to be repaid.

Compared to the large fortune Californian home owners have recently been losing through the negative home equity wealth effect, $7500 is a drop in the bucket, especially given that it must be repaid.

HOUSING SCENE
LEW SICHELMAN
Builders bet on tax credit to help boost lagging sales
August 17, 2008

WASHINGTON – If early curiosity is any indication, the temporary $7,500 tax credit enacted by Congress as part of the Housing and Economic Recovery Act may just turn out to be the motivation needed to bring home buyers back into the market, cut into excess inventory and halt the slide in prices.

Condo associations = worst home maintenance arrangement ever known to mankind? Tick, tick, tick…

Postponed repair work catching up with condos
Attorney: Owners face ‘a ticking time bomb’

By Lori Weisberg
STAFF WRITER

August 17, 2008

Dilapidated stairways, rickety decks, leaky roofs, moldy walls and corroded sewer pipes. These are the sort of structural headaches confronting scores of homeowner associations as costly repairs to older complexes drain their communal treasuries.

After years of deferred maintenance, compounded by tightfisted members’ unwillingness to pay higher monthly fees, condominium associations are facing a looming financial crisis, condo experts say.

“In order to maintain the assets, you have to have long-term thinking, but what we’ve seen is short-term people not planning for long-term futures,” said Karen Conlon, president of the California Association of Community Managers.

When repeated Band-Aid fixes no longer suffice, condominium owners find themselves on the hook for hefty special assessments, sometimes in the hundreds of thousands of dollars. Increasingly, homeowner groups are having to take out loans to soften the blow of high levies.

“Deferred and unfunded maintenance is a ticking time bomb because so many homeowner associations are unprepared for it,” longtime condo attorney Erik Basil said. “What sometimes happens is association members don’t want to contemplate having to write a $1,000 or $5,000 check, so they pretend there’s nothing wrong, and that’s what has occurred for the last 10 years.”

I wonder what effect a global economic slowdown will have on housing prices? I realize that this time is different, but in past recessions, households became very precautious about making big ticket investments like purchasing houses and automobiles.

The week that risk became reality

Published: August 15 2008 19:31 | Last updated: August 15 2008 19:31

Trouble has been in prospect ever since the credit squeeze began last summer, but this was the week when both shoes dropped at once, everywhere from the UK to Japan and most points between. For decades, a concerted world slowdown would have only one cause: a US recession. That is no longer entirely true. To paraphrase Tolstoy, each unhappy economy is unhappy in its own way.

Japan has begun to contract, and plummeting exports are not the sole culprit: domestic demand is weak and consumer confidence has never been lower.

Spain’s economic woes have persuaded the prime minister, José Luis Rodríguez Zapatero, to interrupt his summer holiday; the key problem there was a housing boom, an unsustainable overhang of new property, and the subsequent collapse of a construction sector that provided every eighth job. The UK’s housing boom has ended for a different reason: the banks no longer care to play the game.

Meanwhile, Germany’s resurgent export sector seems to have been smothered by a strong euro, and perhaps the hangover from an unexpectedly good first three months: the economy shrank by 0.5 per cent in the second quarter.

Yet in spite of this wide range of predicaments there is a common thread: the soaring price of commodities, coupled with the return of inflation, is hurting consumers and tying the hands of central bankers.

Is it Constitutionally legal for the Fed to offer below-market (subsidized) lending rates to its favored investment banking constituents on Wall Street, while consumers either have to pay much higher rates or in many cases simply cannot get loans? My impression was that the discount window was traditionally open on a limited basis with strings attached, including above-market interest rates. Now rates that consumers can earn on their deposits are paltry, and we have to pay much higher rates to the banks than the rates at which they are enabled to borrow from the Fed. Something smells very bad about this arrangement.

On Wall Street: Painful lessons in the meaning of the term ‘credit crunch’
By Michael Mackenzie in New York

Published: August 16 2008 03:00 | Last updated: August 16 2008 03:00

This week, The Chambers Dictionary introduced the term “credit crunch” to its readers. This could be viewed as indicating that “a sudden and drastic reduction in the availability of credit”, as defined by Chambers, has reached its apogee.

Unfortunately, a year after bankers first discovered the painful consequences of blowing bubbles in credit, getting a loan is only going to be harder in future.

That was the brutal reminder from the Federal Reserve’s Senior Loan Officer’s Survey this week. Among the dour highlights, some 60 per cent of banks told the survey that they would tighten limits for credit cards in the second half of 2008.

The next day, banks jumped over themselves to grab a slice of the $25bn that the Fed lent out for the next three months. Bidding for 28-day funds on Wednesday was also stronger than recent auctions, indicating that the banking pips are being squeezed.

At the very least, borrowing from the central bank was still below prevailing and elevated money market rates. Both Citi and AIG sold long-term bonds this week at levels way above Treasury yields.

Builders hit by credit crunch as banks tighten cash flow
Banks curtail generous lending practices, putting projects on hold
By NANCY SARNOFF Copyright 2008 Houston Chronicle
Aug. 16, 2008, 11:37PM

Nick Massad was within weeks of signing the papers on a construction loan to build a $55 million Embassy Suites near downtown’s Discovery Green park when the deal began to unravel.

He said the national hotel lender, which he declined to name, would no longer finance 75 percent of the project because it was having trouble getting other banks to participate, a practice used by lenders to limit their exposure to large loans.

Now the hotel developer is back in the market for new financing. This time around, he’s talking to a local bank, even though that means he’ll likely have to pay a higher interest rate, raise more equity and take out a secondary loan to get his hotel built.

“This tight financing market has made it really difficult,” Massad said. “Projects could go by the wayside.”
——————————————————————————
TIGHT LENDING

Percentage of U.S. banks that reported having tightened their lending standards on commercial real estate loans in the second quarter for the past four years.

2008: 80 percent

2007: 27 percent

2006: 13 percent

2005: 6 percent

Source: Federal Reserve Board’s Senior Loan Officer Opinion Survey on Bank Lending Practices

Another casualty of the credit crunch: Sky football in British pubs

Pubs ditch Sky football as credit crunch bites

* Lisa Bachelor
* The Observer,
* Sunday August 17 2008
* Article history

Football fans hoping to catch this season’s Premier League matches at their neighbourhood pub should check that their local is still showing the game. The soaring cost of Sky subscriptions has resulted in 20 per cent of bars abandoning the service over the past five years, according to pub trade group ALMR, the Association of Licensed Multiple Retailers.

The group claims Sky’s premium package price - around £13,000 per annum - combined with the credit crunch effect of higher utility bills and fewer customers is forcing pubs to ditch the service.

‘Watching a big game in the local with a group of friends is as close to being there as you can get,’ said Nick Bish, chief executive of the ALMR. ‘It’s also the only place fans can watch live Premiership action for free. This pleasure is being threatened by Sky’s relentless price rises.’

A misnomer enters the English lexicon…

Let’s face it: ‘Credit crunch’ rolls off the tongue much more readily than ‘insolvency crisis.’

Credit crunch, ecovillage new words in dictionary
ASIANAGE
14 August, 2008 03:48:36
By OUR SPECIAL CORRESPONDENT

London

Aug. 14: Credit crunch, wardrobe malfunction, food miles, electrosmog, ecovillage, wags and HIP have got official sanction. It’s a long list of words, and influences and provenances are diverse, but all of have been included in the 11th edition of the Chambers Dictionary, which will be released in August.

Slowdown of global economy has found a mention in the dictionary in form of the phrase “credit crunch.”

Profile of “Dr Doom” Nouriel Roubini, the man who “saw it coming” in the NY Times Magazine today.

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?_r=1&ref=magazine&oref=slogin

I’m somewhat surprised the powers that be haven’t come up with a double-speak word for “Inflation”?

Please help them out by making one up…

whadyagot?

An article about how difficult it is to be an appraiser in the Bay Area these days –

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/08/17/RELP12AF53.DTL

“The Appraisal Institute, a trade group with 32,000 members, has even begun offering a series of daylong seminars in cities across the country to retrain its members. The lectures are designed to help the group’s appraisers adapt to the current market and learn how to better evaluate data.”

I found this quote amusing; it seems to say that these people actually have to do their jobs now.

Inflation =Plan A

From John Maudlin

When I wrote an article for Financial Times in May discussing risks in stuff stocks (commodities, energy and industrials) I called today’s environment “a global commodity bubble”. I was imprecise, after a conversation with the brilliant Ed Easterling of Crestmont Research (by the way, Ed wrote “Unexpected Returns” - a must read) and reading a wonderful interview with James Montier by Kate Welling, I’d like use James’ more precise definition of today’s environment: a “global growth expectations” bubble. After all, it is the supply demand (to a large degree) that was responsible for this unprecedented growth in “stuff”, shifting the mentality of the market into “this time is different” gear. It is not.

more good news:

“Employers are talking about ending contributions to workers’ retirement savings. If the talk becomes reality, don’t panic. You can still grow a nice nest egg on your own.”

http://articles.moneycentral.msn.com/RetirementandWills/InvestForRetirement/No401KMatchNoProblem.aspx

That’s right, don’t panic, you can do it all by yourself! Personal responsibility! Just don’t expect your employer to match your personal responsibility. Before anyone jumps on me about this, I just want to say that it would be a nice gesture to see some CEO remuneration decreases. It would be nice to see large companies and governments facing the music when they mess up. It’s not the cutting back, but the increasing divide which concerns me.

I work for myself, so doesn’t affect me (I am literally a CEO and CFO myself, and believe me, my remuneration decreases when my worker’s salary gets cut, since I am my main employee - ha!), but I thought the match system was to save companies money, when they switched from the old plan, the one which didn’t involve everyone becoming an investing expert? Then there was the wave of restructured bankruptcies to allow larger companies to get out of their existing pension obligations (like American Airlines, when they borrowed against their pension fund instead of setting aside) and now dropping matching, too? Yikes.

Poll: Most say economy in recession

August 17, 2008

HARTFORD, Conn. - The slow economy has touched prosperous Connecticut, where residents of all wealth levels say they’re reducing expenses, according to a new statewide poll released Sunday.

Three-fourths of state residents said they believe the economy is in recession. And a majority don’t believe it will improve with Republican John McCain or Democrat Barack Obama as president.

“Despite the widespread enthusiasm about the 2008 presidential elections, Connecticut residents are not optimistic about what it portends for an economic recovery,” Samuel Best, director of the University of Connecticut Center for Survey and Research and Analysis, told the Hartford Courant.

Gloom to increase fears of global recession
By Chris Flood
Published: August 17 2008 15:47 | Last updated: August 17 2008 15:47

Mounting fears about the likelihood of a global recession will be fuelled by this week’s data, which promise further bad news from the US housing market, disappointing inflation data and more evidence that industrial activity is weakening.

The US housing market remains moribund with the National Association of Home Builders index, due today, expected to remain at a record low of 16 in August. Housing starts for July, due out tomorrow, are expected to weaken from 1.07m in June to 960,000.

However, activity in the west of the US has started to revive with housing starts rising for the past three months.

Given the foreclosure glut, tightening of lending standards and overhang of unsold new home inventory, I am wondering to whom the builders in the west of the US are planning to sell, and at what price?

Associated Press
Ahead of the Bell: FBR analyst predicts recession
Associated Press 08.15.08, 9:10 AM ET

BOSTON -

If the U.S. economy isn’t already in a recession, it likely will be soon, according to a Friedman Billings Ramsey analyst.

FBR analyst Steve East issued a research note Friday predicting that the standard definition of a recession - two consecutive quarters of decline in gross domestic product - will be met in this year’s fourth quarter or next year’s first quarter.

East said he was more worried about the economy’s growth prospects over the next 12 months than he was last September, when he suggested better than 50-50 odds that a recession would begin sometime in the next 12 months.

“If the U.S. economy has not already entered into recession, we think it soon will,” East said.

Is Goldilocks cheering up again after her nasty bout with PMS?

All quiet as focus switches from inflation to recession
Published: August 17 2008 16:56 | Last updated: August 17 2008 16:56

Among the blizzard of economic data last week, most striking was the jump in US inflation to a 17-year high. What made it remarkable was the market’s reaction. There was none.

This insouciance calls for some explanation. It is not as if inflation is fading elsewhere in the world. The eurozone rate is at a record high while that of the UK is twice the official target and rising.

The market’s mood partly reflects the drop in the oil price, of which more later. More important, attention has switched from the inflation story to the recession one.

Last week brought news of quarterly contractions in both the eurozone and Japan, the former being the first since 1993. That was not supposed to happen. Until lately, economists spoke confidently of an Anglo-Saxon recession, with US and UK consumers suffering and the rest of the world unscathed.

Predictably, investors have over-reacted. In the latest Merrill Lynch fund manager survey, the proportion agreeing that the global economy will suffer a technical recession in the next 12 months is now almost half, against a third two months ago.

This is surely more an emotional response than hard expectation. Official forecasts of global growth at about 4 per cent are doubtless too high. But if the world including China and India is tipping into recession, then we really are in trouble.

From all this, though, a bullish story emerges. This kind of contraction knocks inflation on the head so rate cuts are in order. Then we are off to the races again on a tide of cheap money.

Many factors go into recession declaration
By Erin DeMuth Judd
ejudd@poststar.com
Published: Sunday, August 17, 2008

When analysts and experts discuss New York’s current recession on the news, it can be difficult to determine exactly how they know the state’s in a recession.

New York Gov. Paterson: Recession is Here, Prepare to Tighten Belt
“The Time to Act is Now”
By Shawn Strack, published Aug 13, 2008

“The time to act is now.”

Powerful words erupt from the mouth of one of the most powerful men in New York State.

Governor David Paterson is addressing the people of New York in a live televised speech. He says New York will be $26 million in debt within three years if things don’t change. He says New York State must tighten its belt as its residents have, in order to recover from a recession.

He calls it a recession.

I don’t blame companies one bit for hacking away at company matches in retirement plans. It’s voluntary, not mandatory.

Perhaps I’ll feel different if tort reform succeeds one day. Companies can’t afford to cover much of health care costs for employees, defend themselves from getting sued by ambulance chasing lawyers AND add to the retirement kitty of employees.

Companies aren’t beholden to employees. Employees aren’t beholden to employers either.

Employees offer time and service to employers for which they get paid an agreed-to amount before the employee ever does any work.

Fair enough - point well taken.

Care to illuminate re: what the slaveholding clauses are? Not that I doubt you….I’m just genuinely curious. if the clauses are that punitive, why did you take the job?