Jones, as well as McKenzie and the Davis brothers and others, moved into Ohio. They competed out in California and in Missouri, North Carolina, and Washington state. In 1997 Check Into Cash generated $21 million in fees; it brought in that same amount through the first six months of 1998. By then, the average store in Jones’s growing archipelago of shops was generating $46,000 in profits. The only thing stopping him, Jones concluded, was a shortage of money. He sold his collections business. He started meeting with investment bankers about a possible public offering. It was time, Jones decided, “to really throw the hammer down.”
Confessions of a Subprime Lender
When conservatives defend the Bush administration against the charge that its devotion to deregulation helped bring about the 2008 global economic collapse, they like to talk about the past. The real culprit wasn’t unbridled capitalism as it was practiced in the early years of the twenty-first century; it wasn’t missed opportunities to rein in strange new creatures, such as credit default swaps and collateralized debt obligations, that had been birthed by Wall Street. Instead, fault lies with all those inept if well-intentioned liberals who forced otherwise sober bankers to extend credit to marginal borrowers to buy houses they couldn’t afford. They blame legislation like the Community Reinvestment Act, or CRA, a Jimmy Carter–era law that forced banks to make loans in every neighborhood in which they had branches.
Allan Jones, though, is more specific. He blames the evaporation of trillions of dollars of global wealth in only a few months’ time on just one man: Martin Eakes.
It’s easy to see why Jones might name Eakes. It was Eakes who, in the mid-1990s, convinced the Federal National Mortgage Association—Fannie Mae—to help his organization, the Center for Community Self-Help, create a first-of-its-kind secondary market to buy and sell subprime mortgages. With Fannie’s backing, Eakes and Self-Help were able to buy up billions of dollars’ worth of subprime loans from banks across the country and repackage them into mortgage-backed securities sold on Wall Street. It was the failure of so many subprime loans buried in mortgage-backed securities that accelerated the global credit crisis.
There’s no doubt that Eakes possesses a revolutionary’s desire to change the world. Eakes and Self-Help started making home loans in the mid-1980s to African-American families and others of modest means. As if targeting the kinds of neighborhoods other banks expressly avoided weren’t enough of a challenge, Self-Help deliberately sought borrowers with a credit score below 620 “because we wanted to prove that this number says as much about the lack of wealth in a family as it does the lack of character, which was the dominant stereotype at the time,” Eakes said. Over the years, nearly half the homebuyers who have received financing through Self-Help have been black or Latino and nearly half were single mothers at the time they took out a loan. Its borrowers paid an interest rate around a percentage point above the going conventional rate and a fixed 1 percent in fees and points. That was more than enough, he found, to compensate him for the additional risks he took lending to those of modest income.
Eakes himself never put up much of a fight when someone dubbed him a subprime lender. “It used to be, we were happy to describe ourselves as subprime lenders,” said Eric Stein, a top Eakes aide until taking a post inside the Obama administration as deputy assistant Treasury secretary for consumer protection. “We would say, ‘We’ve been subprime lenders since 1984,’ or whatever.” Self-Help has dropped that sobriquet but Eakes is unapologetic about making loans to all those single mothers with tarnished credit and meager savings. If he harbors any disappointment about his years as a subprime lender, it’s that Self-Help never made nearly enough loans and that the secondary market didn’t grow larger than it did. “I’d rather put my faith and my money in a person who knows what it means to work hard,” Eakes told me when I visited him, more than a year after the start of the subprime meltdown, “than someone who has paper credentials.”
In person, Eakes seems an unlikely candidate for bringing the worldwide capitalist system to its knees. He’s on the short side, about five feet, five inches tall, a wiry and good-natured man in his fifties who seems more jokester than master of the universe. He has an old woman’s cackly laugh and a tendency to playfully propel his eyebrows into a dance to punctuate a point. He certainly hasn’t grown rich off subprime mortgage lending. When I visited with him, he was driving a sixteen-year-old Chevy Corsica with a moldy backseat that for years had a crack that ran the length of the back window. Eakes’s foes, and they are many—“half the people I know would take a bullet for me,” he likes to joke, “and the other half want to fire the gun”—work hard to blacken Eakes’s name so I feel obliged to check: His is among the bigger homes on his block but that’s only because he lives in a working-class neighborhood in Durham, North Carolina, where homes sell for $150,000 to $250,000. He meets frequently with bankers, politicians, and regulators yet owns a single suit, and his wife, Bonnie Wright, still cuts his hair to save money. He claims, and Wright confirms, that he has never had so much as a sip of alcohol in his life.
Eakes had tried warning others about the coming collapse in subprime as early as 2000. That’s when he stood up at a meeting convened by the Federal Reserve to report that overpriced subprime loans were a growing problem across the country. If anything, he made a pest of himself trying to sound the alarm about what he saw going on around him. He is not a man without connections. He has met a president (Clinton) and I heard him speak at a one-day conference sponsored by the Federal Deposit Insurance Corporation (FDIC) that also featured appearances by Ben Bernanke and Henry Paulson. He has testified before Congress at least a dozen times. Yet to Eakes these appearances only underscore how little clout he truly has. “If they had listened to me up in Washington, we wouldn’t be in this mess,” he cackled. In 2002, he created the Center for Responsible Lending (CRL) to fight predatory lending in all its forms, whether overpriced and destructive mortgage loans or any of a long list of products entrepreneurs had devised to grow rich off the working poor over the previous decade or two. If anything, people inside Self-Help chide themselves for having taken so long. “We were way late to this fight,” said David Beck, a longtime Self-Help staffer who handles media and policy for Eakes. “Some people here thought we were embarrassingly late.”
It’s an interesting question whether Martin Eakes was a culprit in the Great Crash of 2008, but his creation of the CRL seems a more reasonable explanation for how Allan Jones came to blame him for the subprime meltdown. The payday loan has taken a close second behind the predatory subprime mortgage as the CRL’s top issue. Eakes and his organization were behind the payday lending industry’s first big political loss in the late 1990s and they would play a critical part in every big loss payday would suffer in the ensuing years. Unsurprisingly, Eakes was involved in the Ohio fight over payday lending that preoccupied the industry through most of 2008.
At his home, Eakes has a framed photo of himself in Ohio, posing in front of a roving billboard that his payday foes had leased specifically to discredit his organization as a “predatory charity.” It’s one of Bonnie Wright’s favorite photos of her husband, who is smiling happily despite the smear. The attacks help to sustain him, Wright said—and on occasion cause him even to betray the memory of his beloved mother. A few years back, Eakes told me, someone inside the payday industry tried scaring him with the news that they had created a $10 million fund not just to counterbalance the CRL’s attacks on the industry but also to destroy his reputation. “My momma raised us that any level of pride is a sin,” Eakes said. “But that got me pretty close to making me feel real proud.”
His mother was the bleeding heart in the family. A demure college graduate from the mountains of western North Carolina, she would make sure to show up at the polls if for no reason other than to cancel out the vote of her husband, a Jesse Helms Republican. “You could say I grew up genetically confused in terms of my politics,” Eakes said. It was more than just politics. His mother, with her simple adages and generous heart, was frequently described as a “living saint.” His father, by contrast, was a tobacco-chewing farm boy who taught himself the heating and air-conditioning business and then grew rich installing systems for businesses around Greensboro. The elder Eakes was outspoken and opinionated, a real brawler. “He makes me look tame,” Eakes said.
Allan Jones saw his birth as a sign he was destined for greatness. Eakes’s birth seemed a testament to his determination. His mother had tied her tubes after having her first two sons but then gave birth to this one, a so- called “blue baby” whose very survival required an immediate blood transfusion. Eakes’s friend Gordon Widenhouse recalled when the two played Pee Wee football together. Eakes was scrawny and small but, Widenhouse said, “Martin always insisted on playing nose tackle.” The position normally calls for someone beefy and wide but “that was Martin; he wanted to show you how tough he was.” Marshall Eakes recalls the time a bigger kid challenged his
