and ice cream.” For twenty-five years Eakes was a vegetarian but it was causing too many headaches in his family. “I decided I’d be the accommodating one,” Eakes said. He has hazel eyes, a ruddy complexion, and a proud, stubborn chin that he thrusts out and clenches, Bill Clinton–style, when conveying sincerity or defiance. With a razor tongue and reedy Southern accent, he is constantly cracking jokes, offering wiseguy asides, and making self- deprecating remarks. He tends to smirk a lot, as if constantly amusing himself with private jokes, and more often than not he seems to share those lines. For fun the former physics major reads science journals.
His office has a temporary look to it, as if he’s only just moved in. Picture frames and plaques lean against one wall; several cardboard cartons sit on the floor. The walls are practically bare. The first time I saw it, late in 2008, I asked if he’d recently switched offices. He cocked his head and looked at me confusedly. He has had the same office, he told me, for nearly a decade.
Since its inception, Self-Help’s bylaws have dictated that no employee can earn more than three times the pay of the lowest-paid person on the staff. At the end of 2008, some Self-Help workers made $23,000 a year, so that meant Eakes, despite the size of Self-Help and his fancy credentials, was earning a salary of $69,000. “He’s a guy who could have made a bazillion dollars on Wall Street if he didn’t have these social goals,” Calhoun said. “Martin is a hard-nosed businessperson. Make no mistake about it.”
Despite its inability to pay big salaries, Self-Help has never had trouble filling its headquarters with young graduates with advanced degrees from redoubts like Harvard and Prince ton. Its halls are filled with Eakes clones, nerdy and smart and over-degreed and seemingly indifferent to their clothes and their cars. Some years back, when the maximum salary at Self-Help was $32,000 a year, a potential funder came to visit. He took one look at the employee parking lot and shook his head. Never in his life, he said, had he seen such a collection of junkers in a single place. “Basically you could describe Self-Help as a bunch of misfits,” Eakes said. New initiatives seem to be born at night, when people find Eakes in his office and sit to spend an hour or two puzzling through a problem. Eakes describes himself as an introvert but friends and even subordinates scoff at that characterization. Being around other people seems to enliven him, and he certainly doesn’t seem an introvert during staff meetings when he’s acting like the class clown.
Yet Eakes seems to have mixed feelings about the limelight. I’ve seen him speak and he’s a natural, playful and chatty and entertaining, yet he says, and people around him confirm, that he genuinely would prefer to remain at the office and let others take the podium on Self-Help or CRL’s behalf. “He probably turns down ten requests to speak for every one he accepts,” said Mark Pearce, who worked as a top Self-Help executive between 1996 and 2006. “To Martin, testifying before Congress or a state legislature—any kind of public speaking—is a necessary evil that he’ll do only if he can convince himself he has no choice.”
That’s not to say Eakes lacks a robust ego. At times he can come off as supremely confident—even cocky. Within the first few minutes of our first meeting, he mentioned an email he had just written to the chief of staff of an important congressman and then dropped the names of two senators with whom he’d recently spoken. “We’re going to get the mortgage industry cleaned up over the next year,” he said over lunch, “and then we’ll be able to take care of these other issues like payday loans and credit card overdraft fees.” He said this matter-of-factly, as if these vexing national issues were just chores his wife had asked him to do on the way home from the office. Given Self-Help’s modest roots, I asked Eakes, was he astonished by its soaring success? “Not really,” he said with a shrug.
With the recognition and the acclaim, the deposits flowed in, and with more capital to work with, Eakes and Self-Help were able to get more ambitious still. A fund was established expressly to loan money to people wanting to get in the day-care business and the credit union got in the charter school financing business as well. Self-Help financed a homeless shelter in Durham and a large home that served as an early sanctuary for people with AIDS. Self-Help even acted in the role of a developer, buying landmark buildings in cities around North Carolina where it had a branch, rehabbing the properties, and then leasing offices to local nonprofits at a discount.
Self-Help’s boldest move began when Eakes started to think about the limits of what he had built. By the mid-1990s, Self-Help was up to seven branches around the state, but in ten years the organization had helped maybe one thousand families buy a first home. Some might have been impressed with Self-Help and its pace of growth but Eakes was struck with how slowly they were moving. That was what propelled him to make the drive to Winston-Salem, ninety minutes from Durham, to meet with Leslie “Bud” Baker, Jr., then the president of the Wachovia Corporation, one of North Carolina’s largest banks.
“We knew we were never going to be big enough to have the kind of impact we wanted to have,” Eakes said. “But Wachovia had branches all over the state. If we could get Wachovia to make loans to single African-American mothers, it would have a much bigger impact than we ever could.”
In Baker’s office, Eakes offered Self-Help’s clients as Exhibit A. His borrowers might not seem loan-worthy at first glance but they also realized this might be the only chance in their lives to own a home. They had less of a financial cushion than those in higher income brackets and were more likely to fall behind in their payments, Eakes conceded. But by that point, Eakes and Self-Help had been in the home loan business for nearly a decade. They had foreclosed on only three homes, and in all three cases the credit union had recouped its original investment. In almost ten years, they had yet to write off a single loss.
Eakes didn’t persuade Baker to start loaning Wachovia’s money to low-income families that first time they met. He failed to convince him a few months later when they met again or when he visited him for a third time several months after that. It might have been the right thing to do, and also judicious given the Community Reinvestment Act, but it also meant breaking with the established benchmarks of lending and Wachovia was a traditional, old-fashioned bank. When Baker finally relented, he told Eakes, “We’ll give it a try. We’ll make $10 million worth of these loans. I think we’ll lose half that money but it’s worth it to get you out of my office so I don’t have to hear you talking anymore.” As Eakes likes to tell the story, he walked out of Baker’s office without another word.
As Baker had promised, Wachovia wrote $10 million in home loans to those with solid work records but tarnished credit ratings, and Wachovia would write another $10 million in similar loans after that. But though people inside Wachovia assured Eakes the loans were performing well, they also told him that was more or less it. The bank didn’t feel comfortable carrying more than $20 million in nontraditional, subprime loans on its books.
That was when Self-Help decided to take the truly revolutionary step of creating a secondary market for subprime loans. As Eakes saw it, Self-Help could help so many more people if they had more than just a dozen or so loan officers scattered around a single midsize state. That was Eakes’s pitch to Bud Baker and the other bank presidents with whom he would meet. “I said to them, ‘Most people covet your money but I covet your delivery mechanism. You have branches all over the state. You have twenty thousand loan officers all over kingdom come. You can reach every little neighborhood we can’t.’” And if joining in his cause wasn’t reason enough to play in the secondary market he was creating, there were more concrete advantages as well. “I would tell them,” Eakes said, “‘We’ll pay you a fee, you’ll make your money, and you get to be the hero and get your CRA credits.’”
Again Eakes started with Wachovia, whom he approached with a unique offer. We’ll buy all the $20 million in loans you’ve made to low-income clients, he told Baker, if you promise to use the proceeds to make more loans to people of modest means. The catch was that Self-Help was going to borrow most of that $20 million from Wachovia itself. They’d put up $2 million as a down payment and the $20 million loan portfolio would serve as the collateral for the loan. “We were taking all the credit risk,” said Mike Calhoun. “If the mortgages went bad, we were out our reserves and the entire portfolio with a book value of $20 million reverted to them.” They would pay market rate on the loan to Wachovia but Calhoun and others had done the math: Self-Help would still come out ahead if all went as planned. Wachovia said yes and, Calhoun said, “We knew we were in business.”
Eakes was anxious to approach other banks with what he called his “godfather proposition”—a deal too good to refuse. Holding him back was a lack of cash. To make that first $20 million deal work, Self-Help needed to make a $2 million down payment, and it wasn’t as if the organization had that kind of money lying around to write more checks of that size. As luck would have it, one of Self-Help’s biggest financial backers, the Ford Foundation, which had aided Self-Help dating back to its worker-owned cooperative days, was confronting a unique challenge: the need to spend a lot of money and spend it fast.
By law, a foundation must pay out at least 5 percent of the total worth of its holdings each year, and in 1998, with dot-com fever fueling the stock market, the Ford Foundation’s portfolio ballooned. “I have a really big idea,” Eakes began when contacting his liaison at the foundation, and his timing couldn’t have been better. Ford gave Self-Help $50 million to help underwrite this new secondary market for subprime real estate loans, and with the commitment from Ford, Self-Help was able to convince Fannie Mae to guarantee the loans. Self-Help’s money would
