One of the nastier assaults has come at the hands of a group called the Capital Research Center, a D.C.- based think tank that keeps tabs on liberal advocacy groups. Eakes’s longtime friend Tony Snow, a conservative stalwart, compared his old running buddy to Jack Kemp, an active combatant in the war on poverty while serving as a Republican representing the Buffalo area in Congress. Eakes even uses the same term to describe his politics—he calls himself a “bleeding-heart conservative”—as did Kemp, a former vice presidential candidate and the director of HUD under the first President Bush. Yet Eakes was more liberal and therefore a foe. “A Leftist Crusader Wants to Dictate Financial Options to Consumers” was the headline over the first of several unflattering pieces about Eakes that the Capital Research Center published. Among Eakes’s various crimes: He uses Self-Help to “form political coalitions with radical left-wing groups whose purpose is to bully banks into changing their lending practices” despite Self-Help’s stated mission of helping the disadvantaged, it has loaned millions to its own executives and officers over the years; and its borrowers have delinquency rates seven to ten times higher than their credit union peers. A second article made fewer personal charges but instead criticized Eakes, among others, for “demonizing” the practices of some of the country’s leading subprime lenders. In that article, Capital Research lauded Countrywide, New Century, and other subprime lenders for increasing “home ownership opportunities for minorities and low-income borrowers” while ripping “left-wing advocacy groups” like Self-Help that “oppose consumer choice.”
In Durham, people didn’t know whether to laugh or cry. Capital Research was accusing Eakes of enriching himself at the hands of the poor yet Self-Help’s salary cap meant their boss and the other top staff were getting paid no more than $69,000 a year. Still, they earned too much to join the credit union they ran and therefore were ineligible for loans. For his part, Eakes was relieved that the
At least one of Capital Research’s charges was true: More of Self-Help’s borrowers were thirty or sixty days late in their mortgage payments when compared to the typical credit union. But that was to be expected given Self-Help’s role as a self-styled bank of last resort. “Our customers don’t have the same cushion that middle-class borrowers have,” Eakes said. “So if they lose a job or someone gets sick, they’re more likely to fall behind a month or two. But then they catch up because keeping a home means that much.” Through the economic turmoil of 2008, Self-Help, despite its low-income clientele, had consistently maintained a loan default rate of less than 1 percent.
Bonnie Wright, Eakes’s wife, believes the attacks on her husband help to sustain him. Longtime Self-Help colleagues say the same, but on some level the assault on his character seems to bother Eakes. He cracked jokes about some of the more personal charges foes have leveled at him but back at his office, he wanted to read me a quote from Eric Dezenhall, Steven Schlein’s boss. It took him less than thirty seconds to find it: “Modern communication isn’t about truth, it’s about a resonant narrative. The myth about PR is that you will educate and inform people. No. The public wants to be told in a story who to like and who to hate.”
“They don’t understand idealism,” Eakes said of the payday lenders and other businesses aligned against him. “They can’t believe idealism exists. So they think, ‘You have to be doing this because you want our business.’ They have the most cynical motives so they conclude everyone else has cynical motives.”
Eakes, Ralph Nader–like in his asceticism, hardly offered a fat target for those looking to tarnish the CRL. The same could not be said of all of its donors, though, starting with its top two funders, Marion and Herb Sandler, former owners of the World Savings Bank in Oakland, California. It was Herb Sandler who had first approached Eakes about starting a group like the Center for Responsible Lending, and the Sandlers proved generous benefactors. Mike Calhoun told me the couple had given the CRL roughly $20 million in its first half dozen years but Herb Sandler said the actual dollar figure was “well over” that amount.
Eakes had never heard of World Savings or the Sandlers when Herb Sandler first phoned him proposing a meeting, but he asked around and liked what he had heard about the couple and their bank. They were stand-up lenders, he was told, who concentrated on writing mortgages for middle-class borrowers. They had testified before Congress about sound lending practices and feature articles generally heralded them as humane and socially conscious—old-fashioned bankers succeeding in a modern world. World Savings held on to its loans rather than selling them off on Wall Street. The Sandlers gave generously to the American Civil Liberties Union and Human Rights Watch.
The Sandlers still enjoyed a solid reputation when Wachovia bought Golden West Financial, the parent company of World Savings, for $26 billion in 2006. Their share of the purchase price was a reported $2.3 billion. But then the housing bubble began to deflate and with it the Sandlers’ reputation. Wachovia’s stock plummeted by nearly 80 percent as reports spread of heavy losses in its mortgage holdings. Wachovia had made its share of irresponsible loans long before merging with World Savings but it was the World Savings portfolio that was blamed, at least initially, for the implosion of this bank that had been founded in 1879. At the peak of the credit crisis, in the fall of 2008, federal regulators pressed Wachovia to sell itself to a more secure partner. Wells Fargo bought Wachovia in October of that year, for $15 billion.
World Savings had specialized in a product called an option ARM. These were adjustable rate mortgages— loans that would see interest rates fluctuate over time—that allowed borrowers to choose how much they would pay each month. The Sandlers dubbed World’s product Pick-A-Pay: A customer could make a full monthly payment or they could pay an amount that wouldn’t even cover the interest for that month. To the Sandlers, theirs was a more humane product that insulated borrowers from payment shock should there be a spike in interest rates and also gave them the flexibility to ride out financial bumps in the road, whether a lost job, a divorce, or a health-care crisis. The problem with the loan was what bankers call negative amortization: Choose to pay the lower rate and the amount of money you owe rises over time rather than shrinks. Critics dubbed the option ARM and Pick-A-Pay in particular a fundamentally dishonest loan product—essentially an expensive way for people of modest means to rent a home because those always choosing the lesser payment were unlikely to ever have the money to buy the property. The product might make sense when housing prices were soaring—it’s a very good deal if you can sell for $400,000 the home you bought for $250,000, even if you paid down little if any of the principal—but a lousy deal when prices fell. Then it only seemed a way of lending to people with little or no regard for their ability to pay. Inside the CRL, they don’t seem to have anything good to say about the option ARM. But that wasn’t something people internally would talk about on the record. “Our stance,” Kathleen Day, CRL’s main spokeswoman told me, “is that the Sandlers are perfectly capable of defending themselves.” She then added, “We are grateful they have been so generous in their funding of our efforts,” and noted that their contributions have never come with any strings attached.
By the time I caught up with Herb Sandler to hear his side of things, he was so fed up with the media that he sputtered more than explained.
Herb Sandler seemed most angry about the article in the
