Publication cate: 5/6/02 (Issue date: 05/27/02
Freddie Mac, Verizon Made Jesse's Hit List
By Kenneth R. Timmerman
The late release by the Rev. Jesse Jackson of his group's 2000 tax returns provide tantalizing glimpses into his corporate fund raising. Among the previously unknown items is a payment of $1,050,000 to the Rainbow/PUSH Coalition from the Federal Home Mortgage Corp. (Freddie Mac) "to develop an infrastructure to support credit- and investment-outreach programs." Also included on the returns is $1,675,000 received from Verizon Communications Inc. and a $500,000 payment from the Citigroup Foundation, both of which have been prime targets of aggressive Jackson tactics.
The large grant from Freddie Mac came on the heels of a highly publicized personal attack by Jackson on the company for alleged discriminatory lending practices and race discrimination against employees. Once the payments came in, however, Jackson's allegations went away. Critics wonder why.
On June 3, 1998, Jackson held a press conference at the National Press Club in Washington, calling on Freddie Mac "to end its racially discriminatory practices" and "urg[ing] Freddie Mac shareholders to divest" from the firm.
The government-subsidized private lender "trailed other industry lenders in terms of minority borrowers and lending practices," Jackson alleged, and "has failed to fulfill its government guidelines in granting loans to deserving households below conventional market rates." He also accused the company of racial discrimination in the workplace and called on the mortgage lender to "launch a full investigation ... and provide adequate remedies to the affected individuals."
If this had been a military campaign, say critics, Jackson's charge would have been the equivalent of a two-pronged frontal assault. Instead, Jackson mysteriously allowed his sharply worded allegations to fade away like smoke, while behind closed doors he now appears to have been negotiating with Freddie Mac executives.
"Jackson stood up with a former employee who claimed discrimination," Freddie Mac spokeswoman Sharon McHale explained to Insight. "Frankly, Jesse Jackson did not have the facts. He subsequently received the facts from us and from our chairman, and the lawsuit was dismissed as completely without merit."
The June 1998 press conference "began a dialogue," McHale said, that by late 1999 led to concrete discussions and eventually to the $1,050,000 grant to Rainbow/PUSH that was disclosed last month on the group's 2000 tax return. Once the deal was cut, Jackson also let drop the other half of his attack, the accusations of discriminatory lending practices.
Ironically, those charges have been widely documented, industry analyst Anne Canfield tells Insight. "Numerous Government Accounting Office [GAO] and HUD [Department of Housing and Urban Development] studies have shown that regulated lenders ó banks and thrifts who are subject to the requirements of the Community Reinvestment Act ó have a far better track record of lending to minorities than do Fannie Mae [the Federal National Mortgage Association] and Freddie Mac," Canfield says.
In addition to her consulting business, Canfield also runs a trade group representing mortgage lenders that has been critical of taxpayer subsidies to Fannie Mae and Freddie Mac, the two largest government-sponsored enterprises (GSEs).
In a September 2001 study (available at http://www.gsereport.com), she argues that little of the $11 billion in federal subsidies awarded to the two GSE lenders actually reaches "those who deserve help." Instead, "Wall Street investors and top executives are the Powerball winners in this subsidy lottery."
Not long after Jackson's public assault on Freddie Mac, company Vice President for Corporate Relations Dwight P. Robinson, a former top Clinton appointee at HUD, began the negotiations that led to the $1 million grant to Jackson's group. Part of the package deal was a Freddie Mac pledge to purchase "up to $1 billion worth of mortgage loans made to minority families" through the Bank of America and Rainbow/PUSH.
Announced with some fanfare by Freddie Mac Chairman and Chief Executive Officer Leland C. Brendsel in April 2000, the deal transformed Jackson from troublesome adversary to ally since it allowed him to claim that he had brokered real benefits for minority communities. The goodwill, if sincere, was also calculated.
Brendsel said the lender would pay Jackson $1 million as part of its "mission ... to make the dream of decent, accessible housing a reality," and was teaming with Jackson's Wall Street Project to "open doors to homeownership for minority families." The money would help "leverage" Jackson's 1,000 Churches Connected, a new program Jackson had announced just three months earlier with an eye toward the Freddie Mac grant.
Freddie Mac announced that its money would fund the hiring of "regional managers to establish and manage the network of finance ministries in five key cities." In turn, those Rainbow/PUSH staff members were supposed to train pastors in Jackson's "1,000 churches," who would hold classes for members of their congregations as part of Freddie Mac's "CreditSmart" financial literacy program.
But in practice it hasn't worked out quite that way. Two years and $1 million later, Freddie Mac officials say they have had contact with four officials from Rainbow/PUSH. Instead of Jackson's group training pastors, Freddie Mac has had to hire external training companies. To date, McHale said, they have trained some 70 to 80 church-affiliated persons identified by Rainbow/PUSH. Jackson's group says the new trainees have exposed between 800 and 1,000 people to the CreditSmart program.
Several pastors contacted by Insight said they had refused to pay the $1,000 membership fee Jackson demanded to join 1,000 Churches Connected because "all Jackson is offering is a group of self-help videos and a Xeroxed course plan." When Freddie Mac first announced the partnership, the lender explained that the $1,000 membership fee was intended to defray the cost of program materials, seminars and services, and that each member-church would receive "a personal computer and financial-planning software." As it turned out, the software and computers were donated separately by Compaq Computer Corp. Jackson's group "set up an 800-number fulfillment center so churches can get the workbooks, teachers and materials from them," McHale said, but that appears to be it.
What about that commitment to purchase loans worth $1 billion for new homeowners. "That's our hope over the next five years," said McHale. "It is the industry experience that roughly one in 10 people who take this type of class successfully purchase a home within one year of taking the class." So far none have applied, although McHale said the lender was hoping to receive the first loan applications by June.
It's not as if financial-literacy initiatives such as CreditSmart weren't important. "They are very worthwhile things," says analyst Canfield. "It's important to help people understand how crucial their credit record is to getting an affordable loan." And there is a real gap between home ownership among blacks, which runs around 47 percent, and among whites, which is 72 percent. The question is whether the Rainbow/PUSH Coalition has been able to deliver, or whether the Freddie Mac board ó which at the time the grant was made included Clinton appointees Rahm Emmanuel and Howard Ickes ó merely intended to buy Jackson's support.
Insight faxed a series of questions to Rainbow/PUSH and was told by Jackson assistant John Mitchell that the group's financial department was handling all details of the Freddie Mac grant. But Mitchell declined to provide specific information on how the money had been spent or how many people had been trained.
Other details revealed in the Jackson Rainbow/PUSH tax returns:
Jackson's take in 2000 totaled some $14.5 million (not including his "church," Operation PUSH, which brought in an additional $1.5 million, according to a February 2001 auditor's report). With that, Jackson spent more than $1.25 million on personal and organizational travel, including 150 campaign stops for the Gore-Lieberman campaign, $3.5 million on staff and another $840,000 on outside consultants.
In an interview last December, Jackson called any characterization of his activities as shakedowns "your editorial conjecture," and insisted that his relationships with his donors "are legitimate and they are aboveboard."
Kenneth R. Timmerman is a senior writer for Insight and author of the best-selling book Shakedown! Exposing the Real Jesse Jackson.