Clinton campaign manager served on board of failed subprime lender

WASHINGTON - Hillary Rodham Clinton's campaign manager, Maggie Williams, earned about $200,000 on the board of a Long Island subprime lender that charged prepayment penalties — a practice that Clinton, a critic of the subprime industry, now seeks to eliminate.

Williams, who took over the reins of Clinton's campaign in February, served as a director on the board of the Woodbury, N.Y.-based Delta Financial Corp. from April 2000 until the firm declared bankruptcy in December, according to Securities and Exchange Commission records.

She was originally recruited by former New York City Deputy Mayor Bill Lynch, a Delta consultant. Her assignments were to create a new code of "best practices," to improve Delta's relationship with African-American customers, and to improve the company's crisis management operation in the wake of state and federal predatory lending probes that resulted in a $12 million payout to borrowers.

Williams, 53, isn't the only Clinton insider who made money from an industry the candidate has demonized. A month ago, The Wall Street Journal reported that Clinton ally and former HUD secretary Henry Cisneros grossed more than $5 million in stock sales and board compensation from Countrywide Financial, one of the nation's largest subprime lenders.

Once a poster child for predatory practices, Delta's reputation improved substantially until its recent travails, as executives eschewed adjustable-rate mortgages for more stable fixed-rate loans, which have fewer defaults.

To boost revenue in the absence of high-profit adjustable loans, the company charged relatively steep interest rates — 11 percent in 2007 — and levied higher-than-prime-loan closing costs.

And Delta assessed prepayment penalties for borrowers who paid off before their loans matured — a practice Clinton frequently decries on the campaign trail.

"I would eliminate the prepayment penalties that lead to such high rates of default," Clinton said in a March 24 speech at the University of Pennsylvania. "I would require lenders to take into account the borrower's ability to pay property taxes and insurance fees when deciding whether to make a loan in the first place."

Subprime loans come with higher interest rates and are offered to borrowers with poor credit. That lending took off during the housing boom and is one of the underlying causes of the current credit crisis.

Williams downplayed her role at the company, saying, through her assistant, that she served only in "an advisory/oversight capacity."

In a statement released through Clinton's campaign, Delta senior vice president Marc Miller said Williams "did not have a role in the day-to-day operations and management."

Calls to Delta executives, board members and their bankruptcy lawyer weren't returned. The company's switchboard and Web site have been deactivated in the last few days.

Williams turned down repeated requests to be interviewed, although her assistant provided brief responses to several written questions by e-mail.

Asked if she shared her experiences in the industry with Clinton, Williams' assistant, Amee Patel, responded, "She generally does not discuss her business, board memberships or organizational affiliations with the Senator."

For her services on the board, Williams was paid around $30,000 per year plus expenses and granted at least 25,000 stock options, according to the SEC.

Records show she was able to cash in some of the options, realizing a profit of about $15,000 during a temporary uptick in Delta's stock price in July 2007.

"She lost remaining options due to the company bankruptcy," her assistant wrote in an e-mail.

A month later, in August 2007, Delta was hit by a sudden contraction of the credit markets and began a first wave of layoffs. By year's end, the company had laid off all but 50 of its 1,350 employees after bailout attempts failed and the credit crisis deepened.

Like many African-American leaders, Williams, who served as Hillary Clinton's top White House adviser from 1993 to 1997, initially had high hopes subprime lending would offer homeowning opportunities to inner-city families long stymied by discriminatory bank practices.

Speaking to Directors & Boards magazine in June 2000, Williams said she excited about offering Delta's home equity loans to working families trying to move into the middle class.

"There are people who miss payments and have bad credit for all kinds of reasons," she said. "It is a very middle-American kind of problem, although I believe it does affect poor people disproportionately."

In the article, Williams said her first tasks were building a new communications operation and learning the ins-and-outs of subprime lending from Hugh Miller, the company's chief executive.

"Hugh was really my teacher in all of this," she told the magazine.

If Williams was impressed by the Miller family, others remained skeptical of Delta's reinvention, with some watchdog groups arguing the company continued to aggressively market high-fee loans to low-income borrowers, driving them deeper into debt.

"There was some improvement after the settlement, but they were still the most aggressive company," said Matthew Lee, founder of the Bronx-based Fair Finance Watch, a nonprofit that monitors inner-city lending.

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