Subprime Bets Haunt GM

GMAC also delved deeply into those products, and many of the loans it made with them weren't classified as subprime. Its interest-only loans produced last year totaled $48.3 billion, up 11% from 2005, according to filings with the Securities and Exchange Commission. Its pay option adjustable-rate mortgages more than tripled last year to $18.3 billion, while its high-loan-to-value mortgage loans were up 33% to $8.8 billion.

"It doesn't take a genius to conclude that you're courting trouble in the future when you make loans like this," says Egan. "Many of these loans were made on the assumption that housing values would continue to appreciate at an extraordinary rate, and any corporate executive should know that markets never go up forever. When you're making mortgage loans to low-income people that are wagered on that assumption, you're not acting responsibly."

In April, ResCap replaced CEO Bruce Paradis with its president and chief operating officer, Jim Jones. More recently, GMAC hired Robert Hull, a Bank of America (BAC) executive, to replace Sanjiv Khattri as chief financial officer. He'll report to Alvaro de Molina, who joined GMAC in August as chief operating officer from Bank of America -- an institution that has certainly had its share of problems from the subprime loan fiasco.

GMAC's longtime CEO, Eric Feldstein, remains in place, as do the leaders of his former corporate parent, GM.

"[GM execs are] ultimately responsible for the corporate direction and the corporate strategy of the company," says Egan. "The managers at GM had a two-and-a-half-year time horizon at most when they got into this mess. The managers at Toyota (TM) think in terms of decades."

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