Self Interest???
Published on Tuesday, April 29, 2008 by CommonDreams.org
Developing the New “Capitalists’ Man”
by Dean Baker
In the wake of revolutions in Russia, China, Cuba, and elsewhere, there was talk of creating a new type of person with a socialist mindset. The idea was that people in the prerevolutionary capitalist societies had been educated to be individualistic and greedy. The post-revolutionary societies would instead educate people to be socially minded and to consider the collective good in their actions.
I’ll leave it to others to debate the merits of these efforts. The reason that they are suddenly relevant is that our political leaders now seem concerned that people have not been adequately educated for their vision of a capitalist society.
This came to light recently when Treasury Secretary Henry Paulson insisted that people who are underwater in their mortgages still had an obligation to pay off their loans. Mr. Paulson is concerned that, because of the collapse of the housing bubble, many people now find themselves owing more than the value of their house and are simply walking away from their debts.
For example, in some of the rapidly deflating bubble markets, many homeowners are in situations where they owe $400,000 or $500,000 on a home that today is worth $100,000 less than the amount of their mortgage. In this situation, homeowners can effectively save $100,000 if they stop paying the mortgage and let the bank foreclose on the house.
Tens of thousands of homeowners are opting do exactly this. They calculate that it makes more sense for them to let the bank take the house than to repay the mortgage. Businesses have even opened that show people exactly how to “walk away” from their mortgage and explain the potential consequences.
As a committed capitalist, we might expect Mr. Paulson to applaud people taking initiative and acting to improve their plight. Instead, he is insisting that these homeowners should ignore their self-interest and act in the interest of the banks. In other words, he wants homeowners to keep making payments on their mortgages even if it is a bad deal for them. Apparently, individualistic behavior can go too far when it affects bank profits.
MORE
http://www.commondreams.org/archive/2008/04/29/8597/
Developing the New “Capitalists’ Man”
by Dean Baker
In the wake of revolutions in Russia, China, Cuba, and elsewhere, there was talk of creating a new type of person with a socialist mindset. The idea was that people in the prerevolutionary capitalist societies had been educated to be individualistic and greedy. The post-revolutionary societies would instead educate people to be socially minded and to consider the collective good in their actions.
I’ll leave it to others to debate the merits of these efforts. The reason that they are suddenly relevant is that our political leaders now seem concerned that people have not been adequately educated for their vision of a capitalist society.
This came to light recently when Treasury Secretary Henry Paulson insisted that people who are underwater in their mortgages still had an obligation to pay off their loans. Mr. Paulson is concerned that, because of the collapse of the housing bubble, many people now find themselves owing more than the value of their house and are simply walking away from their debts.
For example, in some of the rapidly deflating bubble markets, many homeowners are in situations where they owe $400,000 or $500,000 on a home that today is worth $100,000 less than the amount of their mortgage. In this situation, homeowners can effectively save $100,000 if they stop paying the mortgage and let the bank foreclose on the house.
Tens of thousands of homeowners are opting do exactly this. They calculate that it makes more sense for them to let the bank take the house than to repay the mortgage. Businesses have even opened that show people exactly how to “walk away” from their mortgage and explain the potential consequences.
As a committed capitalist, we might expect Mr. Paulson to applaud people taking initiative and acting to improve their plight. Instead, he is insisting that these homeowners should ignore their self-interest and act in the interest of the banks. In other words, he wants homeowners to keep making payments on their mortgages even if it is a bad deal for them. Apparently, individualistic behavior can go too far when it affects bank profits.
MORE
http://www.commondreams.org/archive/2008/04/29/8597/