Financial Liberalization and Securitization in Housing Finance and the Changing Roles of the Government

Housing finance system have been constituting one of the major fields of the welfare state system which should ultimately produce the affordable housing in every advanced countries. But at the same time, housing finance markets have been attracting public attention as one of the most drastically changing markets where financial liberalization and the securitization accompanied with structural transformation of the financial system. In such field, how the structural changes of economic and financial circumstances have affected the welfare state system and the crisis management policies? What are the feature of the new developments of welfare state system and the crisis management policies? And how should we appreciate the characteristics and perspectives of the welfare state mixes composed of public and private entities in Japan and the U.S.? This paper examines how has the government roles in housing finance markets been changing on the process of the financial liberalization and the securitization in Japan and the United States. In the consideration of the government roles in such filed, it is needless to say that effectiveness of the government intervention should be essential to examine, but yielding such study to Professor Gary Dymski in this same series of this discussion papers, this paper focuses on the differences and its backgrounds of the forms of government intervention in the housing finance markets, and the costs of the government intervention through the process of financial liberalization and securitization from the view points of comparison of Japan and the U.S. Section 1 surveys, at first, the general trends of the broader welfare state system which can be commonly seen in the most of advanced countries. And in the Section 2, after examining the framework of the housing welfare state system focusing on the reasons and forms of the government intervention in the housing markets, differences of the government roles and their back ground in Japan and the U.S. are made clear, that is, in the U.S,, because of the existence of traditionally specialized private financial institutions in the markets affected the indirect and multiply intervention forms of the government into the markets, whereas, in Japan, government direct loan programs are given much weight because of the lack of the private housing finance institutions. And in Section 3, reorganization of the government programs are surveyed in both countries, and presented that, in the U.S., further indirect interventions were seeked on the process of financial liberalization and securitization, but paradoxical expansion of the government coverage on the market which resulted in the heavy fiscal burdens since 1980s, whereas, in Japan, steady enlargement of the interest rate subsidies from the general accounts of the central government to the government lending agencies have appeared linking to the business cycle countermeasure policies of the government. Through such considerations, this paper concludes that different courses to reorganize the government programs have not produced the much difference in the social costs, and moreover income reallocation system through the public sector can not be abolished as long as the some external economies or ‘the attempts to shed light on one of the major aspects of today's changing welfare state system and crisis management policies.