The concept of good governance has typically been used in development economics as a way to describe the system of aid-recipient countries – developing economies.The recent economic crisis has brought this concept into light in developed economies where governance, both public and private, has been assumed to be sound.(Or at least that’s what they’re supposed to do.) Systems of governance affect the performance of the state in executing its core functions and through this, the performance of countries in meeting their major economic and social goals.
It became obvious that neither public sector leadership nor private sector leadership really understood the complex financial instruments that were structured, packaged and sold during the boom years. Only after the crisis had begun unfolding did the New York Times publish an account of the brief meeting between Security and Exchange Commission (SEC) officials and the heads of the large investment banks.
The investment banks wanted the SEC to exempt their brokerage units from an old regulation that limited the amount of debt they could take on.
The Wall Street Journal and CBS have reported that Freddie Mac and Fannie Mae spent millions of dollars lobbying some influential members of congress, in exchange for, among others, lax capital reserve requirements.
As a result of their lobbying prowess, these obsolete institutions became virtually untouchable behemoths.
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