St. Cloud Times, May 22
JP Morgan loss fuels reform calls
With JP Morgan Chase now facing three different investigations because of its $2 billion (or more?) derivatives trading loss, a familiar debate is resurfacing about regulations, especially involving banks considered too big to fail.
And have no doubt, JP Morgan definitely qualifies as too big to fail. Its assets are pegged at about $2 trillion, and, by their measure, Forbes has rated it as the world's largest public company.
So what, if anything, can be done from a regulatory standpoint to limit an entity like JP Morgan from taking risks that cost it billions directly and even more in stock value? There are no quick and easy answers, but there are a number of ways to come at the problem.
JP Morgan essentially bet on complex financial instruments — credit derivatives products — that led to the loss. CEO Jamie Dimon told The Associated Press the loss came from trading in credit derivatives that were designed to hedge against financial risk, not to make a profit for the bank.
Interestingly, the near-collapse of the financial industry in 2008 spurred the Dodd-Frank Act, a controversial regulatory overhaul that was supposed to address these tools. However, the federal government has yet to define specifics involving amounts, transparency and similar factors.
Had those been defined, would they have impacted JP Morgan's decisions?
Even more telling: Dimon has been a leading voice in lobbying the government for keeping these derivative regulations to a minimum.
Now, though, there is renewed regulatory interest in several measures.
One example some experts suggest is revising the Volcker rule, which is designed to prevent banks from placing bets for their own profit, also known as proprietary trading. The idea is to protect depositors' money, which is insured by the government. If a bank's losses were to wipe out those deposits, taxpayer money would have to be tapped.
Another suggestion involves reinstating the Glass-Steagall Act, which came about in the Great Depression to stabilize banking but was repealed in the late 1990s to allow banks to expand and enter the securities industry. In other words, deregulation.
Other solutions focus on more stringent application of existing rules, whether through Dodd-Frank or the Sarbanes Oxley Act of 2002, which targeted top executives with accountability for their company's actions. Naysayers of regulations will oppose such efforts. Realistically, though, if a company is deemed too big to fail then the government needs to apply regulations that limit or at least clearly disclose its risky moves. After all, if those fail, it's taxpayers who foot the bill.
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New Ulm Journal, May 23
CEO Jamie Dimon told The Associated Press the loss came from trading in credit derivatives that were designed to hedge against financial risk, not to make a profit for the bank.
We'll have to take state's word
The State Department of Education unveiled its new state ranking system for school districts, to replace the No Child Left Behind system, from which the state has received a waiver. According to Commissioner of Education Brenda Casselius, "With this new accountability system we'll be able to better assess how our schools are really doing."
Well, we'll take her word on that.
No Child Left Behind was a convoluted system of testing and interpreting those test results to measure how schools were progressing toward the goal of each and every child showing mastery of language and math. It was an unreasonable system in which the benchmark kept rising, and a bad performance by a couple of students, regardless of their abilities and potential, could result in a whole school being labeled as not making "Adequate Yearly Progress."
The new system gathers the data and interprets it, measuring proficiency, based on "weighted percentage of subgroups making adequate progress under state academic standards," growth, or getting students to "exceed predicted growth;" achievement gap reduction, or the "ability of schools to get higher levels of growth from lower-performing subgroups," and graduation rate.
This is obviously a system intended to let education experts crunch data that they understand and measure performance. We know it is difficult to assess educational performance in schools all over the state, school by school and student by student.
If the new system works, we're glad. We don't understand it, but we're glad.
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Austin Daily Herald, May 22
Take out politics
The news that Minnesota's two major political parties and several individual citizens have asked the state's court system for $628,000 in legal fee reimbursements after a lengthy redistricting battle gives more credence to a very compelling argument: the current redistricting process is costly and not in the best interests of Minnesotans.
The fact of the matter is that neither Democrats nor Republicans have residents' best interests first and foremost in their minds when they battle over district lines. What makes geographical or residential sense is secondary to the goal of picking up a few more seats or making political rivals more vulnerable.
In the same vein, it's become laughable in this day and age to expect the parties to agree on a redistricting map on their own. Whenever one side presents a map, the other side will self-righteously and hypocritically call it partisan politicking before promoting its own equally unbalanced solution.
In place of the current redistricting setup, a separate entity should create the map based on geographic and population makeup, analyzing real information instead of political advantages. Politicians should have no say in the map's creation.
It's probably a pipe dream to expect litigation to go away completely in redistricting, but it would be nice to try. It would cost the state government less and allow residents to make clearer sense of their representation.
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