With Republicans in Congress unwilling to pass President Obama’s jobs bill, many believe that the Federal Reserve is the only institution left that can lift the economy out of its seemingly perpetual slump.

That has led to the normally quite secretive Federal Reserve, the nation’s most important economic institution, coming under increased scrutiny. This in turn means that the question of who leads the Fed is growing more important.

A new report has revealed that an overwhelming majority of the Fed’s leadership is made up of executives from banks and private corporations, confirming previous American Independent reporting. The report, from the Government Accountability Office (GAO), looked at the membership of the boards of directors of the 12 regional Federal Reserve banks.

Using a voluntary survey of the currently serving directors, the GAO found that over three-quarters of the regional Federal Reserve directors are the president or CEO of the company they work for. Of the directors that have served from 2006 through 2010, only six represented labor and five represented consumers, while 56 represented commerce or industry interests, and 73 represented banking interests.

The report recommends extending director recruitment efforts beyond the senior executive level: “To the extent that director searches are limited to chief-level executives, the Reserve Banks not only limit the diversity of the pool of potential candidates but also risk limiting the perspectives shared about the economy in the formation of monetary policy.”

Federal Reserve Chair Ben Bernanke said in an official response to the report that the Fed has “has already broadened the pool of candidates for these positions to consider qualified candidates who are not chief executives.”

Sen. Bernie Sanders (I-Vt.), who requested the report as part of the Dodd-Frank financial regulatory reform law, called the financial sector’s influence over Fed leadership “unacceptable.”

“Not only do they run the banks,” said Sanders in a statement, “They run the institutions that regulate the banks.”

“Recruiting consumer and labor representatives is a challenge”

The Federal Reserve System is comprised of the central bank in Washington, D.C. and 12 regional Federal Reserve banks. These are charged with carrying out policy dictated by the Federal Reserve guiding committee, the Federal Open Market Committee (FOMC), which in turn is required by Congress to craft policy keeping unemployment low and prices stable. The presidents of the regional Feds, which are selected by the boards of directors, also rotate through five of the twelve voting seats on the FOMC.

Each board consists of nine members: six members are selected by the member banks of the Federal Reserve, and three are selected by the national Federal Reserve Board in Washington. “Class A” members of the regional Fed boards are selected by banks that participate in the Federal Reserve to represent their interests, and are usually commercial bank officials.

The Federal Reserve Act requires that the other 6 directors of each board, 3 “Class B” members appointed by the member banks and 3 Class C members appointed by the national Board, “represent the public” and be “elected with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers.”

But Fed officials told the GAO that “they generally focus their search on senior executives… usually CEOs or presidents.” Officials also told the GAO that “having senior executives on the board of directors helps elevate the stature of the board” and that senior executives “may have a broader view of how their industry is being affected by the economy.”

Despite the fact that Class B and Class C directors aren’t allowed to have ties to the banking industry while serving on the board, the GAO report found that “at least 56 percent [of the surveyed directors] have had some financial industry experience.”

The GAO cited a 2010 memo from the Federal Reserve Board that said recruiting representatives of organized labor and consumers to serve on the regional Fed boards was a “high priority.” But two Fed officials told the GAO that “recruiting consumer and labor representatives is a challenge because many of them are politically active,” and the Board’s policy restricts a director’s political activity.

It’s unclear how the national Board defines “political activity”. TAI’s previous reporting has shown many of the directors have donated generously to political campaigns. And the political activities of at least one director, JPMorgan CEO Jamie Dimon, are regularly the target of speculation by the national media, given his close relationship with the Obama administration and his recent meetings with Republican candidate former Massachusetts Gov. Mitt Romney.

Using data from the Equal Opportunity Employment Commission, the GAO compared the demographics of the Fed board directors with the demographics of “executive and senior level officials and managers” of firms with more than 100 employees, and found that they were quite similar.

Women and racial minorities are extremely underrepresented on the boards: In 2010, 15 of the 108 directors were minorities, and 18 were women. Despite officials telling the GAO that “Class B and Class C directors are a source of demographic diversity on Reserve Bank boards,” only 32 of the 202 Class B and C directors since 2006 have been women, and 23 have been minorities.

The education level of the directors is also unrepresentative: An “overwhelmingly majority” of the directors have a bachelors’ degree, and at least 55 percent have some type of advanced degree.

The GAO found that the selection process relies heavily on personal networking, with many directors selected after a personal recommendation from a current or previously serving director. 86 out of the 91 surveyed directors in 2010 serve on some other board of a for-profit or non-profit company.

One official told the GAO that “they look for candidates in a variety of industry lists such as a Forbes’ magazine list of the most powerful women in business,” while other directors have pursued the job by reaching out to the Fed staff themselves.

“The appearance of conflict of interest”

Fed watchers have noted that regional Fed presidents, selected by the boards of directors, tend to have the most conservative voting records on the FOMC when considering whether to use extraordinary measures to reduce unemployment. Reuters recently rated FOMC members and Fed presidents on their aversion to further stimulating the economy, and found that the most hawkish or anti-stimulus members of the Committee were all regional Fed presidents.

The importance of diversity in the country’s most important economic institution can be seen in the unemployment statistics: While the unemployment rate for people with at least a bachelor’s degree was 4.2 percent in September, for those with only a high school diploma it was 9.7 percent. For whites, the unemployment rate is 8 percent, but for Hispanics it’s 11.3 percent and for African-Americans it’s 16 percent.

Rep. Barney Frank (D-Mass.), the Ranking Member of the U.S. House Financial Services Committee, has proposed eliminating the voting power of the regional presidents. Frank says that all of the voting members of the FOMC should be directly appointed by the president and confirmed by Congress, rather than selected by boards made up of business leaders.

The GAO appears to agree, at least in part, with Frank: “The statutory requirement for three classes of directors was intended to provide representation of both stockholding banks and the public… However, the existence of Class A and to a lesser extent Class B directors on the boards creates an appearance of a conflict of interest, particularly in matters involving supervision and regulation.”

This became especially apparent during the recent financial crisis, when the Fed created multiple emergency programs that provided direct financial support to the country’s largest banks.

The report found no instance of a director being directly involved with the supervision of a program that benefited his or her banking institution. Nevertheless, the GAO recommended that any waivers granted to directors in the event of a conflict of interest be made public.

Saying that “we are a nation, not 50 individual states” and that when a disaster hits “we, as Americans, stand together,” Sanders described Paul’s assertion that government should remove itself from the disaster response business as the GOP presidential hopeful being “completely out to lunch” on the issue.

“That’s what being a nation is all about,” Sanders said.

Although Sanders’ comments to CNN (embedded below) came in the wake of Hurricane Irene slamming the nation’s east coast, Paul, a Republican with a distinct libertarian bent, has long held that FEMA and other government programs should be eliminated. His latest remark came on Fox News Sunday, when he told Chris Wallace that “FEMA has been around since 1978, it has one of the worst reputations for a bureaucracy ever.

“It’s a system of bureaucratic central economic planning, which is a policy that is deeply flawed,” said Paul.

Paul has previously argued that FEMA assistance following hurricanes in along the Gulf of Mexico created a sense of dependency that helped ruin local economies — a charge he repeated on Sunday.

“We’ve conditioned our people that FEMA will take care of us and everything will be OK, but you try to make these programs work the best you can, but you can’t just keep saying, ‘Oh, they need money,’” Paul said, adding “this country is bankrupt.”

Instead of continuing to provide assistance through FEMA, Paul suggested an immediate end to U.S. military involvement in Iraq and Afghanistan, earmarking half of the funds saved for deficit reduction and the other half to “tide people over until we come to our senses.”

From The Hill:

The 1,000-megawatt project will power 300,000 to 750,000 homes and result in about 1,000 temporary construction jobs and a little over 200 permanent jobs, according to the Interior Department.

The project’s price tag is estimated at $6 billion, though developers received substantial subsidies from the Department of Energy as part of president Obama’s stimulus package. Once completed, the parabola-shaped panels will cover 7,000 acres of land.

The American Independent reported June 6 on a bill co-authored by Sen. Bernie Williams (I-Vt.) that would tackle the consumer end of solar installation, helping homeowners acquire permissions faster by cutting out much of the bureaucratic wrangling. That bill’s goal is to enter 10 million home into solar panel fold.

The bipartisan legislation, titled the The 10 Million Solar Roofs Act of 2011 (PDF), would be a boon to a quickly changing solar panel industry. The Solar Energy Industries Association — the national trade association of the U.S. solar energy industry — stated during a conference call with businesses and in a June 1 congressional hearing that the industry already employs 100,000 people, and they expect that number to double by 2013.

The bill, titled End Excessive Oil Speculation Now Act of 2011, has been in the making for weeks as Sanders and other lawmakers in the House and Senate have investigatedwhy prices at the pump remain higher than two years ago even though supply is up and demand is lower.

The Dodd-Frank bill from 2010 included a provision that required the Commodity Futures Trading Commission to tackle the excessive speculation with a plan of enforcement by January 22, 2011. Those statutory obligations have yet to be met, and the bill would add one more piece of law to compel the CFTC to limit disruptive trading.

An email from Sanders’ office to The American Independent reads:

Dodd-Frank required the CFTC to impose position limits to end excessive speculation, but gave the CFTC the flexibility to determine exactly what those limits should be.  A majority on the commission has not determined what those exact limits should be so they have not gone into effect.

Our bill mandates the chairman of the CFTC to unilaterally impose specific speculation limits (the same as the position accountability levels NYMEX has had on the books since 2001); and 12% margin requirements. If [Chairman] Gensler can’t get that done, the Senator said he should resign.

A margin requirement is the amount of collateral the trader must deposit. It is a regulatory instrument meant to cover some of the risk assumed by a broker or exchange for taking part in the trade. The position limits in the bill would be applied to the price of crude oil, gasoline, diesel fuel, jet fuel and heating oil.

Rep. Maurice Hinchey (D-N.Y.) said in a press release, “The price of gasoline has spiked up due to record speculation, and small businesses and working people are paying the price. This legislation would immediately implement new rules to ensure the price of fuel is based on supply and demand – not the whims of greedy speculators.” Hinchey intends on introducing a companion bill in the House.

Sen. Sanders sent a letter (PDF) to the president in April articulating concerns raised in his bill:

Other experts believe that excessive speculation is driving up crude oil prices by 50 percent. This means that Americans are paying Wall Street a premium of 70 cents to $1.63 a gallon every time they fill up their gas tanks.

On the Senate floor in May, Sen. Bill Nelson (D-Fla.) dispensed with the notion market forces were to blame for the uptick in gas prices. “That reason happens to be that there are speculators out there running around, running the price up of commodity exchanges for oil futures contracts,” he said, “and those prices run up until they’re ready to dump them and suddenly [the prices] go down.”

According to the U.S. Energy Information Agency, the average price of a gallon at the pump in conventional areas was $2.315 in 2009. The EIA now puts that figure at 3.713, an eight-cent decline since May 30.

In a report last month from Dow Jones, CFTC Commissioner Bart Chilton tried to clarify the correct punitive language necessary in dealing with traders’ activity.

“Manipulation is something that is very specific in the law and has a really high hurdle for us to prove, so that’s why we’ve only had one successfully prosecuted manipulation case in the 36-year history of the CFTC,” he told Dow Jones. Speculation, on the other hand, is legal, according to Chilton.

On the Senate floor today, Nelson went on to say speculators account for two-thirds to 80 percent of the market. “They are the main player,” he said, “and this is what we need to end.”

Futures trading was established as a way of more accurately aligning the cost of output with consumer demand. For oil, prices are set in futures markets, where contracts allow oil producers to lock in prices on their future output. That makes prices predictable and secure, especially for large consumers like airline companies, who rely on the locked in prices to hedge against inflation and better plan cost of services.

The new legislation is a stand-alone measure titled American Health Security Act of 2011 [PDF]; Rep. Jim McDermott (D-Wash.) filed a companion bill in the House under the same name.

In a press event announcing the bill, the two long-serving legislators were joined by Labor leaders supportive of a single-payer system, including Arlene Baker-Holt, executive vice president of the AFL-CIO; Jean Ross, co-president of the National Nurses United; and Greg Junemann, president of the International Federation of Professional and Technical Engineers.

A statement released by Sanders’ office quotes the senator as saying:

The United States is the only major nation in the industrialized world that does not guarantee health care as right to its people,” Sanders said at a press conference on Capitol Hill. “Meanwhile, we spend about twice as much per capita on health care with worse results than others that spend far less. It is time that we bring about a fundamental transformation of the American health care system. It is time for us to end private, for-profit participation in delivering basic coverage. It is time for the United States to provide a Medicare-for-all single-payer health coverage program.

The bill proposed by Sanders and McDermott is unlikely to pass; House Republicans have offered a spate of bills aimed at repealing parts of health reform that were viewed as mostly symbolic votes, since Democrats control the Senate and Oval Office.

The 188-page document is lithe for congressional standards. Patient Protection and Affordable Care Act is nearly ten times as long with 1024 pages. The American Health Security Act of 2011 explains the urgency of the bill’s passage in the first two pages:

(1) While the United States of America spends on average nearly twice as much per capita on health care services as the next most costly nation, the United States ranks 32d among all nations on life expectancy, and 41st on infant mortality.

(2) The number of uninsured Americans rose by more than 4,000,000 between 2008 and 2009 to a total of 51,000,000, or more than 1 of every 6 Americans.

(3) This rise in the number of uninsured Americans was the largest single-year increase since 1987 and was the result of a continued decline in private health coverage, primarily in employer-sponsored insurance.

(4) Small businesses around the country cannot afford to reinvest in their companies and create new jobs because their health care bills are going up 10 or 15 percent every year.

(5) American businesses are at an economic disadvantage, because their health care costs are so much higher than in other countries. Notably, auto- mobile manufacturers spend more on health care per automobile than on steel.

Sen. Sherrod Brown (D-Ohio) has taken over for Sanders in parts of the filibuster. Sen. Mary Landrieu (D-La.) — a more centrist senator who voted for the tax cuts in 2001 — joined in and made it a colloquy.

This continues. Watch it here.

Reid claims his caucus is behind him on the act, which would give some undocumented students and military service members a change to gain legal status to remain in the country. “We all support the DREAM Act,” he said on Univision in an interview that aired Sunday. “I just need a handful of Republicans to help me.”

Kirk has said he wouldn’t, despite exhaustive efforts by DREAM Act supporters to convince him otherwise. “This is not the time to do that,” Kirk said in a debate.

How important is Kirk’s vote for passing the DREAM Act? It depends on who Reid means when he says “we all support the DREAM Act.” There are 59 senators who caucus with the Democrats and 41 Republicans. Kirk will change those numbers to 58 and 42. Reid needs 60 votes to overcome a filibuster if he hopes to pass the DREAM Act.

If Reid’s right about his caucus, he would only need two Republicans to vote “yes” on the DREAM Act. Sen. Richard Lugar (R-Ind.) co-sponsored the bill and would almost certainly vote for the it as a standalone measure, although he voted in September to filibuster the defense authorization bill that included it. Sen. Bob Bennett (R-Utah) has also said he would vote for the act as a standalone bill.

But if either of them or any Democrats fall through, other Republicans are tougher to pin down. Sen. Orrin Hatch (R-Utah), who was one of the original sponsors of the DREAM Act, seems likely to vote against it now because he favors a borders-first approach to tackling immigration problems. “The American people want the government to secure our borders, create jobs and reduce the deficit.” Hatch said when he announced plans to vote against the DREAM Act’s inclusion in the defense authorization bill.

Lugar, Hatch and Bennett were two of twelve Republicans who voted for the DREAM Act in 2007. The others still in Senate — Sam Brownback (R-Kans.), Susan Collins (R-Maine), Kay Bailey Hutchison (R-Texas) and Olympia Snowe (R-Maine) — have been vague about whether they would support the measure as a standalone this year.

When the bill came up as a possible addition to the defense authorization bill, a few Democrats said they were not sure they would support it this time around. Sens. Kent Conrad (D-N.D.), Byron Dorgan (D-N.D.), Claire McCaskill (D-Mo.), Mark Pryor (D-Ark.) and Mary Landrieu (D-La.) told The Hill in September they might vote “no” on the DREAM Act.

Sens. Sanders and Sherrod Brown (D-Ohio) unveiled the resolution Thursday during a conference call with reporters, arguing that Social Security is not the cause of the national debt.

“Do not send Congress a plan that will cut Social Security benefits, raise the retirement age, or privatize this life and death program,” Sanders said on the call. “If you do, we’ll vote it down, and do everything we can to see it defeated.”

The commission is reportedly exploring ways to reduce payouts for Social Security, which is currently running a $2.5 trillion surplus, according to its trustees report, but is projected to run into financial problems in 2037. Its recommendations will be unveiled in December and voted on by Congress during the lame-duck session.

“We strongly believe that cuts to Social Security benefits must not be part of any recommendations or any policymaking,” Brown said. “This isn’t just a political exercise.”

In addition to Sanders and Brown, the 10 co-sponsors are Sens. Daniel Akaka (D-Hawaii), Barbara Boxer (D-Calif.), Russ Feingold (D-Wis.), Kirsten Gillibrand (D-N.Y.), Tom Harkin (D-Iowa) Dan Inouye (D-Hawaii), Frank Lautenberg (D-N.J.), Barbara Mikulski (D-Md.), Debbie Stabenow (D-Mich.), and Sheldon Whitehouse (D-R.I.). The full list is here.

The lawmakers could be in for a battle with not just Republicans but some members of the Democratic leadership, who have proposed incremental increases to the retirement age in accordance with average life span as a solution to the program’s long-term financial difficulties.

Eighty-five percent of the American public opposes cutting Social Security to reduce the deficit, according to an AARP-GfK Roper poll last month.

A military helicopter. (U.S. Army)

Though the last U.S. troops left Vietnam in 1973, many veterans still live with the war. And at a Senate Veterans Affairs Committee hearing Thursday at the U.S. Capitol, senators expressed concerns for everything from oversight to deficit spending in the discussion over whether to allow three new conditions to the Agent Orange Act. The legislation allows for compensation to veterans for the health effects from herbicide American planes sprayed to root out the Viet Cong.

[Security1] On August 31, the U.S. Department of Veterans Affairs approved three new ailments to the list of “presumptive” causes within the Agent Orange Act — ischemic heart disease, Parkinson’s Disease and hairy cell leukemia. The VA will be able to process new claims — as well as compensate earlier ones — at the end of October unless Congress votes to block it. VA officials estimate that this could add 250,000 new disability claims and cost about $42 billion over the next ten years.

Some have balked at the cost of providing more resources to health care given the deficit. President Obama’s Deficit Committee Co-Chairman, and former chair of the Veterans Affairs committee, Alan Simpson told the Associated Press about the Agent Orange Act rule-making authority, “The irony (is) that the veterans who saved this country are now, in a way, not helping us to save the country in this fiscal mess.” The group VoteVets called for his resignation, and Simpson has not apologized for the remarks. (Simpson did not respond to repeated requests for comment to TAI through the Deficit Commission.)

Alan Oates, chairman of the Vietnam Veterans of America Committee on Agent Orange, thought that was offensive. “It’s a slap in the face,” he said to TAI. Oates, who was exposed to Agent Orange in Vietnam and has Parkinson’s Disease (one of the ailments recently added to the Agent Orange Act by the VA), added, “It’s taking care of some of the budget problems on the backs of veterans. When you send veterans into war, that there’s a cost for that, there’s a cost for health care once that war’s over.”

Others at the hearing also thought the idea was ludicrous because health care for returning veterans was a given. Sen. Bernie Sanders (I-Vt.), said, “This is part of the ongoing cost of war, more than guns and bullets and airplanes.” On the scientific link between Agent Orange and ischemic heart disease, Sanders said to VA Sec. Eric Shinseki, “I think we’re asking you to play God and you’re doing a good job but you’re not God.” He added, “Who is smart enough to make a determination? I’m not.”

Ischemic heart disease drew the most skepticism from the panel since it is common in older men (17 percent of men ages 60-69 have it, and 26 percent of men ages 70-79 have it).

Sens. Richard Burr (R-N.C.) and Jim Webb (D-Va.) have also raised other concerns about the new measure. “Heart disease is a common phenomenon regardless of potential exposure to Agent Orange,” said Sen. Webb in a letter to Shineski. “I have spent my entire adult life one way or the other involved in veterans law. But I do think we need to have practical, proper procedures,” he added. (However, at the hearing, Webb balked at the notion that his hesitation was about cost. “This is not about cost, it’s not,” he said in Thursday.)

Burr has also spoken of similar concerns. “At some point we will have to look at the definition of exposure,” he told the AP.

Burr, the ranking Republican on the committee, was not present at the hearing and was co-chairing the Senate Energy and Natural Resources Committee. (If Alaska Sen. Lisa Murkowski loses her re-election this November as a write-in candidate, then Burr is next in line to be ranking member of the committee.) Burr met with Sec. Shinseki on Thursday, and said his concerns had been answered satisfactorily. He said in a press release, “At the end of our discussion I was convinced that he [Gen. Shinseki] and his agency are prepared to handle these needed changes.”

Webb said in the letter to Shinseki, “The discussions were you could develop a chronological map overlay of where defoliants had been used, and then develop a nexus in someone’s service record on whether they had been in those areas. From that you could say whether these conditions would be presumptively acquired.” But many of the panelists at Thursday’s hearing said, that there’s little reliable data about what exposure was over forty years ago — therefore making it difficult, if not impossible, to pinpoint causality. Oates agreed. “Putting the burden back on the veteran to prove exposure when there was so much misuse of the project would be impossible. Veterans can’t account for every moment and every place they were, they had a job to do,” he said to TAI.

The science linking ischemic heart disease to Agent Orange exposure suggests a “limited/suggestive connection” according to the Institute Of Medicine in its 682-page 2008 report. Of course, it’s difficult to pinpoint any individual case to dioxin exposure, as opposed to other risk factors such as high cholesterol, smoking, genetics or other factors.

Linda Birnbaum, director of the National Institute of Environmental Health Sciences at NIH and director of the National Toxicology Program at the Department Health and Human Services, said, “in humans, dioxin is not causing a unique cardiovascular disease, but increases the risk of developing ischemic heart disease, which has a significant background incidence.” As for the time that had passed between the Vietnam War and now, she said, “Dioxin can permanently alter gene expression. Especially in Vietnam, a young man under additional stress that early — dioxin exposure adds to additional factors.”

The United States government sprayed 20 million gallons of herbicides, mostly Agent Orange, a dioxin compound,during the Vietnam War to defoliate forest with the aim of depriving the Viet Cong and the Army of the Republic of Vietnam from cover, from 1962 until 1971. The agent had obvious ecological effects of killing crops, but also had significant health effects on both veterans and the Vietnamese people. In veterans, the agent has been shown to caused an elevated risk of soft tissue cancers, Hodgkin’s disease, Non-Hodgkin’s lymphoma, spina bifida (in the children of veterans), soft-tissue sarcoma and chloracne.

The Agent Orange Act passed both houses of Congress unanimously in 1991. The act gave the VA the power to add new diseases to the list based on scientific literature reviews done by the Institute of Medicine.

Sen. Lindsey Graham (R-S.C.) has said he wants to change the 14th Amendment so that children of illegal immigrants cannot obtain automatic citizenship for being born in the U.S. Last week, Senate Minority Leader Mitch McConnell (R-Ky.) threw his weight behind a push to reexamine the relevant Constitutional provisions.

“I don’t know if that was based on 2010 or 2012,” Gibbs said, referring to McConnell’s remarks. “But my hunch is it is based purely on politics.”

This is how a proposal with little chance of becoming reality balloons into a political sparring point. Sen. Bernie Sanders (I-Vt.), for instance, told ABC’s “Top Line” he thinks Republicans are using the issue to score points before the election: “I think the way it is being presented now is 100 percent political.”

Of course, hearings on the 14th amendment are not only immigration issue that politicians are using to score points against each other. For his part, McConnell told Bloomberg News the Obama administration used their lawsuit against Arizona’s SB 1070 immigration law as a political move. “The most blatant political move made lately was the administration’s decision to sue the state of Arizona and thereby heightening this issue even further,” he said.

It’s not pretty, but it might explain why Majority Leader Harry Reid is so hesitant to move forward on any type of immigration legislation.