Republicans expect Trump to withdraw controversial Fed nominee

Senate Republican sources expect President Trump to withdraw his nomination of Judy Shelton to serve on the Federal Reserve Board following bipartisan resistance on Capitol Hill.

The White House has not made a final decision, since Trump would first need to sign off on the reversal, but Republican sources say it would be “desirable” for her to withdraw from consideration and that her nomination is “trending” in that direction.

“She’s being pulled,” said a Republican senator.

Senate GOP aides have indicated to colleagues privately that they expect Shelton to withdraw, according to one Senate aide familiar with the discussions.

If Shelton pulls out, she would would be Trump’s third Fed nominee derailed by Senate Republican opposition, and the fifth overall, counting informal picks as well.

GOP senators previously quashed Trump’s selections of entrepreneur Herman Cain and conservative commentator Stephen Moore for the Fed in 2019 before the president could formally nominate them.

The White House press office on Thursday afternoon, however, pushed back on talk that Shelton’s nomination is doomed.

“The nomination of Judy Shelton and Christopher Waller are not being pulled. Both were in front of the Banking Committee today and the White House expects both to be confirmed by the Senate to the Federal Reserve,” the White House said in a statement. 

Trump has also tapped Christopher Waller, the research director of the St. Louis Fed, to serve as a Fed board member.

Shelton has taken bipartisan criticism over a 2009 op-ed in which she urged the United States to return to the gold standard, a policy that was abandoned by President Nixon in the early 1970s.

Her biggest backers for the Fed post are Trump and National Economic Council Director Larry Kudlow. But beyond Trump and Kudlow, her support within the administration is thin, according to a Senate aide briefed on the nomination.

Kudlow was also a strong supporter for Moore’s nomination, which the White House withdrew last year after hitting robust GOP resistance on Capitol Hill.

Shelton, a former Trump campaign adviser, was nominated to the Fed in January after the president first announced his intent to appoint her in July.

Senate Republicans on the Banking Committee were not impressed with her performance at a confirmation hearing Thursday morning, which senators said would be an important test for her nomination.

Lawmakers from both parties criticized her at the hearing for supporting the gold standard, reversing her views on interest rates after Trump’s election and defending the president’s attacks on the Fed and its chairman, Jerome Powell.

“I don’t claim to be in the mainstream of economists,” Shelton said in her defense.

She vowed to “strengthen the discussion” and work closely with the Fed’s leaders.

Asked to rate Shelton’s performance Thursday, Sen. Richard Shelby (R-Ala.), a senior member of the Banking Committee, replied tersely: “She performed.”

“I have a lot of concerns, especially even after the hearing. I’m thinking about it, talking to some of my colleagues,” he said.

Shelby said Shelton’s unorthodox views on economic and monetary policy are among his “primary concerns.”

“I’m not satisfied that she’s mainstream at the moment,” he said. “I’d like to support her. I’d like to support the president’s nominees. I haven’t always done that. I think the Fed should be independent and we should have mainstream people on there, and I don’t think she’s a mainstream economist,” Shelby told reporters.

Shelby, however, declined to say how he would vote or speculate on what would happen to Shelton’s nomination.

Asked when the nominee might receive a confirmation vote, Shelby said, “I don’t know.”

Republicans control 15 seats on the Banking Committee, while Democrats control 13.

If two GOP lawmakers vote against Shelton, her nomination will be defeated in committee.

So far, Shelby and Sen. Pat Toomey (R-Pa.) have raised serious concerns with her nomination. A third member of the panel, Sen. John Kennedy (R-La.), is undecided. 

Toomey on Thursday warned that Shelton’s advocacy for cutting interest rates to prevent the dollar from strengthening any further, which could hurt exports, is a risky strategy.

“That’s a very, very dangerous path to go down. This beggar-thy-neighbor mutual currency devaluation is not in our interest, and it is not in the mandate of the Fed to pursue it,” Toomey said. 

Other Republican senators — even lawmakers not on the Banking Committee — have raised concerns about Shelton’s views. 

“I share Sen. Shelby’s concern,” said Sen. Pat Roberts (Kan.), when asked about the prospect of returning to the gold standard.

Shelby on Wednesday said returning to the gold standard “is kind of like the barter system.”

“Hard to get out of a recession with that,” he said. “Not enough gold in the world. Our [gross domestic product] GDP is worth so much more than gold.”

In addition to derailing Cain and Moore before they could be nominated, Senate Republicans spiked two of Trump’s other Fed nominees. 

Republican lawmakers did not advance the 2017 nomination of former Carnegie Mellon economics professor Marvin Goodfriend after he faced intense scrutiny during his confirmation hearing.

His nomination expired in 2018 and was not renewed by Trump before Goodfriend died of cancer in December 2019.

Republican senators also rejected Trump’s choice of former Fed research director Nellie Liang, a Democrat who was integral to the post-crisis bank regulatory regime often criticized by Republicans. 

Moore told The Hill in an interview that nominees who have unorthodox economic views face an uphill battle to win Senate confirmation.

“There is a bias at the Fed against anyone who thinks out of the box. I find that to be so troubling,” he said. “Whether you agree or disagree with Judy’s position, it’s healthy to have people that don’t just toe the orthodox line on monetary policy.”

Trump announced in May that he would not follow through on his intention to put Moore on the Fed after it became clear he did not have enough votes to win confirmation.

Moore was criticized for writing that it would be dangerous for women to earn more than men, among other controversial statements.

Jordain Carney and Brett Samuels contributed. 

Tags Donald Trump Fed board Federal Reserve Herman Cain John Kennedy Larry Kudlow Pat Roberts Pat Toomey Richard Shelby Senate Banking Committee Stephen Moore Trump nominations

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