Finance

Senate panel advances Trump Fed nominee who recently supported gold standard

President Trump’s controversial nomination of Judy Shelton to the Federal Reserve won the support of a Senate panel Tuesday, paving the way for a final confirmation vote on her appointment to the central bank’s board of governors.

The Senate Banking Committee voted along party lines to recommend Shelton’s confirmation as a Fed governor, the last hurdle she faced before a full vote in the GOP-controlled Senate on her nomination.

All 13 Republicans on the Banking Committee voted in favor of Shelton, who has drawn criticism for her past support of linking the U.S. dollar to the gold standard, while all 12 Democrats voted in opposition.

Shelton’s embattled road to the Fed board appears to be clearing despite early doubts about her viability, including pushback from some GOP senators and the opposition of economists and former Fed officials across the political spectrum. Republicans say that Shelton’s past stances would not impede her service at the central bank, but offer a novel view on the economy.

“Dr. Shelton’s experience working for nonprofits and academic institutions forged her deep knowledge of democracy, economic theory and monetary policy that will broaden and diversify the Fed’s perspective,” said Senate Banking Committee Chairman Mike Crapo (R-Idaho) ahead of the vote.

“I’m confident that her deep understanding of the Fed’s monetary policy toolkit, monetary history, and commitment to maintaining Fed independence will serve the Fed well and its ongoing efforts to stabilize markets and toward its mission of price stability and full employment.”

Shelton is a former U.S. executive director at the European Bank for Reconstruction and Development.

The committee also approved Trump’s nomination of Christopher Waller, executive vice president of the Federal Reserve Bank of St. Louis, to the Fed board by an 18-7 vote, with five Democrats joining all Republicans in support of his nomination. He is expected to be easily confirmed to the Fed board by the full Senate.

Trump tapped Shelton and Waller for the Fed board in January after initially announcing his intent to nominate them in July 2019. While Waller is a widely respected pick in the mold of Trump’s past successful Fed appointments, Shelton’s nomination has faced fierce resistance over her ties to the president and an unorthodox approach to monetary policy.

Shelton, like Trump, blasted former Fed Chairwoman Janet Yellen for keeping interest rates near zero during the recovery from the Great Recession but called for the bank to drastically slash rates after he took office. Both had urged the Fed to lower rates and reduce the value of the U.S. dollar to make American exports relatively cheaper in foreign markets before the coronavirus pandemic forced the central bank into zeroing out rates again.

Shelton had also spent decades arguing in favor of tying the value of the U.S. dollar to gold, an idea widely rejected by economists as impractical and dangerous in the modern central banking system, and called for creating a North American currency union with Canada and Mexico.

“If gold had been at the center of the monetary system, the U.S. and global economies might well have driven over a cliff,” wrote David Wilcox, a former Fed director of research, in an op-ed for The Hill last week. “Shelton’s support for the gold standard is not the only reason why she should not be confirmed by the Senate, but it is high on the list.”

Several fiscal conservatives on the Banking Committee bristled at Shelton’s unconventional views and appeared to oppose her nomination after a brutal confirmation hearing. But Shelton was nonetheless able to win over GOP Sens. Richard Shelby (Ala.), Pat Toomey (Pa.) and John Kennedy (La.), who were initially resistant to supporting her.

Democrats on the committee blasted their Republican colleagues Tuesday for approving Shelton amid the worst economic crisis since the Great Depression. Democrats have slammed Shelton for her controversial and at-times inconsistent views on monetary policy and fear that Trump may tap her to oust Fed Chairman Jerome Powell, a frequent target of the president’s criticism.

“Her flip-flopping, policy beliefs, and objections to Fed independence worry conservative and liberal economists alike and as recently as February, it worried some of my Republican colleagues,” said Sen. Sherrod Brown (Ohio), the committee’s top Democrat, ahead of Tuesday’s vote.

“Dr. Shelton may not be able to imagine an economic crisis like the one we are in today, but I certainly can imagine how much worse it would be if she were on the Federal Reserve Board right now,” he added.

Democrats had called for another hearing on Shelton’s nomination amid the coronavirus-driven recession, but were rebuffed by Crapo.

The committee chairman’s decision to hold a vote on Shelton’s nomination indicates a degree of confidence in her chances before the full Senate. It is rare for any of Trump’s high-profile nominees to be approved by a Senate committee without subsequently being confirmed by the GOP-controlled Senate.

Even so, Shelton has a narrow path toward confirmation if all members of the Senate Democratic caucus oppose her. If no Democrat supports her, the opposition of four Senate Republicans would derail her nomination.

Senate Republicans have already quashed Trump’s past four picks for the Fed board seats Shelton and Waller would fill. 

Former Carnegie Mellon economics professor Marvin Goodfriend was approved by the Banking panel in February 2018, but never received a full confirmation vote after Senate conservatives objected to his nomination. Goodfriend was not renominated when a new Congress convened in 2019 and died of cancer in December of that year.

Former Fed research director Nellie Liang, a Democrat, withdrew her nomination in January 2019 after Republicans voiced concerns with her role implementing the post-crisis banking regulations broadly opposed by the party.

Trump had also announced his plans to nominate economic adviser Stephen Moore and former 2008 Republican presidential candidate Herman Cain to Fed seats in 2019, but he reversed course after several Republican senators announced their opposition.

Tags Central bank Donald Trump Fed Federal Reserve Herman Cain Janet Yellen John Kennedy Mike Crapo Pat Toomey Richard Shelby Sherrod Brown Stephen Moore Trump nominee

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