WASHINGTON – Judy Shelton, an economist known for her criticism of the Federal Reserve, is willing to take a big step to join the central bank’s board, adding a new layer of political tension as policymakers face the biggest crisis. economic in decades.
The Senate Banking Committee will vote Tuesday on Shelton’s nomination, which appeared in jeopardy after several Republicans on the panel suggested that Shelton’s views made her too atypical for a seat on the Fed’s board of governors. Lawmakers and economists have voiced concern about Shelton’s push to return the country to the gold standard, along with their views that the Fed should withdraw its powers and maintain closer ties to the White House.
Opposition from a single Republican on the committee would have been enough to derail Shelton’s nomination.
After Shelton’s confirmation hearing in February, her nomination seemed to be in trouble. Senator Pat Toomey, R-Pennsylvania, said he was unsure whether Shelton could defend central bank independence. Senator Richard Shelby, R-Alabama, said Shelton “could be an outlier” for the role. Both lawmakers have since said they will vote to confirm it.
“It won’t be me who kills your nomination,” Shelby said in March. “I try to help the administration. I have some doubts about it, I raised them in the Banking Committee. But if the other Republicans want it, I would vote to confirm it.”
On Monday night, a spokesman for New York Republican Senator John Neely Kennedy, another senator who was concerned about Shelton, said the legislator would also support Shelton’s nomination, essentially guaranteeing the full support of the 13 Republicans on the committee. .
All 12 Democrats on the Senate Banking Committee strongly opposed Shelton’s nomination from the start. Earlier this month, members of the Democratic committee called for another hearing so Shelton could be pressured about the current economic crisis and how it would respond.
“We are now in a worse economic crisis than Dr. Shelton was asked at his confirmation hearing,” the senators wrote to committee chairman Mike Crapo, R-Idaho, after announcing a voting date. “Based on his responses at the hearing, we are deeply concerned that the situation we find ourselves in today would have been worse if Dr. Shelton was already on the Board of Governors.”
In addition to criticizing the Fed for having too much power, Shelton has argued that the country must link the US dollar to gold, silver or some other benchmark so that its value fluctuates less. The gold standard was abandoned by American economists and lawmakers decades ago.
Shelton has also advocated for tighter connections between the central bank and the White House, despite the Fed putting a lot of its reputation on being politically independent. Shelton was an adviser to Trump’s 2016 presidential bid and has argued that the Fed’s power over the economy must be controlled.
Shelton’s views have raised particular concerns among lawmakers and economists who say Trump has exerted extreme public pressure on the Federal Reserve in a way that undermines central bank authority. Before the current crisis, Trump routinely criticized Fed President Jerome Powell for not doing what the president thought was enough to stimulate the economy. More recently, Trump called Powell his “most improved player.”
The Federal Reserve’s ability to stay away from the political fray has been especially difficult during the current crisis. From wearing masks to state reopens, the country’s public health and economic response to the pandemic have been intertwined with partisan fanfare. Shelton’s nomination would add another layer of political tension to the Fed’s efforts to steer the economy toward recovery.
The Fed board has been operating with two empty seats since several of President Trump’s previous elections, including businessman Herman Cain and conservative economist Stephen Moore, failed to muster enough support and pulled out of a series of personal incidents.
On Tuesday, the Senate Banking Committee will also vote on the nomination of Christopher Waller, an economist at the St. Louis Fed. Waller’s nomination has been much less controversial.
If approved by the Senate, Shelton would serve on the Federal Reserve’s seven-seat board. But there is widespread speculation that if Trump were re-elected in November, he would decide not to resign from Powell as president when his term expires in 2022. If Shelton replaced Powell, his critics say he could harness much more power over the country’s economy.
David Wilcox, former director of the Federal Reserve’s Research and Statistics Division, said he was concerned that Shelton’s skepticism about the Federal Reserve’s importance as an independent body would make him see a board position as “an integrated part of the President’s economic apparatus. “
“With a higher-ranking position would come a much broader capacity to inflict damage on the institution and, more importantly, on the functioning of the American economy and financial system,” Wilcox said.
Still, some describe Shelton’s views as a good dose of balance in the Federal Reserve. Moore, a White House economic adviser whose nomination was criticized for her previous writings and comments against women and gender equality, said Shelton’s nomination should never have been so politicized.
“Judy is certainly well rated,” Moore told The Washington Post. “It’s healthy to have someone with Judy’s philosophical orientation in the Federal Reserve. Whether you agree with her or not, the important thing is to have a variety of opinions. People need to wonder what the president is doing.” .
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Heather Long of The Washington Post contributed to this report.
