Three Republican senators are undecided about whether to support Judy Shelton, President Donald Trump’s latest nominee for a seat on the Federal Reserve board, after a contentious hearing in which lawmakers from both parties raised questions about her controversial policy stances.
Republicans grilled Shelton Thursday over her positions on interest rate cuts and other issues, raising doubts about whether her nomination will survive an initial vote by members of the Senate Banking Committee.
Sen. Patrick Toomey, a Republican from Pennsylvania, pressed Shelton on her calls for the Fed to cut interest rates even further to prevent the US dollar from strengthening in value relative to other currency. Trump has repeatedly made that argument in attacking the current chairman, Jerome Powell, who he named to the post in 2017.
“I think that’s a very, very dangerous path to go down, this beggar-thy-neighbor mutual currency devaluation, and it is not in our interest and it is not in the mandate of the Fed to pursue it,” Toomey said to Shelton during a nearly two-hour hearing. “I don’t think it’s achievable.”
Toomey later told reporters he remained undecided on whether to vote in favor of her nomination.
Later Thursday, the White House issued a statement in defense of Shelton and a second nominee, Christopher Waller, after a report suggesting that their nominations might be withdrawn.
“The nominations of Judy Shelton and Christopher Waller are not being pulled,” said Judd Deere, a White House spokesman in a statement. “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.”
Republicans have only a one-seat advantage on the Banking, Housing and Urban Affairs Committee. If any GOP senator votes against Shelton’s nomination, it would result in a tie and most likely Shelton wouldn’t advance out of the committee — an embarrassing defeat for the White House after Trump’s previous pick, outside adviser Stephen Moore, withdrew last year amid Senate opposition.
Shelton, an economist and a former 2016 Trump campaign adviser, defended her stance on rates by pointing to the 49 central banks that lowered their interest rates last year, causing their currency to depreciate against the US greenback. She noted the Fed then followed suit in July, lowering rates by a quarter-percentage point, and then twice more.
The Federal Reserve has made it a routine policy not to discuss the US dollar, which is the purview of the Treasury Department.
Toomey wasn’t the only GOP lawmaker with tough questions for Shelton.
Republican Sen. Richard Shelby of Alabama also said he was “troubled” over some of her writings and what others had written about her views and papers, particularly on advocating for the return of the gold standard. He also questioned whether she might be an “outlier” on the interest-rate policy-setting committee for a post that could last for up to 14 years.
Shelton vowed to work with her Fed colleagues to benefit the US economy even as she brings a different perspective, acknowledging: “I don’t claim to be in the mainstream of economist.”
After the hearing, Shelby told reporters he “still has a lot of concerns.”
“We should have mainstream people on there,” said Shelby. “And I don’t think she’s a mainstream economist. She’s definitely another voice.”
Shelton has long advocated for returning to the gold standard, which the United States abandoned in 1971. She’s argued that the policy would make the dollar less susceptible to inflation or other volatility — a view the majority of US economists believe would be disastrous for the US economy.
Shelton, a former fellow at Stanford University’s Hoover Institution, backed away from her previous support of the gold standard throughout the hearing, suggesting that it would simply be valuable for policymakers to look at it for “historical use.”
“You never go back with money,” she insisted. “It keeps moving forward into the future.”
Republican Sen. John Kennedy of Louisiana also aired concerns, pressing Shelton on what she would do if the US economy were to fall into a recession, including whether she would endorse the use of negative interest rates and additional fiscal stimulus despite a ballooning deficit. After the hearing, he told reporters he was still “undecided.”
But other Republicans, including Mike Crapo, the chairman of the Senate Banking Committee, came to her defense, describing her testimony as “very solid.”
“We all knew this was going to be a very aggressive hearing today,” said Crapo in his final comments at the end after introducing a Wall Street Journal op-ed, “The War on Judy Shelton,” and described the confirmation proceeding as “an orchestrated calculated effort.”
Shelton appeared alongside fellow Fed nominee Waller, who currently serves as the executive vice president and director of research at the Federal Reserve Bank of St. Louis.
Trump has moved to reshape the Fed since taking office. If Shelton and Waller are confirmed by the Senate, Trump will have appointed six out of the seven of its current board members.
Trump selected Shelton and Waller last summer after he failed to advance two picks last year: Moore and former Republican presidential candidate Herman Cain, who withdrew from consideration, citing concerns about taking a pay cut. Cain was also shadowed by the revival of sexual harassment allegations that had ended his 2012 campaign, while Moore drew Senate opposition following CNN KFile reports concerning his earlier writings appearing to disparage women, which he dismissed at the time as “a spoof.”
For their part, Democratic senators also grilled Shelton, describing her as flip-flopping on decades of her work in order to align herself more closely with the President’s views.
“We don’t know who we are nominating to the Federal Reserve, Ms. Shelton has disavowed 40 years of writing as so many on this panel have shown to say what she needs to say to be confirmed,” said Brown. “It isn’t just my colleagues on the Democratic side of the aisle who are concerned, I’ve heard Sen. Shelby’s concerns, I’ve heard Sen. Toomey’s, I’ve heard others, and even conservatives outside of this body are concerned.
Shelton defended herself at one point by saying, “Senator, you are getting the authentic Judy Shelton.” Adding, she’s been “intellectually consistent throughout my career.”
Democratic senators also questioned her ability to withstand political pressure from the White House and her views on the importance of the independence of the Fed, an institution created by Congress.
She called the Fed’s independence a “vital aspect to its credibility with the public” while noting that policymakers are using their “best judgment” and are “not subject to political pressure.”
“I don’t think they are easily intimidated,” said Shelton, referring to the Fed’s board. “I think that’s what you are looking for is people who can think for themselves.”
Even so, she balked at criticizing the President over his repeated attacks on Powell, who he called “loco.”
“I don’t censure what people say,” Shelton said. “Every American — even our President — has the right to criticize the Federal Reserve.”