Feb 13, 2020 - Economy & Business

Senators press Trump's Fed pick Judy Shelton

Fed board nominees Judy Shelton and Christopher Waller. Photo: Tom Williams/CQ-Roll Call via Getty Images

Senators questioned Judy Shelton, a former Trump campaign adviser who's been nominated for a seat on the Federal Reserve Board, on her views on monetary issues and Fed independence at a hearing on Thursday.

Why it matters: There was some bipartisan concern about Shelton, which could complicate her path to confirmation — or eliminate chances of confirmation altogether, if the worries hold. President Trump's previous picks to fill the remaining vacant Fed slots — Nellie Liang, Marvin Goodfriend, Stephen Moore and Herman Cain — have failed to make it through.

The big picture: Senate Banking Committee Democrats asked about Shelton's opinions on the Fed's apolitical nature and how her stance on monetary issues has shifted since Trump took office.

  • She also took heat about poor attendance as U.S. director of the European Bank for Reconstruction and Development, a Senate-confirmed post, and controversial comments where she likened a currency counterfeiter to Rosa Parks.

Republicans questioned her view on lowering the value of the dollar if other countries manipulate their own currencies and her record on advocating for a return to the gold standard.

  • Republican Sens. Richard Shelby (Ala.) and Pat Toomey (Pa.), who asked tough questions of Shelton during the hearing, later told reporters they had "concerns," as the Washington Post reports. Sen. John Kennedy (R-La.) was undecided on Shelton's nomination after the hearing, according to a Kennedy aide.
  • Sen. Mike Crapo (R-Idaho) said Shelton was "very solid" in defending her positions.
  • Asked for comment, a White House spokesperson said the “nominations of Judy Shelton and Christopher Waller are not being pulled” and both nominees are expected “to be confirmed by the Senate to the Federal Reserve.”

What they're saying: Shelton said the Fed's political independence is "vital," despite previous comments in which she challenged that notion. She also backtracked on her writings that advocated for pegging the dollar's value to gold.

  • "I would not advocate going back to a prior historical monetary arrangement," Shelton told the Senate panel, referring to the gold standard. "Money only moves forward."

Between the lines: Senators largely focused on the trove of interviews and writings by Shelton on the economy — many of which contradict the economic beliefs she said she now supports.

  • Christopher Waller, another nominee for the Fed board who testified alongside Shelton and is considered a more conventional pick for the job, faced fewer questions at the hearing.
  • Toward the end of the hearing, senators shifted focus to other issues the Fed grapples with — like inflation, employment and money markets.

The bottom line: Economists and senators worry Shelton’s appointment to the Fed would threaten its nonpolitical nature. Shelton spent the hearing trying to downplay those concerns.

  • What's next: The Senate Banking Committee must vote to clear Shelton and Waller before either advance to a full Senate vote for confirmation.

Go deeper:

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Fed picks to raise political independence at confirmation hearings

Illustration: Sarah Grillo/Axios

President Trump's picks to fill the Federal Reserve board, Christopher Waller and Judy Shelton, will publicly air views on the Fed's political independence in a Senate hearing on Thursday, according to released drafts of testimony.

Why it matters: Trump's nominees, particularly Shelton, an economist who has been critical of the Fed and previously served as an adviser to Trump's campaign, will face questions about their commitment to the Fed's nonpolitical economic decisions.

Judy Shelton vs. Fed independence

Illustration: Aïda Amer/Axios

President Trump hasn't given up on his dream of politicizing the Fed. After failing to get Herman Cain and Stephen Moore onto the Fed's board of governors, his latest candidate is one of his former campaign advisers, Judy Shelton, who testified in front of the Senate Banking Committee today.

Why it matters: Shelton is no more qualified to sit on the Fed board than Cain or Moore. But she's already further along in the process than either of them ever managed.

The Fed may be setting the table for 2020 rate cuts

Illustration: Sarah Grillo/Axios

The Fed looks to be laying the groundwork to lower U.S. interest rates this year, just as they did in April 2019 before cutting rates in July, September and October.

Why it matters: A Fed rate cut makes taking on debt more attractive for U.S. consumers and businesses, helping to juice the economy, but also puts the central bank in a weaker position to fight off a potential recession.