Senate panel expected to OK Shelton for Fed

The Senate Banking Committee is set to vote Tuesday on Shelton's nomination, which appeared in jeopardy after several Republicans on the panel suggested Shelton's views made her too much of an outlier for a seat on the Fed's board of governors. Lawmakers and economists have raised concerns about Shelton's push to return the country to the gold standard, along with her views that the Fed should pull back its powers and keep closer ties to the White House.

Opposition from just one Republican on the committee would have been enough to derail Shelton's nomination. 

After Shelton's confirmation hearing in February, her nomination looked like it was in trouble. Sen. Pat Toomey, R-Pa., said he was unsure whether Shelton could uphold the central bank's independence. Sen. Richard Shelby, R-Ala., said Shelton "could be an outlier" for the role. Both lawmakers have since said that they will vote to confirm her.

"I will not be the one to kill her nomination," Shelby said in March. "I try to help the administration. I have some misgivings about her, I raised them in the Banking Committee. But if the other Republicans want her, I'd vote to confirm her."

On Monday evening, a spokesperson for Sen. John Neely Kennedy, R-La., another senator who had concerns about Shelton, said the lawmaker would also support Shelton's nomination, essentially guaranteeing full support among the 13 Republicans on the committee.

All 12 Democrats on the Senate Banking Committee staunchly opposed Shelton's nomination from the start. Earlier this month, Democratic committee members called for another hearing so Shelton could be pressed on the current economic crisis and how she would respond.

"We are now in an economic crisis worse than the one Dr. Shelton was asked about at her confirmation hearing," the senators wrote to Committee Chairman Mike Crapo, R-Idaho, after a vote date was announced. "Based on her answers at the hearing, we are deeply concerned that the situation we are in today would have been worse if Dr. Shelton were already sitting on the Board of Governors."

In addition to criticizing the Fed for having too much power, Shelton has maintained that the country should link the U.S. dollar to gold, silver or some other benchmark so its value fluctuates less. The gold standard was abandoned by American economists and policymakers decades ago.

Shelton has also advocated closer connections between the central bank and the White House, despite the fact that the Fed stakes much of its reputation on being politically independent. Shelton was an adviser to Trump's 2016 presidential bid and has advocated that the Fed's power over the economy needs to be reined in.

Shelton's views have raised particular concerns among lawmakers and economists who say Trump has exerted extreme public pressure on the Fed in a way that undermines the central bank's authority. Before the current crisis, Trump routinely criticized Fed Chair Jerome Powell for not doing what the president thought was enough to stimulate the economy. More recently, Trump dubbed Powell his "most improved player."

The Fed's ability to steer clear of the political fray has proved especially tricky during the current crisis. From mask wearing to state reopenings, the country's public health and economic response to the pandemic have become 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 picks, including businessman Herman Cain and conservative economist Stephen Moore, failed to rally enough support and withdrew over a series of personal incidents.

On Tuesday, the Senate Banking Committee also will vote on the nomination of Christopher Waller, a St. Louis Fed economist. Waller's nomination has been far less controversial.

If approved by the Senate, Shelton would fill one slot on the Fed's seven-seat board. But there is wide speculation that if Trump were reelected in November, he would decide against renominating Powell as chair when his term expires in 2022. If Shelton were to replace Powell, her critics say she could harness much more power over the country's economy.

David Wilcox, former director of the Fed's Division of Research and Statistics, said he worried that Shelton's skepticism of the importance of the Fed as an independent body would cause her to view a board seat as "an integrated part of the president's economic apparatus." 

"With a more senior position would come a much wider capacity for inflicting 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 healthy dose of balance at the Fed. Moore, an economic adviser to the White House whose nomination was criticized over his past writings and comments against women and gender equity, said Shelton's nomination should never have become so politicized.

"Judy is certainly well qualified," Moore told The Washington Post. "It's healthy to have someone with Judy's philosophical orientation on the Fed. Whether you agree with her or not, the important thing is to have a variety of opinions. You need people to question what the chairman is doing."