By Christopher Rugaber
Washington (AP) — One of President Donald Trump’s nominees for the Federal Reserve came under sharp questioning Thursday from Senators who expressed skepticism at her unorthodox economic views, including two Republicans who raised doubts about her nomination.
The nominee, Judy Shelton, sought to make those views an asset by promising to bring “intellectual diversity” to the Fed. Shelton has previously expressed support for a wide range of out-of-the-mainstream views, including tying the dollar’s value to gold. She has also raised the concerns of economists and Fed watchers by questioning the need for the central bank’s independence.
During the hearing, Senator Pat Toomey, a Republican from Pennsylvania, criticized Shelton’s view that the Fed should consider acting to lower the value of the dollar if other nations appeared to be manipulating their own currencies.
“I think that’s a very, very dangerous path to go down,” Toomey said. “It’s not in the Fed’s mandate.”
Toomey later told reporters that Shelton’s answers to his questions did not satisfy his concerns. He also said he wasn’t worried about opposing one of Trump’s nominee if they were “unqualified.”
Likewise, Sen. Richard Shelby, Republican from Alabama, said he remained “concerned” about Shelton’s nomination. Shelby is the former chairman of the Banking Committee and recently became its longest-serving member.
The views of committee Republicans are especially crucial, because Shelton’s nomination would need the votes of all of them in order for the committee to recommend her nomination to the full Senate for its confirmation. The Banking Committee and the full Senate are controlled by Republicans.
Democrats on the committee highlighted Shelton’s previous criticism of the Fed for cutting interest rates to nearly zero in the aftermath of the Great Recession, which it did to help save the financial system. At the time, she wanted to keep rates at a higher level. They noted that Shelton, like Trump, now supports lower rates.
The nominee also said she strongly supports government insurance for bank deposits — a key pillar of the U.S. banking system since the Great Depression — even though she had questioned the value of such insurance in a 1994 book.
“The only pattern I see here is a political one, not an economic one,” said Sen. Chris Van Hollen, a Democrat from Maryland.
Shelton recently served as U.S. executive director for the European Bank for Reconstruction and Development, a multilateral institution set up in 1991 to help former communist countries transition to market economies. She was previously a scholar at the Hoover Institution at Stanford University.
Besides Shelton, Trump has nominated Christopher Waller, director of research at the St. Louis Federal Reserve Bank, for a second vacancy on the seven-member Fed board. If both nominees were to be confirmed by the Senate, Trump will have installed six of the seven Fed governors.
Waller, who drew much less attention from the committee’s senators Thursday, is seen as a much more conventional choice than Shelton. Some of his most widely cited research examines the benefits of the central bank’s independence from political interference.
Waller said he has attended more than 60 meetings of the Fed’s policy-making committee. Before joining the St. Louis Fed he worked as an academic, researching monetary policy, for 25 years.
Shelton, though, has been a skeptic of the need for the Fed’s independence, which most economists regard as critical to allowing the central bank to make delicate decisions on interest rates and inflation that elected officials might otherwise oppose or block. Many Fed watchers worry that Trump himself is weakening the Fed’s independence with his frequent public attacks on its chairman, Jerome Powell, for not cutting rates more aggressively.
Source: AP News