Facing opposition to her joining the Federal Reserve Board over questions about her political independence, among other issues, Judy Shelton refused to budge from some of her controversial positions at a confirmation hearing Thursday.
Her stance appeared to disappoint a few Republicans on the Senate Banking Committee, including Patrick J. Toomey of Pennsylvania, Richard C. Shelby of Alabama and John Kennedy of Louisiana. Each said they remained concerned after the hearing, but declined to say how they would vote.
With unanimous Democratic opposition a safe assumption, Shelton cannot afford to lose a single Republican on a panel split 13-12 in favor of the GOP. If she advances out of committee, just four Republican no votes could block her confirmation on the floor.
The committee heard from two nominees for the Fed board: Shelton, an economic adviser to President Donald Trump’s 2016 campaign and the president's choice to represent the U.S. on the European Bank for Reconstruction and Development, and Christopher Waller, a high-ranking economist at the Federal Reserve Bank of St. Louis.
Shelton has espoused a range of views considered outside the mainstream of macroeconomics.
She has called federal deposit insurance a questionable government subsidy that distorted financial markets. Most economists credit it with restoring faith in the banking system following the Great Depression. She has advocated a return to a gold standard and floated the idea of the U.S. joining a multinational currency union, ala the euro.
On Thursday, she softened or repudiated some of those stances in response to senators' interrogation. She affirmed deposit insurance’s importance, and when asked about the Fed’s independence, said, “I pledge to be independent in my decision making and frankly no one tells me what to do.”
But Shelton stressed the Fed’s accountability. “Along with the political independence and operational autonomy granted to the Federal Reserve comes an obligation to be wholly accountable both to Congress and to the public,” she said.
She said that she merely looked to the gold standard for historical guidance. “I would not advocate going back to a prior historical monetary arrangement,” she said.
Pointing to Shelton’s past advocacy for a global currency, ranking member Sherrod Brown, D-Ohio, took aim at persuading his Republican colleagues to join him in opposition. “That kind of globalist — probably no better word than that — that kind of globalist ideology doesn’t belong anywhere near our fiscal and monetary policy,” he said.
Brown aggressively questioned Shelton’s apparent about-faces on many of her more controversial stances. In response, Shelton said she had remained intellectually consistent, adding, “I don’t claim to be in the mainstream of economists.”
That did not seem to sit well with Shelby. “Your views should be mainstream,” he said. “If you were on the Fed, how would you work with the other members? Could you work with them on the goal of price stability and full employment? Or would you really be an outlier?”
Shelton responded by saying she would work with her colleagues. “I have great respect for their capabilities and judgment,” she said. “I think I’d bring my own perspective. But I think the intellectual diversity strengthens the discussion and would be welcomed.”
Toomey fixated on Shelton’s recent writings advocating that the Fed devalue the dollar in response to trading partners’ devaluation of their currencies. “I think that is a very, very dangerous path to go down. This beggar-thy-neighbor, mutual currency depreciation is not in our interest,” Toomey said.
Outside the hearing, Toomey said he had not yet made up his mind on Shelton but added, “I remain concerned that she is an advocate for using monetary policy to devalue the dollar and what could easily devolve into a downward spiral.”
Waller appears uncontroversial
Waller, a respected economist who has consistently favored lower interest rates, can expect an easy confirmation. He didn't receive many questions Thursday, and the few he did receive were mainly used to contrast his mainstream positions to Shelton’s unorthodox views. Brown asked Waller if he would hire Shelton for his research department. He demurred, saying she studied a different branch of economics.
Trump has struggled to get Republicans to back his Fed appointees. While he has successfully seen four confirmed — including Jerome Powell, a Barack Obama-appointee that Trump promoted to chairman — another four nominees haven’t advanced. Most recently, Republican senators' opposition to Herman Cain and Stephen Moore’s nominations resulted in their withdrawals before a hearing took place.
Cain and Moore shared Shelton’s support for a gold standard, which economists say would limit the Fed’s ability to respond to changes in the economy. All three nominees flipped from opposing low interest rates when Obama was president to backing them once Trump took office. But Cain and Moore were undone by issues involving treatment of women. Cain had been accused of sexual harassment and Moore had written misogynistic articles. Shelton holds their monetary views — including echoes of Trump’s criticism of Powell — without that personal baggage.
Sen. Bob Menendez, D-N.J., questioned Shelton’s performance at the EBRD, which she resigned from in July, saying that she had missed 11 of 26 meetings during her tenure. “You were the U.S. representative to the bank, a Senate-confirmed position, but you made it to slightly over half the board’s meetings,” he said.
Shelton took issue with the Menendez’s math. “It’s a matter of public record that my attendance was actually closer to 70 percent,” she said, adding that she missed meetings to meet with U.S. Treasury officials in Washington.
“That’s why we have telephones,” Menendez retorted.