Senate Majority Leader Mitch McConnell sought to steer a controversial nominee for the Federal Reserve through some Republican opposition and the absence of members of his conference Tuesday but fell short of the votes he needed.
McConnell didn’t muster the simple majority needed to end debate and advance to a confirmation vote on Judy Shelton, President Donald Trump’s nominee to join the Fed board. The tally was 47-50, with McConnell voting “nay” to reserve his right to call it back up.
Shelton’s unorthodox economic views managed to unite opponents from across the political spectrum. Several Republican senators; progressives such as Democratic Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio; economists at the American Enterprise Institute, a free-market think tank; and the National Review editorial board all said she had no business getting confirmed to the Fed.
Retiring Republican Sen. Pat Roberts of Kansas cast his vote for ending debate on Shelton after telling reporters earlier Tuesday he was still undecided and “a little troubled” by her unorthodox views.
More than 100 economists, including seven Nobel laureates, signed a letter to senators urging them to vote no. Conservatives, liberals, libertarians and leftists alike have said she would be a bad Fed governor.
Shelton is seen as a particularly partisan pick for an apolitical post. She lambasted the Fed’s loose monetary policy in the wake of the 2008 recession, when Barack Obama was president, only to reverse position when Trump took office, attacking the central bank for not lowering rates even further in a period of strong, sustained economic growth.
Critics feared she would work to support whatever monetary policy helped Republicans politically, rather than balancing pro-employment low rates against the risk of rising inflation.
Shelton also spent decades advocating a return to the gold standard or a similar system that would peg the dollar to an index of commodities. Economists warn that would impair the dollar’s stability and limit the Fed’s ability to respond to economic downturns, like the one the nation currently finds itself in.
Shelton has also disparaged the Fed’s independence from the White House and proposed a monetary union with Mexico and Canada akin to the eurozone — two stances unpopular with mainstream economists.
“I am not convinced that she supports the independence of the Federal Reserve Board as much as I believe the Board of Governors should,” Tennessee GOP Sen. Lamar Alexander said in a press release Monday. “I don’t want to turn over management of the money supply to a Congress and a President who can’t balance the federal budget.”
Republican Sens. Mitt Romney of Utah and Susan Collins of Maine had earlier said they would vote against her. But the opposition to Shelton was dealt a blow last week when Alaska GOP Sen. Lisa Murkowski said she would support her. Murkowski had helped sink Herman Cain and Stephen Moore, Trump’s last two controversial Fed nominees.
Shelton might have survived that opposition, but Republican Sens. Rick Scott of Florida and Charles E. Grassley of Iowa went into quarantine this week because of exposure to COVID-19. Alexander’s absence from Washington during the vote left the count unclear as the voting started. Roberts added to the suspense by saying he was undecided shortly before the vote.
McConnell’s task was complicated further by other difficulties ahead. Mark Kelly, the Arizona Democrat who won a Senate seat in a special election, will arrive in early December, reducing the Republican majority.
Shelton was nominated alongside Christopher Waller, an economist at the Federal Reserve Bank of St. Louis. Waller has bipartisan support, and his term would run into 2030 if he’s confirmed.
Some Shelton opponents have tempered their disapproval by noting that she would be just one vote out of the seven Fed governors and 12 Federal Open Market Committee members, who set interest rates. But in order for the Fed to set up emergency lending facilities, like the 13 they established this year to calm pandemic-wracked credit markets, five governors must vote affirmatively.
Given that Fed vacancies can last months, opponents like Sam Bell, policy director at Employ America, a left-wing think tank focused on monetary and fiscal policy, fear it would give Shelton a veto on these potentially economy-saving measures during a subsequent financial crisis.
Before Shelton’s nomination to the Fed, Trump had picked her to be the U.S. director of the European Bank for Reconstruction and Development. The Senate confirmed her by a voice vote in March 2018.
“Donald Trump’s Fed Chair is charting a course for full employment. The Senate was wise to allow him on his way by rejecting the Shelton nomination,” Bell said.