Senate panel now likely to back questionable Trump Fed pick

WASHINGTON (AP) — In a shift, the Senate Banking Committee is likely to back President Donald Trump’s unconventional nomination of Judy Shelton for the Federal Reserve’s Board of Governors in a party-line vote Tuesday.

The committee’s support would move Shelton’s nomination to the full Senate, which would have until the end of the year to confirm or reject it. On Tuesday, a spokesman for Senate Majority Leader Mitch McConnell, R-Ky., said he had no comment on when the Senate would consider her nomination.

Late Monday, Sen. John Kennedy, Republican of Louisiana, said he would support Shelton’s nomination, essentially guaranteeing that she would win the votes of all 13 GOP senators on the committee. The Democrats have 12 members on the panel. Kennedy had previously said he was undecided.

Shelton’s unorthodox views and questionable credentials have drawn widespread opposition among economists and many former Fed officials. She has previously voiced support for linking the U.S. dollar’s value to gold, has expressed skepticism about the Fed’s political independence, and has supported lower interest rates since Trump’s election after having criticized them under President Barack Obama.

Sen. Sherrod Brown, the senior Democrat on the Banking Committee, complained Tuesday that Shelton “has advocated for failed Depression-era policies like a return to the gold standard and the removal of deposit insurance.”

Most mainstream economists regard any return to a gold standard as reckless, arguing that it would cause more and deeper recessions by limiting the Fed’s ability to cut interest rates to fight downturns. At a hearing in February, Shelton retreated from her previous stance and said she “would not advocate going back to a prior historical monetary arrangement.”

Still, her nomination appeared to stall at that hearing after three Republican senators said they were skeptical enough about her suitability for the Fed to either oppose her nomination or declare themselves undecided.

Kennedy had grilled Shelton on how she would respond to a recession if she were able to unilaterally set Fed policy. Shelton replied that she would cut the central bank’s benchmark short-term interest rate to zero and start buying $80 billion a month in Treasury bond purchases — policies that she had denounced when the Fed pursued them after the Great Recession.

Since Shelton’s hearing in February, the coronavirus pandemic has plunged the U.S. economy into its worst downturn since the Depression. Democrats on the Banking Committee have asked the panel’s chairman, Michael Crapo, an Idaho Republican, for a second hearing given the drastic deterioration in the economy since the February session.

Shelton served as an economic adviser to Trump’s transition team and then as U.S. executive director for the European Bank for Reconstruction and Development, which helps former communist countries transition to market economies. She holds a Ph.D. in business administration from the University of Utah.