Judy Shelton, a longtime critic of the way the Federal Reserve operates and an advocate for a return to the gold standard, is one step closer to becoming a member of the central bank’s board of governors.
On Tuesday, the Senate Committee on Banking, Housing and Urban Affairs voted 13-12, along party lines, to advance Shelton’s nomination to the full Senate. It also gave its approval to a less-contentious pick for another vacant seat on the board: Christopher Waller, currently the director of research at the Federal Reserve Bank of St. Louis.
Several Republicans, including Sens. Pat Toomey of Pennsylvania and John Kennedy of Louisiana, who were once critical of Shelton, said in advance of the vote that they had changed their minds. Assuming all Democrats on the committee would vote against the president’s pick, as they did, one Republican “no” vote would have derailed the nomination.
Toomey said Shelton gave him “assurances” in a two-page letter that “she will oppose using monetary policy for the purpose of devaluing the dollar." That, the senator said, “would have been imprudent and contrary to statutory authorization.”
A spokesman for Kennedy said the senator has reviewed Shelton’s writings, which include “Money Meltdown: Restoring Order to the Global Currency System,” as he said he would do, and he decided to back her nomination.
In February, the Banking Committee held a hearing for Shelton and Waller, but since then, the global economy has changed drastically. Because of the pandemic, global growth has stalled, tens of millions of men and women are unemployed in the United States, and the Federal Reserve has taken unprecedented steps to support workers, employers and financial markets.
This month, because their “concerns are compounded during this unprecedented health and economic crisis,” the Democratic members of the Banking Committee asked Sen. Mike Crapo of Idaho, the committee’s chairman, to hold another nomination hearing for Shelton.
In a letter, they said Shelton, who was an adviser to the Trump campaign in 2016, “does not believe that the Federal Reserve should be shielded from political whims, and she has advocated for failed Great Depression-era policies — like a return to the gold standard and the removal of deposit insurance — that would make our economy more volatile.”
“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,” they argued.
"Dr. Shelton is a dangerous pick. Period. Her ideas are far outside the mainstream. Her flip-flopping, policy beliefs, and objections to Fed independence worry conservative and liberal economists alike," Ranking Committee member Sen. Sherrod Brown, D-Ohio, said in a statement.
The Federal Reserve is fiercely independent, but in recent years, President Donald Trump has attacked the central bank and its chair, Jerome Powell. At times, Shelton has questioned the Fed’s independence and questioned some of its policies.
There are seven seats on the Board of Governors of the Federal Reserve, but it has been operating with only five members since 2018, when the former Fed chair, Janet Yellen, stepped down. The seat for which Waller has been nominated has been vacant since 2014, when Sarah Bloom Raskin stepped down to become deputy secretary of the Treasury Department.
During his tenure, Trump has tried unsuccessfully to fill the two vacant board seats.
In 2017, he nominated another controversial economist, Marvin Goodfriend, who died of cancer last year. He was a professor at Carnegie Mellon University, and while his nomination made it out of committee, the full Senate never voted on it. In 2019, Nellie Liang, a fellow at the Brookings Institution, withdrew her name from consideration.
Those were the official nominees, but there have been other potential picks whose names the White House floated, but never sent to Capitol Hill, including Stephen Moore, an economics commentator who has been an informal adviser to Trump, and former Republican presidential candidate Herman Cain.
Members of the Board of Governors of the Federal Reserve serve 14-year terms. If confirmed, Shelton’s term would expire in 2024, and Waller’s would end in 2030. There is speculation that Trump, if re-elected, could consider Shelton to replace Powell, whose tenure as Fed chair ends in 2022.