Judy Shelton: President Trump's Controversial Nominee To The Federal Reserve Board

Aug 17, 2020
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A controversial pick for the Federal Reserve is just a Senate vote away from taking her place on the governing board of the powerful central bank. It's an opportunity for President Trump to put his personal stamp on the Fed. That's something Trump has tried and failed to do in the past. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Judy Shelton's name was first floated by the president more than a year ago after two of Trump's earlier Fed nominees withdrew in the face of stiff opposition. Shelton was an adviser to Trump's 2016 campaign. In an interview with the investing website Small Cap Power, she suggested Trump was in the market for a different kind of central banker.

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JUDY SHELTON: I mean, he's a disruptor. We need a disruptive voice on the Fed as well.

HORSLEY: Shelton herself would certainly be such a voice. She's acknowledged some of her views are well outside the economic mainstream, especially her support for the gold standard. Tying the dollar to physical gold is a relic of the last century and would sharply limit the amount of money in circulation. Kathy Bostjancic, who follows the Fed for Oxford Economics, notes Shelton has also questioned the very mission of the central bank - to promote maximum employment, along with stable prices.

KATHY BOSTJANCIC: She's very unorthodox in her views and her background.

HORSLEY: Critics also worry Shelton would not be sufficiently insulated from political pressure. To be effective, central bankers sometimes have to make unpopular decisions - raising interest rates, for example, to keep the economy from overheating. Bostjancic says that would be difficult if Shelton's taking marching orders from the White House.

BOSTJANCIC: You could hold it hostage to short-term political whims as opposed to what's really best for the economy and the nation.

HORSLEY: Throughout his time in office, Trump has publicly lambasted Fed Chairman Jerome Powell, first for raising interest rates, then later for not lowering them more quickly. At her confirmation hearing, Shelton insisted she would not simply bow to the president's demands.

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SHELTON: I pledge to be independent in my decision-making. And frankly, no one tells me what to do.

HORSLEY: Shelton would have limited authority in any case, as just one of seven members on the Fed's governing board. Critics' real concern is that if Trump is reelected, he might tap Shelton to replace Powell as Fed chair when Powell's term expires in a couple of years. The chair of the Fed is one of the most powerful figures in the U.S. economy. During the pandemic, the central banks pumped trillions of dollars into the economy in an effort to cushion the financial fallout.

Shelton was critical when the Fed made similar moves during the financial crisis more than a decade ago. But at her confirmation hearing a month before the U.S. economy cratered, she promised to be a team player.

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SHELTON: I would bring my own perspective, but I think the intellectual diversity strengthens the discussion and would be welcomed.

HORSLEY: Shelton's perspective appears to shift with the political winds. As Democratic Sen. Chris Van Hollen noted during her hearing, she's pushed the Fed for easy credit during Trump's time in office, even though she took the opposite tack during the Obama administration.

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CHRIS VAN HOLLEN: Your responses today are totally inconsistent with the positions you've taken in the past. The only thing that has changed is who's in the White House.

HORSLEY: Some Republicans on the Senate banking committee also expressed reservations about Shelton, though in the end, she won narrow backing from the committee on a straight party-line vote. Two of the Senate's more independent Republicans, Mitt Romney and Susan Collins, have said they'll vote against Shelton on the Senate floor. But unless opponents can find two more Republican no votes, the central bank could be getting an unpredictable and unorthodox new board member just as it's confronting the deepest economic crisis in memory.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.