Friday, 19 Apr 2024

Trump Fed nominee Shelton blocked in Senate, for now

(Reuters) – The U.S. Senate blocked President Donald Trump’s controversial nomination of Judy Shelton to the Federal Reserve’s board on Tuesday but left a path open for her potential confirmation in the coming weeks.

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

Shelton, 66, a former economic adviser to Trump’s 2016 presidential campaign, has come under fire for inconsistent, controversial views, including an embrace of the gold standard and a shifting stance on interest rates as control of the White House passed from Democrat Barack Obama to Trump.

Critics say she is too partisan for the job and could imperil the independence of the powerful interest-rate setting institution, which includes presidential nominees but does not report to the White House.

Shelton told lawmakers in her February confirmation hearing that “no one tells me what to do.”

Supporters praise an out-of-the-box thinker who they say can shake up an institution they view as being dominated by “groupthink” because of its consensus-driving decision-making style.

Trump’s Republican Party has a 53-47 majority in the current Senate, but several senators were absent on Tuesday, including two Republicans who were quarantining due to exposure to the coronavirus. Others joined Democrats in voting “no” in the so-called cloture vote.

The vote was 47-50, with Senate Majority Leader Mitch McConnell voting “no” to preserve the option to reconsider Shelton’s nomination later, when colleagues including Senator Charles Grassley of Iowa and Senator Rick Scott of Florida, who are quarantining, return to the Senate floor.

A successful vote could require careful timing.

Newly elected Democratic Senator Mark Kelly is eligible to take the oath of office as soon as Arizona certifies its election results, which is scheduled for Nov. 30. He expects to take office in early December.

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Quarantines for COVID-19 typically last 14 days, meaning Grassley and Scott could be back at the Senate by then, health permitting.

The vote on Shelton marks the first time since the establishment of modern Fed governance in 1935 that Congress has voted on a Fed nominee during a lame duck session.

Shelton has argued the nation would be better off returning to the gold standard, and as recently as 2017 criticized the Fed’s power over money and financial markets as “quite unhealthy.”

During her Senate confirmation process, she called the Fed’s bond buying and zero interest rates in the last crisis “extreme.”

Her views on rates have moved in lockstep with Trump’s. She lambasted easy money before his presidency, but supported it after he took office, and has expressed skepticism over the Fed’s need to set policy independently from the president and Congress.

Formerly U.S. executive director for the European Bank for Reconstruction and Development, Shelton was also a co-director of the Sound Money Project, part of the libertarian American Institute for Economic Research.

Her skepticism about the role of the Fed was part of the appeal for some Republicans voting “yes” on Tuesday.

“The Federal Reserve plays too much of a role shaping our economy,” Marco Rubio, a Republican senator from Florida, said in a statement after the vote. He added that he thinks Shelton shares his belief “that relying on the Federal Reserve to boost asset prices is no substitute for a strong American economy.”

Democrats voting against Shelton expressed concern over her lack of knowledge about the banking system. Shelton’s unfamiliarity with capital requirements and other protections against losses means it would be “imprudent” to appoint her to the Federal Reserve Board, Massachusetts Senator Elizabeth Warren said on Twitter on Tuesday afternoon, “especially during this crisis.”

Other Trump picks for the central bank have faltered earlier in the process, including former Republican presidential candidate Herman Cain and economic adviser Stephen Moore.

Whether Shelton is ultimately confirmed or not, Trump will have put his mark on the Fed. He has nominated all but one of its board’s current five members.

The White House expressed confidence Shelton would be confirmed eventually, with spokesman Judd Deere tweeting she is “incredibly qualified,” and adding, “The @WhiteHouse fully supports her.”

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