“I oppose the nomination of Judy Shelton because I am not convinced that she supports the independence of the Federal Reserve Board as much as I believe the Board of Governors should,” Alexander said in a statement to The Washington Post. “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.”
Shelton’s nomination to the Fed board has been controversial from the start. In her past writings and remarks, Shelton has said the Fed harnesses too much power and should be reined in. Shelton, who advised Trump’s 2016 presidential run, has also caused lawmakers to question her commitment to the Fed’s independence from the White House, a core part of the central bank’s reputation and authority. She has also been outspoken against the Fed as an institution.
Before the coronavirus pandemic thrust the economy into a sudden recession, Shelton altered some of her views to appear in closer agreement with Trump’s aggressive push for lower interest rates. On policy, Shelton has also called for a return to the long-abandoned gold standard, which the nation fully abandoned in 1971.
There’s widespread agreement that the Fed’s seven-seat board benefits from a range of perspectives and opinions. But Shelton’s critics say her views make her too much of an outlier to set monetary policy at the central bank, and that the stakes are especially high as the economy fights its way out of the coronavirus crisis.
Democrats are also expected to oppose Shelton’s nomination, and Republicans hold a 53-to-47 majority in the Senate. It is unclear whether Vice President Pence, who is marshaled in to break ties in the Senate, will have to do so; a spokesman for Alexander said he will not be in Washington this week because of family matters, so he won’t be present to vote on the nomination if it occurs this week.
But Sen. Rick Scott (R-Fla.), who is expected to support Shelton, will be in quarantine this week, according to spokesman Chris Hartline, after coming into contact with someone Friday night in Naples, Fla., who later tested positive for the virus.
Asked whether Republicans have the votes to confirm Shelton, Senate Majority Whip John Thune (R-S.D.), the party’s chief vote-counter, said “We hope so.”
“As you know, we have some attendance issues,” Thune said.
If Scott and Alexander both miss the vote, it could come down to a 49-to-49 tie if Vice President-elect Kamala D. Harris votes. In that scenario, Pence would be needed to break the tie. Aides to Harris did not respond whether she would participate in Shelton’s vote later this week.
And if the vote drags into early December, incoming Sen. Mark Kelly (D-Ariz.) will be seated, which probably will imperil Shelton’s chances.
The Fed’s board often prides itself on reaching consensus, and individual governors can have limited influence. Earlier in Shelton’s nomination process, some economists speculated that if Shelton was confirmed and Trump won his reelection bid, then Trump would try to put Shelton in the Fed’s top job once Jerome H. Powell’s term expires in 2022. Even if Shelton is ultimately confirmed, Joe Biden’s win almost entirely zaps her path to Fed chair.
Yet Fed officials vote on monetary policy and regulatory policy decisions, and can prove influential during debates. Trump has remade almost all of the Fed’s board of governors, including through the nomination of Powell. Yet Trump has had less success filling two open slots in the past few years, as some of his ideas for nominees were rejected by Republican senators or withdrew their bids.
The Fed’s role in the U.S. economy has come under a particular spotlight since the coronavirus pandemic thrust the nation into a sudden and painful recession. Since March, the Fed has overseen and implemented a slate of emergency lending programs to bolster the markets and keep credit flowing in a way its leaders say has staved off an even deeper financial crisis.
Normally, the Fed’s main policy lever rests in the setting of interest rates, which the Fed can tweak up or down depending on what it is seeing in the economy. At the beginning of the pandemic, the Fed slashed rates to near zero and is expected to keep them there for some time, raising questions about how much further the Fed can go to keep the economy from scarring.
Trump’s other pick for the second Fed vacancy has been far less controversial. Yet it’s unclear when or if Republicans will move to confirm Christopher J. Waller, a St. Louis Fed economist, by the end of the year.
Last week, Senate Majority Leader Mitch McConnell (R-Ky.) took procedural steps to set up a vote on Shelton’s long-pending nomination, suggesting his party’s leadership believed there was enough support to move forward. For much of 2020, Shelton’s prospects have looked dicey given her views on the Fed’s independence and the gold standard.
Left-leaning economists and Democratic lawmakers have staunchly opposed Shelton’s nomination, saying Shelton’s views are too extreme for a job as one of the country’s top economic policymakers. Over the summer, Democrats on the Senate Banking Committee called for another chance to vet Shelton given how drastically the economy had been shaped by the coronavirus crisis since her initial hearing.
“Imagine someone like that making decisions about monetary policy back in April when our economy was in free fall,” Senate Minority Leader Charles E. Schumer (D-N.Y.) said of Shelton on Monday. “We should not confirm to the Federal Reserve someone who would likely stymie efforts to dig ourselves out of this crisis.”
Even among Republicans, Shelton’s nomination has appeared in jeopardy multiple times. Earlier in the year, Republicans on the Senate Banking Committee raised concerns about Shelton’s monetary policy views and whether she could maintain the central bank’s independence, which is core to the Fed’s reputation and authority.
Shelton’s nomination narrowly made it through the banking panel, which voted 13 to 12 along party lines to send the nomination to the full Senate. Romney and Collins publicly said they’d oppose Shelton’s nomination soon after.
“We’re still working it,” Thune said at the time. “She’s a priority for the White House. It’s the Federal Reserve. It’s important, so obviously we want to get it done. But we’re not going to bring it up until we have the votes to confirm her.”
Chelsea Janes contributed to this report.