The Senate Banking Committee’s approval of Judy Shelton by one vote last month was supposed to seal the deal for President Donald Trump’s controversial nominee to the Federal Reserve Board of Governors, but last week Sen. Susan Collins (R-ME) threw a wrench in the gears.
The committee’s party-line approval of Shelton, an adviser to Trump’s 2016 campaign, was expected to be followed by an up-vote by the full Senate, controlled by Majority Leader Mitch McConnell (R-KY). But Collins, in a tight election race to remain New England’s only Republican member of Congress, took a stand against Shelton.
“I have serious concerns about this nomination,” Collins said in a statement. “In her past statements, Ms. Shelton has openly called for the Federal Reserve to be less independent of the political branches, and has even questioned the need for a central bank. This is not the right signal to send, particularly in the midst of the pandemic, and for that reason, I intend to vote against her nomination if it reaches the floor.”
Shelton’s nomination comes as the Fed provides critical support to a limping U.S. economy, including a bond-buying program that has driven mortgage rates to the lowest level on record, helping to bolster refinancings and home purchases.
Sen. Mitt Romney (R-UT) has already said he would vote against Shelton, meaning one more “no” vote from a Republican would make it a tie that would need to be broken by Vice President Mike Pence, and two more “no” votes would doom the nomination. There are several Republican senators locked in tight re-election battles like Collins, and McConnell has signalled recently that they can oppose the president if needed to win their races, according to CNN and other reports.
Shelton has a record of more than three decades of books and articles voicing controversial views about monetary policy including a return to the gold standard, abandoned by the U.S. in 1971. She has called for a Bretton Woods-style conference to make that happen, referring to the international meeting held in 1944.
“If it takes place at Mar-a-Lago that would be great,” she told the Financial Times in July.
Economists “roundly reject” the idea of returning to the gold standard, the Los Angeles Times wrote in an editorial on Friday opposing her nomination.
“It makes no sense – and ignores the lessons of history – to abandon the central bank’s ability to react to crises in the banking system and the wider economy,” the editorial said. “The rigid gold standard is the antithesis of modern monetary policy, which seeks to increase the supply of money when credit is dangerously tight and decrease it when inflation is eating away the dollar’s value.”
Last year Shelton authored a Wall Street Journal opinion piece calling for “greater cooperation” between the Trump White House and the Fed.
She also decried the Fed’s slashing of rates and other accommodative measures during the Great Recession, but approved cutting rates when Trump called for it in 2019.
A vote by the full Senate hasn’t yet been scheduled. An unnamed White House official told the Wall Street Journal the nomination likely will be voted on before Aug. 10 when the Senate is scheduled to go on summer recess.
The Senate also is expected to vote on Trump’s second nominee to the Fed, Christopher J. Waller, director of research at the Federal Reserve Bank of St. Louis. Waller received widespread support from Democrats and Republicans when he was approved by the Senate committee last month.