Via Financial Times

Two senior Republicans on the Senate banking committee said they were unsure whether they would vote for Donald Trump’s nomination of Judith Shelton to the Federal Reserve Board after a bruising confirmation hearing on Thursday.

Senator Richard Shelby, a six-term Alabama Republican, “came out of the hearing undecided, and still has concerns”, according to a spokesperson. Pat Toomey, a Republican senator from Pennsylvania, is also “undecided”, a spokesperson said.

Asked whether the White House was considering pulling Ms Shelton nomination, deputy press secretary Judson Deere said: “That’s absolutely false.” Mr Deere said the White House expected the nominations of both Ms Shelton and Christopher Waller to the Fed’s Board of Governors to move forward. 

Ms Shelton, an economic adviser to Mr Trump’s 2016 presidential campaign, and Mr Waller, the head of research at the St Louis Fed, appeared before the committee as it considers whether to send their nominations to the full Senate. Because the panel has 13 Republicans and 12 Democrats, one Republican defection could be crucial.

While few questions were posed to Mr Waller, Ms Shelton faced concerns over her past support for a gold standard and her abrupt shift towards easier monetary policy. 

Ms Shelton made headlines even before her nomination to the Fed board for her outspoken views on what she called the “Soviet power” on the Fed. In an interview with the Financial Times last year she said she would ask “tough questions” on whether the central bank should maintain its rate-setting powers. 

“Dr Shelton, I’m troubled by some of your writings,” said Mr Shelby during the hearing, questioning whether her views put her out of the mainstream of economists. 

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Ms Shelton has faced opposition from even conservative commentators for an extensive record of support for linking the value of the US dollar to gold, a policy few economists support. Since Mr Trump took office, she has shifted her views, urging the Fed to loosen policy and encourage more growth, as the president frequently does. 

“I would not advocate going back to a prior historical monetary arrangement,” she told the committee when asked about the gold standard. “I have looked at historical systems going back to the beginning of our country, because I think you can gain valuable insights by comparing economic performance under one set of monetary rules versus another. But money only moves forward.”

Mr Toomey quizzed Ms Shelton on her support for intervening on foreign exchange markets to prevent other countries from gaining a trade advantage through devaluation. 

“We don’t get to control other countries’ monetary behaviour, and I’m concerned about the extent to which you advocate for our monetary policy to be influenced and reactive to the foreign exchange behaviour of other countries,” he said.

“It would be anathema to me to suggest that we devalue our money to gain a trade advantage,” said Ms Shelton. “What I’m saying is that within the context for the framework for monetary policy, we also have to look at the impact on employment and on stable prices. And if other central banks engage in those unfair practices, it can affect employment.”

Senate Republicans have shown little deference to Mr Trump on some of his picks for the Federal Reserve, making it clear last year that they would not approve potential Trump nominees Herman Cain or Stephen Moore. Like Ms Shelton, they did not have a traditional background for the Fed as either policymakers or monetary economists.

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Democratic senators homed in on whether Ms Shelton would be capable of acting independently of the White House, and whether it was appropriate for the president to publicly attack the Fed chair, as Mr Trump frequently does.

“I don’t censor what other people say,” she said. “But I do believe that every American, every member of Congress and even the president has the right to criticise the Federal Reserve.” 

She added that most Fed chairs face political pressure from the White House, and that she thought it was better to have that pressure out in the open rather than behind closed doors. 

Tim Duy, a monetary economist at the University of Oregon, said Ms Shelton’s “past views and her inability to explain her 180-degree turnround leaves even some Republican senators with understandable concerns about her nomination”.

Claudia Sahm, a former research section chief for the Fed board who now works at the Washington Center for Equitable Growth, a think-tank, said Ms Shelton had not said anything that would assuage concerns over her ability to be fully independent from Mr Trump. 

“Independence came up repeatedly, and I didn’t see any of her answers really addressing that in any kind of credible way, or even the nuanced way in which she backed off the gold standard,” Ms Sahm said. 

Mr Waller was largely ignored by the committee. Sherrod Brown, a Democrat from Ohio, turned to Mr Waller only to ask whether he would have hired Ms Shelton to his research staff in St Louis. Mr Waller said he tended to hire academics. 

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Mike Crapo, the Idaho Republican who chairs the committee, said the hearing had been, as expected, “very aggressive”, particularly with regard to Ms Shelton, who holds a doctorate in business administration and also has served as the Trump administration’s envoy to the European Bank for Reconstruction and Development.

“I think you have been very solid in defending your writing and explaining your positions,” he said.