(Bloomberg) -- Judy Shelton, President Donald Trump’s controversial pick to join the Federal Reserve’s Board of Governors, was poised to clear a key hurdle to confirmation after a key Republican senator said he’d vote in her favor.
Louisiana Senator John Kennedy said Monday he would back Shelton, removing much of the suspense from a vote scheduled for Tuesday in the Senate Banking Committee.
“I think she’ll be confirmed in the committee,” he told reporters, adding that he expected Senate Republican leadership to move quickly on the nomination, which must still face a full Senate vote. Kennedy had previously voiced skepticism about Shelton and until Monday had not said publicly that he would support her for the Fed job.
Shelton -- the former gold-standard advocate turned policy dove -- and fellow nominee Christopher Waller, director of research at the St. Louis Fed, will finally receive their committee votes more than five months after appearing before the panel to answer questions. The committee will meet at 2 p.m. Washington time.
Some Shelton critics have warned that Trump might elevate her to replace Jerome Powell when his term ends in 2022. That’s assuming the president wins re-election in November and is unhappy with his current Fed chair, whom he’s recently praised after years of harsh criticism for too-tight policy.
Waller, a respected economist and Fed insider, is expected to win bipartisan support for his confirmation after Democrats during the Feb. 13 hearing voiced no strong objections to his appointment.
But Shelton’s unorthodox views on central banking and inconsistent stance on monetary policy led to tough questioning by Democrats and some Republicans, including Kennedy.
“Nobody wants anybody on the Federal Reserve that has a fatal attraction to nutty ideas,” he told reporters following the hearing in February, though he insisted that didn’t necessarily apply to either of the nominees.
With Democrats expected to vote in unison against Shelton, just one Republican “no” on the committee would have been enough to block her confirmation. If her nomination has enough support in committee, she must still win the backing of the full Senate, where four Republican defections would be enough to sink her chances, assuming Democrats are unified in their opposition.
Mitt Romney, Republican senator from Utah, said earlier on Monday that he had “concerns” on Shelton’s nomination.
Shelton holds a doctorate in business administration from the University of Utah and acted as an informal adviser to the Trump campaign in 2016. She has long favored policies aimed at eliminating even very low inflation and advocated a return to the gold standard, fixing the value of the U.S. dollar to a weight of gold, a system the U.S. followed to varying degrees until 1976.
Those positions made her controversial to begin with, but since becoming a potential candidate for the Fed job in early 2019, she has reversed her views, even saying in June last year, well before the coronavirus pandemic, that she would seek to lower interest rates “as expeditiously as possible.” That prompted accusations she would simply do Trump’s bidding at the Fed.
She has also questioned the efficacy of the so-called dual-mandate goals set for the Fed by Congress, to seek stable prices and maximum sustainable employment.
“I would probably be highly skeptical of those,” she said in an interview in May 2019. “Those are such nebulous objectives.”
The prospect of Shelton as a governor is not especially alarming to many of her critics. Their biggest concern is that Trump, if re-elected, might make her Fed chair when Powell’s term expired in February 2022, though that would require a separate Senate confirmation process.
Prior to the coronavirus crisis, Trump had criticized Powell repeatedly and threatened to remove or demote him. More recently, though, he has praised the Fed chief’s aggressive policy response to the pandemic.
David Wilcox, former director of the Fed’s domestic research and forecasting unit, said even as an isolated governor, Shelton could damage the complexion of the Fed as a non-partisan institution. But the largest peril, he said, would come if she were to reach the chair.
“The costs of having someone in the role of chair who clearly has instincts way outside the bounds of received wisdom, those costs could be just extraordinary for the U.S. and for the global economy,” he said.
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.