MNI EXCLUSIVE: Senator: Shelton's Diverse Views May Help Fed

--Senate Vote on Trump Nominee Looks Tight on Partisan Divide

By Evan Ryser

     WASHINGTON (MNI) - President Donald Trump's nomination of Judy Shelton to

the Federal Reserve's board of governors could turn on how Republicans view her

unorthodox policy ideas including the gold standard.

     Senator Mike Rounds told MNI he has met with Shelton to discuss ideas such

as the gold standard and is supportive of her nomination. "The fact that we've

got some folks on with different points of view can be very healthy," said

Rounds, Republican of South Dakota and Senate Banking Committee member. "We'll

have an opportunity (Thursday) to get into that a little bit more."

     The Senate Banking Committee, with jurisdiction over nominations to the Fed

Board, will hold a hearing with Trump nominees Shelton and Christopher Waller

Thursday at 9:00am. The committee is closely split between 13 Republicans and 12

Democrats, with Senator Elizabeth Warren saying Shelton has "radical" views and

Senator Doug Jones noting strong concerns. 

     Rounds expects Waller to be confirmed by the Senate. "He is solid. He is

there. I don't think we are going to have any issues there."

     On Shelton, Rounds suggested support for the direction of the FOMC but also

said Chair Jerome Powell "doesn't believe in groupthink."

     "There is room for diversity on the Board," Rounds said. "Let's have the

discussion and allow her the opportunity to share her thoughts. I thought she

did a good job in my office" when the two of them met, he said.

     Chairman Mike Crapo has indicated support and pledged a quick confirmation

process, and some analysts have predicted a swearing-in will come in late May.

     Asked whether a potential split on the Fed Board might be disruptive in the

marketplace, Rounds said "I am not worried about it."

     "The markets are going to want to see how she responds if she is actually

put on the Board," he said. "It will be up to her. I think she is sensitive to

markets."

     Senator Chris Van Hollen, a Democrat from Maryland, told MNI he has

"serious concerns about Judy Shelton and her past statements and her record."

     Carrying Trump's views into the Fed would be a big change in a world where

major nations have given up the gold standard. Trump has called for mirroring

the ECB's negative interest rate policy, in contrast to Powell's view the U.S.

is in a good place after three cuts last year.

     Jack Reed, a Democrat from Rhode Island and member of the Senate Banking

Committee, told MNI he looked forward to hearing from the nominees. Senator Tina

Smith, Democrat from New Mexico, finds Shelton's views concerning, her office

said.

     The FOMC is big enough for some outsider views according to Vincent

Reinhart, who held roles at the Fed over 24 years until 2007. "Historically the

fact that the policy committee is big, that all 12 bank presidents participate,

and that some of the governors have longer tenures, and there is a deference to

the chairman, means that composition of the Board is not particularly

significant."

     "You change two it doesn't matter. You change three, you change four, then

that does begin to matter," Reinhart said. "It's not the individual members,

it's the collection of members."

     "Diversity of views isn't such a bad thing and it also does help the

leadership of the Fed to say, 'these decisions are hard,'" he said.

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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