MNI POLICY: Trump Fed Nominee Shelton Struggles in Senate Talk

--Nomination May Be Lost If Single Republican Votes Against

By Evan Ryser

     WASHINGTON (MNI) - President Donald Trump's nominee to the Fed board Judy

Shelton faced skeptical questions at a Senate hearing, including from

Republicans who likely need to vote as a unit to advance her appointment.

     Republicans Richard Shelby, Pat Toomey, and John Kennedy all expressed

doubt in the Senate Banking Committee hearing on Thursday. They quizzed her on

central bank independence, federal deposit insurance, the Fed's role over

exchange rates, the gold standard, and her lifetime of writings.

     The committee is split between 13 Republicans and 12 Democrats and looks

tight along a partisan divide. Shelton needs a simple majority to move her

confirmation to the full Senate where Republicans have a larger vote advantage. 

     Richard Shelby, a rare senator to stay attentively in his seat throughout

the hearing, had some "trouble" with Shelton's writings. He called her an

"outlier" and said Fed members especially with longer terms "should be

mainstream."

     "I don't claim to be in the mainstream of economists," Shelton said.

     --UNDECIDED SENATORS

     Shelby's office later said he has not decided yet on Shelton's nomination

as of now, but he still has some concerns.

     Senator Toomey expressed concern over Shelton's history of suggesting the

Fed has a role to play in devaluating the dollar.  

     "Among the factors that we need to consider if I were to become a member of

the board of governors is the political context of the global economy, and

global finance," Shelton responded. "We have to be aware of what other central

banks are doing. Last year, 49 central banks lowered their interest rate which

caused their currencies to depreciate relative to the dollar."

     Toomey said: "You believe the Fed should actively seek to devalue our

currency if other countries are doing that, and I think that's a very, very

dangerous path to go down. This beggar thy neighbor mutual currency devaluation

is not in our interest. And it is not in the mandate of the Fed to pursue it."

     Toomey reiterated after his questioning he remains undecided on Shelton's

nomination, his office said. Senator Kennedy also has not made up his mind.

     --DEVIL'S ADVOCATE

     While supportive Republicans maintained Shelton had taken a Devil's

advocate approach in her writings, Democrats feel differently.

     Democratic Senator Jon Tester said, "I support your willingness to serve,"

but "the dog doesn't hunt." Senator Mark Warner told Shelton: "I don't doubt

your integrity, but I doubt your consistency."

     Senator Chris Van Hollen, a Democrat, said, "Your responses are totally

inconsistent with your history of writings."

     Shelton maintained President Trump has a right to criticize the Fed and it

is better for him to be "transparent" rather than criticize behind closed doors.

     Addressing concerns over federal deposit insurance, Shelton said "I totally

support federal deposit insurance." She said her previous writings were to

merely show an example.

     On the gold standard, Shelton said her views have been misunderstood and

she wouldn't advocate "going back to a prior historical arrangement."

     Shelton said she is "absolutely" for independence of the Fed, saying its

operational autonomy assures its independence.

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

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