The Senate on Tuesday narrowly voted to block the confirmation of Judy Shelton, President Donald Trump’s controversial pick to join the Federal Reserve’s seven-member board of governors.
In a procedural vote on whether to end debate on Shelton’s nomination and move along to the confirmation vote, all Democrats voted no as well as three Republican senators: Mitch McConnell of Kentucky, Susan Collins of Maine and Mitt Romney of Utah.
McConnell’s vote against Shelton gives him the option to bring her nomination up again at a later date.
Three Republican senators were absent and therefore unable to vote. Chuck Grassley of Iowa and Rick Scott of Florida were self-quarantining after they announced they were exposed to the coronavirus, and Lamar Alexander of Tennessee was out for family matters, according to his office.
Shelton, who advised Trump’s 2016 presidential run, has been an outspoken opponent of the Federal Reserve as an institution. Her critics have questioned whether Shelton would support the central banking system’s independence from the White House.
In a statement released ahead of the vote, Senate Minority Leader Chuck Schumer (D-N.Y.) called Shelton “without a doubt, one of the least qualified nominees I have ever seen for our nation’s central bank.”
“Ms. Shelton has shown herself to be an economic weathervane, pointing whichever direction she believes the partisan winds are blowing,” Schumer said in his statement.
Shelton made her career working with right-wing organizations including the Atlas Foundation and the Hoover Institution, where she criticized the very existence of the Federal Reserve and advocated a return to the gold standard ― the monetary system from the late 19th century that was abandoned during the Great Depression.
In a Financial Times interview from May 2019, she claimed the Fed exercises Soviet control over financial markets and dismissed the very idea that its top officials could perform their jobs effectively.
“How can a dozen, slightly less than a dozen, people meeting eight times a year, decide what the cost of capital should be?” Shelton asked. “We might as well resurrect Gosplan,” the USSR’s economic planning committee.
Shelton has also opposed the government guarantee on bank deposits — a program initiated under President Franklin Delano Roosevelt that ensures that ordinary citizens don’t lose their money if their bank should fail. During the early years of the Great Depression, millions of Americans lost their savings through no fault of their own when their banks failed. During the crisis of 2008, nobody did.
Shelton’s views have made her a doyen of the far-right fringe, where a return to 19th century economic institutions is viewed as the cure for all that ails the global economy. But those same ideas have alarmed mainstream economists and financial professionals who believe such programs fueled the Depression and would generate international economic chaos today.
Shelton is also viewed even within her own party as a partisan opportunist. After advocating the gold standard and voicing support for high interest rates, she quickly reversed course once Trump announced his intention to nominate her to the Fed. Trump is an outspoken advocate of low interest rates, believing them to be a source of economic growth. And prior to the COVID-19 pandemic, the Fed’s commitment to low rates proved an economic boon, helping to drive unemployment to its lowest levels in decades. With Trump in the White House, Shelton insisted she wanted to keep rates low and distanced herself from her prior comments about the gold standard and deposit insurance.
The fear ― shared by liberal Democrats and otherwise conservative stalwarts in the financial sector alike ― is that Shelton would have encouraged economic contraction under a Democratic president, a scenario that would be bad for Democrats and also bad for bank profits, even as it would spur business failures and corporate concentration.
Igor Bobic contributed reporting.