Trump's 'Parachute' Fed Board Nominee Faces Another Risk of Rejection

Gold Standard and Low Interest Rate Claims Shift to "Respect Fed's Position" After Lawmaker Criticism
Opposition Grows in Both Democratic and Republican Parties
Senate Banking Committee Confirmation Hearing Uncertain

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The Senate confirmation of Judy Shelton, a Federal Reserve (Fed) board nominee appointed by U.S. President Donald Trump, has become uncertain. If Shelton is rejected, it will inevitably disrupt President Trump's plan aimed at Fed interest rate cuts.

On the 13th (local time), the U.S. Senate Banking Committee held confirmation hearings for two vacant Fed board nominees, Shelton and Christopher Waller.

Although President Trump nominated Shelton with a 'dovish' approach in mind, lawmakers scrutinized her past controversial remarks with a strict standard.

From the beginning of the hearing, lawmakers cornered Shelton. The lead came from Democratic lawmakers. The clash was already anticipated.

Shelton, who served as the U.S. Executive Director of the European Bank for Reconstruction and Development (EBRD), is a gold standard advocate. This means her theory is completely detached from current monetary policy. Moreover, she strongly criticized the Fed's low interest rates in the past but transformed into a supporter of low interest rate policies after joining President Trump's campaign, which was enough to put her out of favor with lawmakers. Lawmakers expressed concerns that her appointment as a Fed board member could undermine the central bank's independence.

Some speculate that if President Trump is re-elected, Shelton could be nominated as the successor to Fed Chair Jerome Powell, whose term ends in 2022, so the Democrats are reportedly determined to block her confirmation at all costs.

Sherrod Brown, the Democratic ranking member of the Banking Committee, argued, "Shelton has expressed too many concerning opinions and has reversed her stance on important issues, so she is not qualified to serve as a Fed board member."

Ultimately, Shelton pleaded, "I will protect the Fed's independence" and "I will follow the Fed's methods," but CNBC reported that she failed to divert lawmakers' attention.

For Shelton to pass Senate confirmation, she must receive the approval of 13 out of the 25 banking committee members. The committee consists of 13 Republicans and 12 Democrats. If all Democrats oppose and even one Republican defects, confirmation will be impossible.

Concerns about Shelton have also been raised within the ruling Republican Party, and opposition votes are already expected. The Wall Street Journal (WSJ) reported that two Republican lawmakers have already expressed skepticism about Shelton's confirmation, casting a shadow over her approval.

Republican Pat Toomey (Pennsylvania) pointed out, "It seems like a very dangerous path." Toomey also told reporters, "I am concerned that Shelton supports devaluing the dollar through monetary policy."

Previously, Fed board nominees recommended by President Trump were consecutively rejected. In March last year, Stephen Moore, a Heritage Foundation researcher nominated by Trump, resigned after issues regarding unpaid child support following a divorce and tax delinquency surfaced. Herman Cain, former Federal Reserve Bank of Kansas City board member, who was nominated alongside Moore, also resigned amid sexual misconduct allegations. Nelly Liang, a senior researcher at the Brookings Institution nominated in September 2018, withdrew amid controversy over her Democratic Party affiliation. Marvin Goodfriend, a Carnegie Mellon University professor nominated in November 2017, failed to secure Senate confirmation and was rejected.

On the other hand, Waller, a former Federal Reserve Bank of St. Louis vice president, is expected to be confirmed. With a long career as an economics professor and a financial policy expert who joined the Federal Reserve Bank in 2009, even Democrats have no reason to oppose him.