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VOL. 44 | NO. 6 | Friday, February 7, 2020

Trump Fed nominee Shelton promises 'intellectual diversity'

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WASHINGTON (AP) — President Donald Trump's nominee to the Federal Reserve touted her credentials in written testimony Thursday and said she would "work collegially" if approved.

Judy Shelton, a former adviser to Trump's campaign, said, "I hope to contribute intellectual diversity" to the Fed's Board of Governors. Shelton will likely face tough questioning by the Senate Banking Committee Thursday, which is considering her nomination.

Shelton has come under fire from mainstream economists and Fed watchers for her unorthodox views, including support for tying the dollar's value to gold or some other reference point and questioning the need for a fully independent Fed. Shelton has also expressed seemingly contradictory views on interest rate policy and once suggested that the federal government need not guarantee bank deposits.

In the aftermath of the Great Recession, when the unemployment rate peaked at 10% in 2009, Shelton opposed the Fed's ultra-low interest rate policy. Yet she has since echoed Trump's support for ultra-low rates even as the unemployment rate has reached a near-half-century low of 3.6%.

Shelton recently served as U.S. executive director for the European Bank for Reconstruction and Development, a multilateral institution set up in 1991 to help former communist countries transition to market economies. She was previously a scholar at the Hoover Institution at Stanford University.

Besides Shelton, Trump has also nominated Christopher Waller, director of research at the St. Louis Federal Reserve Bank, for a second vacancy on the seven-member Fed board. If both nominees are confirmed by the committee and then by the full Senate — both controlled by Republicans — Trump will have installed six of the seven Fed governors.

Waller said in prepared testimony that he has attended more than 60 meetings of the Fed's policymaking committee. Before joining the St. Louis Fed he worked as an academic, researching monetary policy, for 25 years.

Waller is a far more conventional choice for the board. Some of his most widely cited research examines the benefits of the central bank's independence from political interference.

Shelton, however, has been a skeptic of the need for the Fed's independence, which most economists regard as critical to allowing the central bank to make delicate decisions on interest rates and inflation that elected officials might otherwise oppose or block. Many Fed watchers worry that Trump may be weakening the Fed's independence with his frequent public attacks on its chairman, Jerome Powell, for not cutting rates more aggressively.

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