Judy Shelton Moves a Big Step Closer to Joining Fed Board

Judy Shelton, President Donald Trump's contentious pick for the Federal Reserve's Board of Governors, cleared a key hurdle to confirmation by winning the approval of a majority on the Senate Banking Committee.

She was backed in a party-line vote Tuesday, 13-12. The committee also voted in favor of Fed nominee Christopher Waller, currently director of research at the St. Louis Fed. His nomination passed 18-7.

Shelton, who has drawn controversy for her unorthodox views on monetary policy, could still fall short before the full Senate where four Republican defections could block her confirmation. Utah's Mitt Romney has said he has "concerns" about the nomination.

If Senate Majority Leader Mitch McConnell is confident he has 50 Republican votes in hand, he has the power to call a vote before the Senate recesses for its August break.

Chair-in-Waiting

Some Shelton critics have warned that Trump might elevate her to replace Jerome Powell when his term ends in 2022. That's assuming the president wins re-election in November and is unhappy with his current Fed chair, whom he's recently praised after years of harsh criticism for too-tight policy.

Committee chair Mike Crapo, Republican of Idaho, said Shelton had affirmed in writing that she believed in the independence of the Federal Reserve and that diverse views were important at the central bank.

Ranking Democrat Sherrod Brown of Ohio in turn issued a scathing critique of Shelton, calling her a "dangerous pick" who represents "a threat to our economy, our democracy, and our country."

Trump Advisor

Shelton holds a doctorate in business administration from the University of Utah and acted as an informal adviseor to the Trump campaign in 2016.

A strict inflation hawk, she long favored returning the U.S. to the gold standard and has questioned the need for a central-bank-controlled benchmark interest rate.

When she emerged as a candidate for a Fed post in early 2019, Shelton also began calling for lower interest rates, a contradiction with her earlier views on inflation but in line with Trump's demands for easier monetary policy. That exposed her to charges her policy decisions would be driven by political loyalties.

Critics have said Shelton is a threat to the Fed's nonpartisan character, especially if Trump wins a second term and elevates her to the central bank's top job when Powell's term expires.

– With assistance from Steven T. Dennis.

— Check out Fed Is Setting the Stage for a Major Policy Change on ThinkAdvisor.