U.S. Senate panel set to advance Trump Fed nominee Shelton, backer of gold standard

[July 21, 2020]  (Reuters) - Judy Shelton, U.S. President Donald Trump's controversial pick to serve on the Federal Reserve's interest-rate-setting panel, is expected to win narrow backing from the Senate Banking Committee Tuesday, allowing her nomination to advance to consideration by the full Senate.

A vote is expected around 2 p.m. eastern.

A second nominee to the Fed Board, St. Louis Federal Reserve bank research director Christopher Waller, is also expected to win the panel's support.

Shelton, a conservative economist who has argued the nation would be better off returning to the gold standard and as recently as 2017 criticized the Fed's power over money and financial markets as "quite unhealthy," drew criticism from Democrats and even some Republicans during a contentious hearing in February.

That was before the coronavirus pandemic sent the U.S. economy into a tailspin, and the Fed responded by slashing interest rates to zero, buying trillions of dollars of bonds, and rolling out an unprecedented set of credit backstops that give the Fed a bigger footprint than ever in U.S. financial markets.

An economic advisor to Trump during his 2016 campaign, Shelton would be just one of 19 interest-rate-setters at the Fed, meaning her influence at the central bank would be limited.

Still, critics worry that if Trump is reelected he could name her to succeed Fed Chair Jerome Powell in 2022, giving the Trump ally sway over U.S. monetary policy.

 Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

Powell had drawn Trump's anger for resisting rate cuts that the president demanded.

Shelton's own views on interest rates have moved in lockstep with Trump's. She lambasted easy money before Trump's presidency but supported it after he took office. She has also expressed skepticism over the Fed's need to set policy independently from the president and Congress.

The power of the Fed chair has come into focus during the pandemic. Powell has met frequently with Treasury Secretary Steven Mnuchin to craft a credit rescue for the economy, and has urged lawmakers both privately and publicly to do more to help out regular Americans hurt by job loss.

Senate Democrats launched a #StopShelton campaign on Twitter, but Republicans looked set to use their 13-12 majority on the panel to move her nomination to the full Senate, where a handful of moderate Republicans will hold the deciding votes on her confirmation.

(Reporting by Ann Saphir; Editing by David Gregorio)

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