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Trump's Fed pick faces hurdles after testy confirmation hearing

The fate of a Federal Reserve nominee remains unclear following a contentious Senate confirmation hearing that failed to ease the concerns of two key Republicans.

The Feb. 13 hearing featured two nominees to the Fed's Board of Governors, Christopher Waller and Judy Shelton. But much of the senators' attention focused exclusively on Shelton's past statements backing an international gold standard and her views on President Donald Trump's ongoing criticism of the central bank.

Trump, who nominated the pair to the two vacant spots on the Fed board, has pressed the Fed to aggressively cut interest rates and has called Fed officials "boneheads."

Shelton, a former Trump adviser, most recently worked as U.S. executive director for the European Bank for Reconstruction and Development. She told senators she would contribute to intellectual diversity at the Fed and would "work collegially to promote sound money and sound finances."

"Senator, you are getting the authentic Judy Shelton," Shelton told Sen. Catherine Cortez Masto, D-Nev. "I feel like I have been intellectually consistent throughout my career, always focusing on monetary policy that is conducive to productive economic growth."

Sen. Mike Crapo, R-Idaho, and chairman of the Senate Banking Committee, told reporters after the hearing that Shelton "very capably" answered questions on her views.

But two key Republicans said they remain uneasy about Shelton's nomination, though both said they were undecided on how they would vote. Sen. Pat Toomey, R-Pa., told reporters he is "concerned" about her recent comments saying the Fed should loosen monetary policy to weaken the dollar so the U.S. can compete with other countries that are "cheating" and engaging in currency devaluation.

"The idea of having the Fed intervene to drive down the value of the dollar strikes me as very dangerous and a bad idea," Toomey told reporters after the hearing.

Sen. Richard Shelby, R-Ala., told reporters after the hearing he also has reservations about Shelton based on her past writings. Shelby is the longest-serving committee member and a former chair.

"Shelton's overall testimony was delivered in a thoughtful and steady manner, but it appears to have not been enough to win over skeptical Republican senators," Raymond James public policy analyst Ed Mills wrote in a note to clients. Four of Trump's past Fed picks have been unable to garner enough Republican support to move forward.

White House spokesman Judd Deere said the White House expects both Shelton and Waller to get confirmed, denying a report from The Hill that cited unnamed Senate Republican sources who expect Trump to pull the nomination.

"The nominations of Judy Shelton and Christopher Waller are not being pulled," Deere said in an email. "Both were in front of the Banking Committee today and the White House expects both to be confirmed by the Senate to the Federal Reserve."

Some Republicans on the panel indicated their support for Shelton's nomination, including South Dakota Sen. Mike Rounds and North Carolina Sen. Thom Tillis.

"I like the idea that she has a different point of view that she's not afraid to express," Rounds said in an interview. "I think [Fed] Chairman [Jerome] Powell clearly understands the need for differing points of view."

"I think she did a very good job," Tillis said. "I think she was poised in her answers and I intend to support her nomination."

Shelton's past comments in favor of the gold standard ⁠— including in a 2009 Wall Street Journal op-ed — were a major focus of the hearing.

Shelton told senators she "would not advocate going back" to prior international gold standard arrangements, such as the post-WWII system in which countries pegged their currencies to the U.S. dollar, which was, in turn, pegged to the price of gold. That arrangement ended in 1971 under President Richard Nixon.

She said economists can gain "valuable insights by comparing economic performance" under historical economic regimes but that "money only moves forward."

Democrats slammed Shelton for what they described as flip-flopping behavior, noting that she called on the Fed to tighten monetary policy under the Obama administration but has since backed Trump's call for lower rates. Sen. Doug Jones, D-Ala., told Shelton that she appears to have gone through a "confirmation conversion."

"I think you said it best, that what we would get is the authentic Judy Shelton, and that is what bothers me tremendously," Jones said.

Democrats also questioned whether Shelton would be able to make decisions without outside political influence. She pledged to make her decisions independently, saying, "Frankly, no one tells me what to do."

As for Trump's public criticisms of the Fed, Shelton said they are somewhat "refreshing" in that they are out in the open rather than behind the scenes.

"I don't censor what other people say, but I do believe that every American, every member of Congress and even the president has the right to criticize the Federal Reserve," she said.

Shelton's past comments on the need for deposit insurance also came under question. Shelton wrote in her 1994 book Money Meltdown that she supported removing deposit insurance from the Federal Deposit Insurance Corp., writing that it serves to "insulate bank management from the discipline required to properly manage deposited resources."

But Shelton told senators that she backs deposit insurance and that she only used it as an example of "moral hazard," which could prompt banks to engage in riskier behavior because they know depositors' money is insured.

"I totally support federal deposit insurance," she said. "We've had it since 1933. I think it's essential to reassuring depositors that they can safely put their money into American banks."

For most of the hearing, Waller stayed out of the limelight and seemed to gain enough support to clear a pending confirmation vote. Sen. Jones said he did not have concerns about adding Waller to the Fed board. Waller is currently research director at the St. Louis Fed and is seen as a more conventional nominee.

Shelton and Waller would first have to clear the Senate Banking Committee, where Republicans have a 13-12 majority, before getting a vote from the full Senate. Crapo told reporters he plans on moving "expeditiously" on their confirmation.