SAN FRANCISCO (Reuters Breakingviews) - The Federal Reserve is being dragged into partisan politics. The U.S. Senate will finally vote on the controversial nomination of Judy Shelton to the central bank’s board. She had been in limbo partly due to fringe ideas, like returning to the gold standard, and she has shown her partisan colors. Installing her before the White House changes hands to Joe Biden’s administration is bad monetary policy.
Shelton’s nomination had been in trouble for months. Nominated in July 2019 by President Donald Trump, Republicans and Democrats alike questioned her qualifications, as she shifted from a hawkish view on interest rates to then calling for negative rates to support the economy, an idea shared by the commander-in-chief.
While she has distanced herself from her long-running push to peg the dollar’s value to gold reserves, her work as an adviser to the Trump campaign, and while he was president-elect, also troubled some lawmakers. Reverence for the Fed’s independence is generally bipartisan.
That’s why Senate Republican leaders had avoided acting on her nomination. She barely cleared the chamber’s banking committee and two GOP members already came out against her. But on Tuesday, another senator came out in support of Shelton, leading Majority Leader Mitch McConnell to kick off a process that could lead to a vote next week.
That would fill the Fed board in a way it hasn’t been for years. The last time the central bank had seven governors was in 2013. If Christopher Waller, who was nominated at the same time as Shelton and is head of research at the St. Louis Fed, also receives approval, all the board seats will be filled.
That means the first vacancies that President-elect Biden would get to fill would come in 2022. Republicans have every right to approve nominees for empty Fed seats. But given the party’s skepticism about Shelton and the sudden push to approve her, it looks like a rush job before a new administration takes over.
That’s akin to the Senate’s speed in October in approving Amy Coney Barrett for the Supreme Court, just seven weeks after Justice Ruth Bader Ginsburg died. Afterward some Democrats advocated packing the court with additional justices to offset conservatives. Politicizing the Fed, especially at a time of economic uncertainty because of the pandemic, devalues the central bank.
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