By Nick Timiraos and Sarah Chaney
WASHINGTON -- Republican senators dealt a significant setback to one of President Trump's nominees to the Federal Reserve Board when they raised concerns over her writings and public statements at a confirmation hearing Thursday.
Lawmakers of both parties on the Senate Banking Committee said they were uncomfortable with at least some of Judy Shelton's policy preferences. The former adviser to Mr. Trump's presidential campaign has advocated for the Fed to reduce U.S. interest rates over the past year in response to rate cuts by other central banks and to prevent the U.S. dollar from strengthening relative to other currencies.
"That's a very, very dangerous path to go down. This beggar-thy-neighbor mutual currency devaluation is not in our interest, and it is not in the mandate of the Fed to pursue it," said Sen. Pat Toomey (R., Pa.).
Sen. Richard Shelby (R., Ala.), the committee's longest-tenured member and its former chairman, said Ms. Shelton's answers during the hearing had not resolved his doubts about whether she should serve. "I am concerned," he said.
Ms. Shelton has been a controversial selection because of her history endorsing a return to the gold standard, which could limit the Fed's ability to respond to U.S. inflation and employment, and because she had appeared to stray from those long-held views after being considered by the White House for a Fed nomination last year.
A third Republican, Sen. John Kennedy (R., La.), said he was undecided on her nomination. "Nobody wants anybody on the Federal Reserve that has a fatal attraction to nutty ideas," he said. "Now I'm not saying that's the case here, but that was sort of the dialectic going on."
Opposition from any Republicans -- and especially from Messrs. Toomey and Shelby, who are among the panel's most senior members -- could deliver a knockout blow to her candidacy because Democrats appeared united in opposition. Republicans enjoy a one-vote majority in the committee.
It would be difficult, though not impossible, for her to win Senate confirmation without a favorable committee recommendation. Republicans can lose no more than three votes in the Senate given that they control 53 seats.
Ms. Shelton received support from several other Republicans on the banking panel, including the chairman, Mike Crapo of Idaho.
White House officials said later Thursday they were confident Ms. Shelton would overcome any lingering doubts to win Senate backing and disputed a report that said she would withdraw from consideration.
"I think she did very well today, and I think she's headed for confirmation," said Lawrence Kudlow, director of the National Economic Council.
Senators from both parties indicated no concerns with another Fed board nominee, Christopher Waller, research director at the Federal Reserve Bank of St. Louis.
Two people familiar with the matter said the committee had been eyeing a vote within two weeks, though it couldn't be determined whether those plans had shifted after the hearing.
Mr. Trump has railed at the Fed and its chairman, Jerome Powell, over the past 18 months, first for raising interest rates and later for not cutting them more aggressively. But he failed to win backing for four earlier picks, including two that were never formally nominated, to fill two vacancies on the Fed's seven-member board of governors.
Ms. Shelton endured critical questioning from all Democrats on the panel.
During one exchange, Sen. Doug Jones (D., Ala.) extracted an apology from Ms. Shelton, the former U.S. envoy to the European Bank for Reconstruction and Development, for comparing a convicted currency counterfeiter to civil-rights icon Rosa Parks.
While she offered context for some of her more controversial writings, Ms. Shelton also said, "I don't claim to be in the mainstream of economists."
She contrasted Mr. Trump's public attacks on Mr. Powell with other presidents that privately pressured the Fed chief. "In some ways, it's refreshing that's out in the open," said Ms. Shelton.
Ms. Shelton defended a recent body of work in which she endorsed lower rates advocated by Mr. Trump by highlighting how dozens of central banks had lowered rates, causing their foreign-exchange rates to decline relative to the dollar. "If other central banks engage in those unfair practices, it can affect employment, especially our manufacturers who have to compete," she said.
Mr. Toomey offered little indication he would support her in comments to reporters after the hearing, though he said he had not made up his mind. "I remain concerned that she is an advocate for using monetary policy to devalue the dollar," he said.
The Fed doesn't actively target or manage the relative value of the dollar. Instead, it takes into account how changes in financial conditions, including the dollar's value, influence its broader goals of boosting employment and maintaining stable consumer prices.
Political analysts said Ms. Shelton's chances at confirmation had slipped Thursday. "This was her time to shine and assuage concerns," said Brandon Barford, a former GOP banking committee staffer who is now a strategist at Beacon Policy Advisors. "There isn't another public forum to do so and give [senators] political cover to change their minds."
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