Senate blocks Trump’s Federal Reserve nominee in major setback to last-minute reshaping of the board

The senate has voted to block President Donald Trump’s nomination to the Federal Reserve Board, Judy Shelton, setting back his plans to significantly alter the board before leaving office next year.

Ms Shelton’s nomination was rejected in a 47-50 vote, in which Senate Majority Leader Mitch McConnell (R—Ky) switched his vote from “yes” to “no” — a move that effectively allows him to recast his vote at a later point. 

Two key Republicans were absent because of COVID-related concerns. The vote came as the Republican-controlled Senate continues to focus its energies in the post-election lame-duck session on confirming Mr Trump's appointees.

Ms Shelton is an unusually caustic critic of the Fed and was opposed by two GOP senators in Tuesday's vote. 

Her nomination to the Fed was criticized by Democrats, with Vice President-elect Kamala Harris, a California senator, writing in a statement: “Judy Shelton’s dangerous ideas would devastate our economy, and her lack of commitment to using the full force of the Fed to provide COVID-19 relief is unacceptable. I voted no on her nomination.”

Ms Harris has been focused on the transition to the Biden administration but returned to the chamber for her first vote since winning the vice presidency.

Senator-elect Mark Kelly, (D-Az)., is likely to join the Senate when the chamber returns from its Thanksgiving break. That could leave Shelton short of support for confirmation even if Majority Leader Mitch McConnell, R-Ky., seeks a revote next month.

Ms Shelton, a conservative economics commentator, is opposed by Senate Democrats, most economists, and many former Fed officials for her past support of the gold standard and for writings that questioned the Fed's political independence. Under the gold standard, the US dollar's value is tied to gold. Under that approach, the Fed has had less leeway to adjust interest rates, even in a severe recession.

Ms Shelton was approved by the Senate Finance Committee on a 13-12 party-line vote in July. Senate Democrats criticized her for appearing to flip-flop on many positions, including near-zero interest rates. She opposed ultra-low rates during former President Barack Obama's presidency but supported them after Mr Trump took office and demanded that the Fed lower its short-term benchmark rate.

"Shelton has shown herself to be an economic weathervane, pointing whichever direction she believes the partisan winds are blowing," said Minority leader Chuck Schumer, (D-NY).

As a member of the Fed's powerful board of governors, Ms Shelton would vote on the Fed's rate decisions and on banking regulation. 

The governors also vote on whether to institute emergency measures, such as the Fed's decisions in March to start buying corporate bonds for the first time and institute a raft of programs to bolster financial markets.

The Associated Press contributed to this report