Congress vets Trump's Federal Reserve nominees Shelton and Waller – 2/13/2020

see friends and family in the room today and I welcome them as well we're fortunate to have these two highly qualified nominees appearing today these positions are critical to ensuring a safe sound and vibrant financial system and a healthy growing economy the Federal Reserve was created by Congress as the nation's central bank to promote a stable economy and a safer more flexible financial system among the Federal Reserve's responsibilities is conducting the nation's monetary policy with the mandate of promoting maximum employment stable prices and moderate long-term interest rates in addition to its monetary policy role that oversees a significant portion of the banking sector including large regional and community banks as well as certain non banks and it aims to foster a safe and efficient payment and settlement system with this in mind it is important that we nominate and confirm well-qualified candidates with different perspectives to the positions of governors to ensure robust debate and more effective decisions before turning to dr. Shelton and dr. Waller I'm entering into the record a letter from over a hundred economists supporting the nomination of dr. Waller and also an article from The Wall Street Journal supporting dr. Shelton titled the war on Judy Shelton dr. Shelton most recently served as the executive director for the European Bank for Reconstruction and Development and was confirmed by voice vote in the Senate in 2018 doctor Shelton's experience working for nonprofits and academic institution forged her deep knowledge of democracy economic theory and monetary policy that will broaden and diversify the feds perspective dr. Waller has served as the research director at the Federal Reserve Bank of st. Louis for the last 11 years and aided the president of the st. Louis Fed in analyzing the economy and recommending u.s. monetary actions his research on monetary theory and the micro foundations of money and payment systems will be valuable as we are seeing a rise in crypto currencies and digital currency in this country and abroad I'm confident that dr. Shelton and dr. Waller will bring strong leadership to the Federal Reserve System as governors at the Federal Reserve dr. Shelton and dr. Waller will play key roles in carrying out the feds regulatory and supervisory activities consistent with the law while also playing an important role in striking the balance between tailored regulations and supervision and safety and soundness I appreciate the positive meetings I've had with each of you leading to today's hearing I look forward to continuing a robust discussion on the following topics the importance of right sizing regulations and tailoring the Supervisory framework to support a vibrant growing economy while also ensuring a safe and sound financial system assessing market-based fixes to maintain stability in money markets the development of central bank digital currencies and other technological innovations in the financial space which we also discussed with chairman Powell yesterday and continuing to encourage the Federal Reserve to submit all rules to Congress under the Congressional review act as well as to submit all significant guidance for purposes of the Congressional review Act I look forward to working with dr. Shelton and dr. Weller on these and other areas where the Fed and Congress can act to further reduce unnecessary burdens and promote economic growth congratulations again on your nominations and thank you and your families for your willingness to serve Senator Brown Thank You mr. chairman welcome and thank you for beginning this hearing earlier so because the votes coming I'm miss miss Shelton mr. mr. Waller I'd like to extend my greetings to your family and your friends who have joined you welcome independence matters we know economies with independent central banks have less price volatility fewer Bank panics and more stable communities one of the nominees though today before us doesn't believe in an independent Fed and has spent her entire career advocating for policies that would make our economy more volatile give families and businesses even more to worry about it certain world the point of the independent Federal Reserve is to be a steady guiding hand to worry to worry about the big picture I think if the economy so hard-working families don't have to but for miss Shelton these aren't hazards to avoid they are the goal we all understand they're an economic issues there are conservatives and liberals and most people fall somewhere in the middle of that continuum but miss Shelton is not a conservative she's far outside the mainstream she's off the ideological spectrum for three decades miss Shelton has been a prominent advocate for returning to the gold standard in making the case for Michelle's nomination her friend James grant wrote in The Wall Street Journal with the nomination of Judy Shelton to the Fed the discussion is tilted to gold gold is money or a legacy form of money miss Shelton contend contends and the gold standard is a reputable even superior form of monetary organization unquote people can agree to disagree on certain issues but we don't get our own facts and the facts are clear if we as a nation had followed Miss Shelton's advice it had not advanced beyond the gold standard nearly half century ago our nation would have bounced from boom to bust without the monetary new tools necessary to pull us out of the recession out of recessions depressions would have been deeper and longer millions of working families would have suffered even more for no reason and for certainly inexplicable reasons to them that's not the end of the story in multiple writings miss Shelton clearly voiced their opposition to FDIC deposit insurance the insurance that everyone takes for granted that's been part of our culture and our economy for so many years the insurance most importantly that protects the savings of hardworking Americans in other words she thinks that if a bank fails and we all remember far too vividly 1012 years ago when they did indeed fail then all the families who savings and paychecks are stored in that Bank should just lose all their money passing Federal Deposit Insurance was one of President Roosevelt's first act during the Great Depression for a reason that guarantee that your money is safe in the bank the bedrock of our modern economy this is not some intellectual exercise about moral hazard this is the real world I dare to explain to work anyone to explain to working families and in Idaho or Pennsylvania or Alabama or Louisiana or Minnesota or New Jersey or Rhode Island III dare anyone to explain to working families that experience bank closures in the Great Recession or the savings and loan crisis that FDIC is a FDIC insurance is a hugely distorting factor with me Sheldon it doesn't stop there the money in your wallet is backed by The Full Faith and Credit of the United States government he has miss Shelton advocated for doing away with the dollar and replacing it with the common currency for North America I'm serious to make NAFTA more effective she mused that the dollar could be replaced with a common currency for North America called the Amero at other times she's called for the creation of a generic global currency backed by gold that kind of globalist probably no better word than that that kind of globalist ideology doesn't belong anywhere near our fiscal in monetary policy the American dollar is the world's reserve currency it should stay that way we want it that way we agree that it should be that way and we're proud of it the bottom line is miss Shelton has too many alarming ideas and has flip-flopped on too many important issues to be confirmed for this job we know she'll say exactly what the president wants her to say further threatening the independence of the Fed she was an interest rate hawk until President Trump wanted lower rates she opposed tariffs in China before she was for them and based upon what I another committee members heard in meetings with her it appears a miss Sheldon has changed pretty much all her positions on everything from the gold standard of Bretton Woods to steadfast opposition to FDIC insurance that's not the steadying hand required at the Fed 11 years amid this recovery more than ever the Fed needs to be independent and careful not reactive to every tweet coming out of the White House a vote for Miss Shelton is a vote against fat in dependence in our nation's reputation is a financial ball work for the whole world our other nominee to the board mr. Waller is an economist whose work has been subject to peer review and whose analysis has helped direct the research path undertaken by the st. Louis vet I look forward to hearing more about how he will hold Wall Street accountable if he's confirmed last mr. Chairman I want to note that there should have been a third chair at this table we're not exactly sure why but Ms Jesse Liu was supposed to be considered by this committee today her nomination was withdrawn 36 hours ago although the Treasury secretary told me publicly yesterday he knew for two days although I don't think the chair this committee and I know I didn't know as a ranking member at the position she was nominated for is responsible for overseeing our country's work preventing terrorists and drug cartel financing and forcing economic sanctions now that her nomination has been withdrawn that position will remain empty once again to protect himself the president knighted States put our national security at risk thanks Jim senator Brown thank you will now administer the oath would you both please rise and raise your right hands do you swear or affirm that the testimony you are about to give is the truth the whole truth and nothing but the truth so help you God and do you agree to appear and testify before any duly constituted Committee of the Senate thank you you may be seated your written statements will be made a part of the record in their entirety and before you begin your statements I invite you to introduce your family and attendants thank you and you may start miss Sheldon Thank You member Brown and members of the committee thank you for the opportunity to appear before you today I am honored that the president has nominated me to serve as a member of the board of governors of the Federal Reserve System and I'm grateful to this committee for considering me for the position I'm also deeply grateful for the support of my husband of 42 years Gil who is here today along with our son give and I want to give special thanks to my mother Jeanette Potter and the healthy contingent of family members seated behind me John and Charmin Jim and Christie Rick and Suzy they all flew out from California yesterday to be here today with me it means a lot for nearly four decades going back to my years as a doctoral student at the University of Utah I have focused on the impact of monetary policy on economic performance my studies encompass current financial and economic conditions as well as historical antecedents tracing back to our Constitution one thing is very clear the power to regulate the value of US money is granted to Congress Congress created the Federal Reserve as an independent agency and through the Federal Reserve Reform Act of 1977 charged it with the mandate to promote maximum employment stable prices and moderate long-term interest rates our central bank has been entrusted with considerable power to carry out its responsibilities along with the political independence and operational autonomy granted to the Federal Reserve comes an obligation to be wholly accountable both to Congress and to the public if confirmed my priority will be to support monetary policy that facilitates productive economic growth while also ensuring the soundness and stability of the US financial system in exercising the Federal Reserve's regulatory oversight I will support policies that are effective efficient and appropriately tailored to financial institutions allowing them to better serve their customers and communities in ways consistent with maintaining a safe financial system I am well prepared to conscientiously fulfil the duties of the position for which I have been nominated based on my background and experience the first college course I ever taught was money and banking as a research scholar at the Hoover Institution at Stanford University I analyzed the relationship between monetary policy and economic sustainability in the context of geopolitical competition my first book accurately predicted the collapse of the Soviet Union my second book examined the impact of currency movements on trade I have testified numerous times as an expert witness before congressional committees in both the House and Senate as US executive director of the European Bank for Reconstruction and Development I demonstrated strong leadership to achieve high priority objectives in accordance with US strategic interests combining academic perspective with real world insights I hope to contribute intellectual diversity as a governor and would work collegially to promote sound money and sound finances in closing I wish to emphasize my commitment to honor the constitutional authority of Congress to regulate the value of US money by fulfilling the statutory mandate Congress has assigned to the Federal Reserve we ensure that America's money remains the world's most respected currency and it's most trusted standard of value thank you again for the privilege of appearing before you today and I look forward to your questions thank you dr. Waller chairman Crapo ranking member Brown members of the committee thank you for the opportunity to appear before you today I am honored to have been nominated by the president for this prestigious position and grateful to the committee for its consideration of my nomination I would be humbled to be able to serve my country in this capacity I'm also thankful for the support of my family members who are here with me today my loving wife flooring my three children Sarah Maggie and Sam and my mother Ann who has been my hero throughout my life for the last 11 years I have served as the director of research at the Federal Reserve Bank of st. Louis during that time I've attended over 60 Federal Open Market Committee meetings and I've served as the main policy adviser to my bank president as a result of this experience I fully understand and support the dual mandate of the Federal Reserve I also understand and appreciate the Federal Reserve's role in pursuing policies to ensure a safe and stable financial system if I am confirmed I will continue to advocate for policies that achieve our dual mandate and maintain financial stability I believe that my background and experience makes me uniquely qualified to fulfill the responsibilities of a Federal Reserve governor in my decade-long experience as a senior Reserve Bank official I was deeply involved in policy issues confronting the Federal Reserve but in my role I also spent a substantial amount of time talking to members of our community about how monetary policy affected their lives and their businesses that public input affected how I thought about policy and its consequences I also learned how valuable it was to communicate clearly to the public what our policies were and why we were pursuing them in addition to my experience as a Federal Reserve official I was an academic for over 25 years and I did a substantial amount of research on monetary Theory monetary policy and central bank design I have written extensively on the importance of central bank independence for the conduct of monetary policy my research also focused on the central bank can be made accountable to the electorate without giving up its independence in particular I study the importance of the nomination and Confirmation process in achieving central bank accountability the Federal Reserve has been given tremendous responsibility by Congress to use its policies to improve the lives of the citizenry Congress is also given the Federal Reserve tremendous freedom to pursue those policies as needed but in return it must be accountable to the public for its actions and be able to explain what those policies are and why they are being pursued if I am confirmed I pledge to work with my colleagues to implement policies that help us meet our dual mandate I also pledged to be accountable for those actions and to be transparent as to why those actions were taken thank you again for the privilege to appear before you today I look forward to your questions thank you very much and I will begin the questioning with a couple of questions for each of you to answer you don't need to give long answers to these as long as it's the right answer first do you agree with the importance of right-sizing regulations and tailoring the Supervisory framework to support a vibrant growing economy while also ensuring a safe and sound financial system yes I do mr. chairman yes I do as well thank you and that was the right answer do you agree that it's important to encourage the Federal Reserve to submit all rules to Congress under the Congressional review Act as well as to submit all significant guidance for purposes of the CRA absolutely yes I do all right thank you again this is for both of you and you can give a longer answer of this one the Federal Reserve independence is critical to enacting monetary policy and for addressing long-term economic objectives I know I and I think every single member of this committee and member of the Senate wants to assure that the Federal Reserve is independent there is strong bipartisan support for maining maintaining the Fed independence what are your perspectives on the Federal Reserve maintaining its independence miss Sheldon you may start thank you very much for the question mr. chairman I believe that the independence of the Federal Reserve is a vital aspect of its credibility with the public Congress has granted tremendous powers to the Federal Reserve and citizens have to be assured that monetary authorities will be relying on their own best judgment and their own analytical capabilities in making their decisions not subject to political pressure doctor Waller I've lived and breathed some romantic independence for 35 years both in my academic career and in my job as a Federal Reserve official it's absolutely critical to do the right policies to beget the best economic performance and to look at the data to determine how you want to set policy as opposed to partisan influences thank you and then this question is I'm gonna ask both of you to answer it but I want to start with dr. Shelton dr. Shelton some have tried to characterize your support for the gold standard is outside the mainstream thought and disqualifying for this position what exactly are your views on monetary policy in the gold standard I would not advocate going back to a prior historical monetary arrangement I think it's really important to acknowledge that the power to regulate the value of u.s. money is given to Congress by our Constitution and Congress has created the Federal Reserve as an independent agency and given it its monetary mandate that is a framework under which I will make decisions if confirmed as a member of the Board of Governors I have looked at historical systems going back to the beginning of our country because I think you can I think you can gain valuable insights by comparing economic performance under one set of monetary rules versus another but money only moves forward and we see it evolving faster than ever these days and so I only use it to give perspective on money thank you and I'd like your views on this to dr. Waller first I've studied monetary theory for the last 20 years have studied both asset-backed monetary systems as well as Fiat monetary systems which you currently have the Fiat monetary system is pretty much what we have around the world it works well as long as it's well managed by the central bank there's no need to have the inefficiency of tying things to a metallic standard or any other real asset if needed all right thank you senator Brown thanks chairman I want to talk about Fed independence in a slightly different way from the Chairman I appreciate his questions mr. Waller start with you do you think that Chairman Paul's done a good job making independent decisions regardless of what the president tweets at him I think chairman Powell has been very professional in his job in carrying out policy as best he can and building a consensus on the committee ask you the exact same question Michelle do you think chair Paul has done a good job making independent decisions regard regardless of what the president tweets to him Thank You ranking member Brown I think chair Powell and every member of the Federal Open Market Committee is sufficiently self-possessed to rely on their own judgment I don't think any of them are influenced by political pressure so is it okay that the president states to eat sediment calls who the president who appointed him tweets at him and calls him names and said he's not doing good things to the economy that's just okay well 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 our federal reserve based on on what the president says about chair appalled miss Shelton it looks like the Fed and the mean you could watch this and we all in this committee in both parties are fed Watchers to a degree you could watch this these attacks by the President on his chairman our Chairman now it looks like the president and the Federal Reserve aren't working well together do you think the Chairman is doing a bad job accommodating the president's wishes I don't think it's the job of the Federal Reserve to accommodate political agendas what I'm saying is is that the Fed operates independently it should working for the best interests of the nation understanding that won't be your answer to the next question but go with me a little bit here what do you think about the president's criticisms of Chairman Powell as I said as president right it's German Powell right as I said I'm not censoring what other people I'm not asking you to censor I'm just saying what we have something we've never seen in American history where the president United States consistently attacks his own nominee who many of us myself included up here voted for trying to get him to do different things on economic policy what do you think about what the president not not censoring him what do you think about the president's advice to chairman Powell and what he tells him to do I think what we've seen historically is some Fed Chairman have felt they were being pressured behind the scenes in some ways it's it's refreshing if that's out in the open and as I say everyone certainly business journalists dissect every word that's uttered by a Federal Reserve official and it's it's available all all the information anyone can make a comment at any time mr. Waller I think that I think that the chairman of the Federal Reserve has done a pretty good job remaining independent when he was here yesterday testified yesterday senator Kennedy and Senator rounds and Senator corker Creepo and Senator tester and I'm leaving out a couple all emphasized emphatically emphasized I guess that's anyway certainly complimented the chairman on his independence but emphasized how important Independence says so why'd you pledge to be independent regardless of what President Trump tells you to do thank you senator Brown I pledge to do what's best to the economy in terms of how we read the data and what does to do to achieve our dual mandate that's how I view the job and that's what I intend to do Michelle do you pledge to be independent your decision-making regardless of what the president tells you to do I pledge to be independent in my decision making and frankly no one tells me what to do um miss Shelton my last comment question mr. Chairman I go back three decades you've written extensively some 95 articles and books including several op-eds in the last couple of years can you explain to the committee why you've published in Cato or in the Wall Street Journal time and again praise for one set of provocative beliefs like the US should revert to the gold standard that low interest rates steal from investors that the Fed is an interloper in the marketplace and should be abolished now when you come before Congress you claim you're firmly in the mainstream of economic thought I'm I'm troubled with that you have a paper trail for 30 years you seem to not be you seem to be the new Judy Shelton not the old Judy Shelton what are we to make of that senator I think I've been intellectually consistent since I wrote a book in 1994 called money meltdown restoring order to the global currency system I don't claim to be in the mainstream of economists but I don't think that's not what you're not an economist for one thing right I am an economist sir I fear your PhD was in something else my PhD from the University of Utah was administered through the finance department as majoring in international finance and economics but it is a Business Administration degree through their school yes okay senator Shelby Thank You mr. chairman I think dr. Waller and dr. Shelton both of you have an extensive experience and you're academically qualified I have no problem with that dr. Sheldon I do have some trouble by some of your writings and some of the articles that you you well that others have written about your writings and some of the stains this is a good time to air amount I suppose I think the question to me I've been on this committee a long time and we have was senator Brown we're more than fed Watchers were tasked with the Senate to evaluate all of you before you're confirmed are not confirmed some people say that that dr. Sheldon and you're basically an outlier that you're not mainstream you're you don't have mainstream views in the economy we think a lot most people think not everybody that the role of the Federal Reserve stated as stated by law surprise stability and full employment whatever that's goals that we try to reach you the Federal Reserve when you're nominated the Federal Reserve and confirmed by the Senate generally is for a long term probably the longest term that we have a lot more than often time up to 14 years so our views I believe should be mainstream how do you if people deem you a lot of people have that you're an outlier not a mainstream player if you were on the Fed how would you work with the other members could you work with them on the goal of price stability and full employment or would you be really an outlier Thank You senator Shelby I would look very much forward to working with my colleagues at the Federal Reserve I have great respect for their capabilities and for their judgment I think I would bring my own perspective mm-hmm but I think the intellectual diversity strengthens the discussion and would be welcomed and so that is what I would hope to bring but but certainly with the goal of working with the people who were there as together we would try to formulate monetary policy most conducive to productive economic growth you know you you've talked about it and other people have written about the gold standard if we had all the gold in the world all that's been mine and all the jewelry and storage it wouldn't be worth I believe anything what our economies or what the GDP of this country is worth or the GDP of the European Union are China or Japan and so forth well that would that basin be true that is true so when you talk about the gold standard that obviously was coming the gold standard came in the old economy when we had a barter economy basically didn't we in a sense we've had about have we progressed beyond that and it's the confidence of the nation and the people in the economy backing all the wealth behind it is that what we deem valuable today definitely so talk to us a little bit about your views on the gold standard which we've given up long ago and the other people in the world I don't know anybody's relying on it now and do you still believe that's important and why and where are you thank you senator Shelby well first I totally agree with your assessment you never go back with money it keeps moving forward into the future and I'm surprised that people attempt to say they must have some thought about me advocating a gold standard and I suppose they're talking about the classical international gold standard I would just point out that there's about 1.8 trillion in outstanding Federal Reserve notes that's just the currency most of its held outside the country if you looked at the market value of the US government's total holdings of gold it would be less than even a quarter of that amount and that's just the most basic form of money so I'm not really sure what anyone's a commodity in it it is a commodity it has it has a historical use as a monetary surrogate but but it's mixed use today and so as I've said it's it's useful to look at something that worked from 1870 to 1913 when the US was a participant in the classical gold standard it's worth it to look at the Bretton Woods Gold Exchange standard where the US was the anchor from 1944 to 1971 but that was 50 years ago when we had any kind of a monetary role for gold we certainly have to just be looking toward the future have you advocated to return to the Bretton Woods program what I've said about the Bretton Woods Agreement is that it did establish a level monetary playing field in terms of exchange rates that's when the world was in disarray right after the at the time of the Second World War precisely and a lot of nations still struggling the war wasn't over when Bretton Woods was being put together by the United States we're thinking is this going to be worth it to win because if we're going back to what we had in the 1930s when you had competitive devaluation you had retaliatory tariffs and that created a downward spiral in international trade that's not worth fighting for so the United States actually set up the Bretton Woods Agreement to give hope that there would be a better future and that investment would flow to its highest use around the world and that people would not use competitive depreciation to undermine the principles of free trade thank you mister thank you senator Menendez Thank You mr. chairman dr. Shelton you're being considered for a very important position today can you think of a quote more stimulating challenge than serving on the Fed a more stimulating challenge than serving on the Fed seems to me that would be the ultimate for someone who studied monetary policy and economic performance can you think of a quote more meaningful responsibility than serving on the Fed I think it's gravely responsible position and can you think of a more important role than quote safeguarding our nation's vital interests and deeply rooted values by serving on the Fed no senator Menendez those are serious words about serious responsibilities that will impact every American but I question whether you fully understand the gravity of those words just two years ago you appeared before the Senate Foreign Relations Committee which on the ranking member for your nomination as the u.s. executive director of the European Bank for Reconstruction and redevelopment in your testimony before the committee you said quote given my background and analyzing the strategic implications of global financial developments and my strong commitment to democracy I cannot imagine a more stimulating challenge more meaningful responsibility and to take the role of safeguarding our nation's vital interests and deeply rooted values at the EBRD and I agreed with you them yet during your brief tenure which she was drew from prematurely you missed 11 of 26 board meetings you were the US Representative to the bank you in a senate-confirmed position but you made it just a slightly over half of the board's meetings dr. Shelton would you give someone a promotion if they missed almost half the most important proceedings that they were assigned to thank you for the question senator menendez it's a matter of public record that actually my attendance was closer to 70% but let me explain something about the way among that matter you dispute the numbers I just absolutely I do how many you missed not only that but there's a perfect correlation which I would like to explain when I wasn't there I was in Washington meeting with the people to whom I reported at the Treasury Department I was conferring with my interagency colleagues that's why we have telephones as a matter of fact ambassadors are given telephones they're given ways to communicate so they don't leave their posts it's unique that each of the meetings you missed you claimed that you were in DC but you needed to be at the bank voting on behalf of the United States in these all-important issues you know I I just cannot imagine that the Foreign Relations Committee would give an ambassador a higher position if they weren't there nearly half of the time that they were supposed to be so if you're confirmed do you expect to serve your full term on the Fed I do you do well that's what you told the Foreign Relations Committee when you were confirmed as the director of the EBRD and here you are so I fail to understand how I can take that answer seriously showing up is a basic requirement of a job and any of us if any of us missed half of our votes half of our hearings I don't think our constituents would send us back let me ask you in a different topic if we didn't have the Federal Deposit Insurance do you think consumers would trust a small unknown financial institution with their money or would they turn to bigger institutions with better name recognition senator Menendez I totally support Federal Deposit Insurance we've had it since 1933 I think it's essential to reassuring depositors that they can safely put their money into American banks this idea that I'm somehow against Deposit Insurance I tried to find out where that even came from the only reference I could find to me even commenting on deposit insurance goes back 25 years where in the course of explaining the theory of moral hazard I said that if there's government insurance in theory a bank might engage in riskier financial behavior seeking profits because they would be protected by the government insurance we had a lot of that which led us to the Great Recession not because of financial insurance but at the end of the day one of your writings suggested that the deposit insurance increases risks in our financial system but now you're telling us you support deposit insurance so I'm concerned how do we use you also made have you ever told the president of your views that North America needs no borders no and if you're referring to ooh something I wrote in 2000 I'd be happy to explain the context of this rumor I was talking nothing to do with a lot of rumors what you wrote so well it was nothing to do with immigration in 2000 as I'm sure you're aware for the first time in 70 years Mexico elected a president who had not been a member of the ruling party and Vicente Fox was saying that he recognized Mexico was experiencing a collapse in his currency every six years coinciding with their electoral cycle he wanted to be something new and he wanted to bring Mexico's finances into order balance the budget align their regulatory approach to banking to something closer to what we have in the United States and I thought that should be encouraged I think we want a prosperous stable economy on our border and I also feel that it's only fair for Mexicans to have a chance to be successful in their own country so that's what that article was about yeah I'm happy to submit for the record mr. chairman some articles that speak quite differently to the view you just expressed on this and some of the other things I've raised with you and we'll let the members decide their judgment thank you senator Toomey Thank You mr. chairman and thank you to both the nominees for being here today and for the discussion we had in my office separately earlier this week let me just say for the record I think that using a price rule that might include precious metals is an intellectually defensible approach to monetary policy just for the record is a defensible approach dr. Shelton I understand that you have long advocated for stable international monetary system stability and exchange rates and I doubt there be any disagreement that that is certainly preferable to the alternative the concern I have is that we don't get to control other country's monetary behavior we don't have a vote on what they do and I'm concerned about the extent to which you advocate for our monetary policy to be influenced and reactive to the foreign exchange behavior of other countries so in August of 2019 in a Wall Street Journal article a interview that you gave on CNBC was characterized it said miss Shelton said an interview on CNBC Thursday that central banks in Europe China and Japan are all devalue occurrences against the dollar through monetary policy when asked if the US should follow suit she said yes looking at the interview it does look like that's an accurate characterization to me in July of 2019 you wrote in a Wall Street Journal piece and I quote when the United States trading partners engage in currency manipulation it is not competing it's cheating that is why it is vital to weigh the implications of u.s. monetary policy on the dollars exchange rate value against other currencies unquote in September of last year in a Wall Street Journal op-ed you clarified your view that the Fed should fight this alleged cheating you said and I quote in an era of worldwide currency exchange America's central banks should not ignore the effects of movements spurred by other major central banks with no consistent free trade principles governing global monetary policy the Fed must take proactive steps to ensure that the u.s. can compete successfully unquote so I guess my direct question after reading these and these things that you have said and written is is it your view that if a major American trading partner were to significantly devalue its currency intentionally aren't you saying that the US should match that devaluation and the Fed should play a role in achieving that devaluation well thank you senator Toomey for the question and also for our discussion the other day which I thought was very substantive and I agree with what you were saying that monetary policy executed by the Federal Reserve is is directed at achieving our domestic economic objectives and they've been outlined very clearly by Congress I have said that among the factors that we need to consider if I if I were to become a member of the Board of Governors is the political context of the global economy and global finance and I think we have to be aware of what other central banks are doing last year 49 central bank's lowered their interest rate which caused their currencies to depreciate relative to the dollar and it wasn't until July that our Federal Reserve decided likewise to lower a quarter point as they did the next I know I only have five minutes and we're down to one Mike my question is and and and I think it the only rational conclusion one can come to from reading what you have written and what you've said is that you believe the Fed should actively seek to devalue our currency if other countries are doing that and I think 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 I don't think it's achievable you've got multiple currencies which ones would you be watching would it be the Euro or the one they could be moving in different directions and a Fed that has famously been unable to achieve its inflation target for lo these many years why we should think that the Fed by changing monetary policy is going to be able to achieve some currency target I think is very very unlikely so I just want to stress I think this is a dangerous path to go down and the recent body of your work certainly seems to be advocating for that intervention if I may sir it would be anathema to me to suggest that we devalue our money to gain a trade advantage what I'm saying is within the context of the framework for deciding monetary policy we also have to look at the impact on employment and on stable prices and if other central bank's engage in those unfair practices it can affect employment especially our manufacturers who have to compete but we can observe that from domestic data we don't have the reference foreign exchange rates to determine whether there's an adverse problem with employment in the u.s. sorry mr. chairman senator tester Thank You mr. chairman and I want to thank you and the ranking member for having this hearing I want to thank both of you for being here in front of the committee and your willingness to serve on the Fed I'm going to start with you miss Shelton do you do you think it's a good idea to sell our public lands I'm sorry do you think it's a good idea to sell off our public lands to sell off public lands senator tester honestly I've never considered that night I don't have any opinion in a 2009 book that you wrote you said for the purpose of balancing our budget we should consider and I paraphrase telling the Postal Service Amtrak and federal lands I I don't recall taking that position it's not something I'm strongly advocating well it's it's it's an important it's an important issue and where do you live I live in Fredericksburg Virginia okay so they probably don't have a lot of federal lands in Fredericksburg Virginia in Montana we do have a lot of public lands and if we've got people out there in positions of power that are in the position of making sure that unemployment is maximized as we're doing the Fed and we have people that have written about selling off things like the postal service and Amtrak and our federal land holdings that's a problem would you see it as a problem I understand what you said that that would be a problem for the local economy or the area that you're speaking of but but not generally for the current well I think it's it's always disconcerting to change employment or make some transition away well I think it's it's also important to note that that that these public lands drive an economy in Montana and Montana has only got a million people and a little over a million people but it's about seven billion dollars to our economy in Montana so we would somebody would advocate this would have pretty significant impacts on the 72,000 people who work in this outdoor industry a month yeah I believe senator tester that that's a decision up to Congress would have nothing to do with the federal reserve but it you're right but it does it does have impacts on people that are in positions of power and I will tell you has been pointed out with previous questionnaires the Federal Reserve is a position of power one of the things that I like in folks is consistency and I want to quote you something that you wrote very recently six months ago because you've said today and and correct me if I'm wrong that you are for independence of the Fed absolutely six months ago in a Wall Street Journal op-ed you wrote and I will quote this directly it would be in keeping with the historical mandate if the Fed were to pursue a more coordinated relationship with both Congress and the president if that is not shipping the independence of the Fed out the door tell me what it is senator tester that article was explaining the legislation that has shaped the role of the Federal Reserve especially with regard to its accountability I was quoting from the 1978 humphrey-hawkins Act which was passed by Congress a year after the Federal Reserve Reform Act and what I was explaining is that that legislative language actually sets out six economic objectives for the country and then it says quote attainment of these objectives should be facilitated by improved coordination among the president the Congress and the Board of Governors of the federal concern might that's in the law I didn't well I am telling you that if you believe that we need to pursue a more coordinated relationship with both Congress and the president think these questions about presidents tweeting and potential of me having influence on the Fed which I don't think should be correct is real honestly it surprised me to read that in the language in a row legislation it surprised me to read it and then I merely revealed that and I've been subsequently surprised that it's attributed to me rather than to Congress who wrote it because you wrote it you wrote it I was voting from the legislation okay let's go a different direction the gold standard also in a Wall Street Journal let's return to the gold standard and you hope that vice president pence would hey Stan return to the gold standard you talked about a New Britain would be held in Merrill Largo if that isn't advocating for return for the gold standard I mean what is well I would differentiate that the Bretton Woods Agreement was a Gold Exchange standard when only the United States as the anchor had any kind of convertibility responsibilities what I was suggesting there is that having a stable international level monetary playing field is very supportive of free trade consistent with the principles of comparative advantage and mutual I really appreciate your willingness to serve I do but I'm going to tell you something when when I read things and they say the things as directly as you said them which I appreciate by the way and then you come in here and and by the way can try to justify them the dog doesn't hunt I'm just telling you it doesn't it's you have a lifetime of writings and not once are there things in there would indicate anything other than what I've pointed out in this committee meeting whether it's sale of public lands whether it's sale the postal service whether it's gold standard whether it's independence of the Fed Thank You mr. chairman senator rounds Thank You mr. chairman first of all welcome to the committee I'd like to go back just a little bit we had the opportunity to chairman Powell in front of us yesterday and I'd like to just remind my colleagues of what chairman Powell said yesterday about what we called groupthink chairman Pao agreed with me that groupthink is unhealthy and he said I'm strongly inclined to think that you need to hear all sides of a case and to that end dr. Waller and dr. Shelton I think both of you would provide the board with fresh perspective and I think that's healthy III did want to have the opportunity to maybe delve into just a couple of separate items and I'm gonna begin with dr. wall or just I think you've been neglected here a little bit and I'd like to talk about you're from the st. Louis Fed and can you talk a little bit about what the differences are between what you see in the Upper Midwest with regard to the AG economy versus what we find in a lot of the rest of the economy which has really been significant in terms of its growth and yet the AG economy has been has been very slow and perhaps in a large part because they've been on the tip of the spear of the trade negotiations that have been going on can you share a little bit about what you've seen in your previous work yeah thank you senator so as I mentioned my opening saving a large part of my job at seeing those fetters to talk to the members of our community bankers businesspeople and we have a big AG section in fact our district is the largest soybean producer in the United States so clearly the the trade wars with China have had a huge impact on our AG sector and we hear that all the time when we go out and talk we're hoping that some of the deals that have been signed will reverse this and there won't be a persistent decline in farm income also hopefully they'll put some support under land prices which have been drifting down to the last five years which potentially could create some problems for rural and anks if that continues we're keeping an eye on that and but we're hoping that some of the train uncertainty with China will sort of alleviate this pressure thank you dr. Shelton they've made it very clear that they think that you come from a unique perspective with regard to your discussions in an academic sense with regard to the gold standard they have suggested or at least some of your critics have suggested that you would not be independent I've looked at some of your writings it would appear to me that you have taken almost a devil's advocate approach in some cases I think the chairman of the Fed Chairman Paul has made it clear that he looks for different points of view and yet at the same time I think each time we ask you questions we lead the question a little bit I'd like to give you just a few minutes and I've got one minute and 53 seconds left but would you take some time here and just explain what your thought is with regard to the gold standard and perhaps a little bit about what you see your role as a member of the board was regard to both being a team member but also being an independent member as well in South Dakota we value that independent point of view and we think it's important I'd like you to share your thoughts without being led into any question thank you I appreciate that senator rounds I keep going back to the fact that the power to regulate the value of US money is granted by our Constitution to Congress it's an article one section eight and in the very same sentence Congress has given the power to define official weights and measures for our country because many was meant to be a measure to be a standard of value and I think that money has to work the same for everyone in the economy and it's important that it's served that purpose as a reliable measure so that people can plan their lives I don't see how you can have a free market economy if people can't rely on the most vital tool that makes markets work it's through money that we transfer market signals and you need clarity of those signals or supply-and-demand can't figure out what's the optimal solution so I think the the importance of feeling responsible in discussions at the Federal Reserve is is the responsibility to remember that the money has to work for everyone and that in a sense it's a moral contract between the government and the citizens thank you Thank You mr. chairman thank you senator Smith Thank You mr. chair and ranking member Brown and thanks to both of you for being here and for your willingness to serve and welcome to your families also as you can see many of us on the committee have great interests and concerns about the Independence of the Fed so I want to just pursue this a little bit dr. wall or do you believe you you believe that the Fed was designed to be an independent institution yes yes I do and do you think that that independence is an important feature of what allows the Fed to to work yes I do it does structure the Fed this process everything is designed to give the Fed the responsibility to conduct monetary policy as it sees fit right according to achieving the goals of Congress has laid out for us so Congress gives us the goals then they give us the freedom to do what we think is best those goals because the opposite of an independent Fed is as a Fed that is politicized a Fed that would allow sort of the short-term interests of a political leader to trump what's in the best interests of the Americans and the American economy in the in the long run I mean that's really the choice independence of the Fed or politicization of the Fed so what would be your judgment of a statement like this that you that not this is a quote noting that quote don't see any reference to independence in the legislation that is defined the role of the Federal Reserve for the United States or think it's healthy that again quote criticism from the white house of the Fed is out in the open what do you think of that dr. Waller well the institutional design of the central bank is what gives us its independence combination of having political nominee confirmed board members plus regional fed presidents who are not political appointees provides a check on the political aspect the overlapping long terms of office give you some protection in the sense of being able to think in the long run for the good of the country and how you develop policies the fact that we don't make policy by one person that it's actually a group that has to make that decision requires some degree of consensus and how you develop policy and that's the tough job of the Chairman but the fact that there isn't in this statement that there isn't reference to independence in the legislation that defines the role of the Federal Reserve the United States do you think that that means that there isn't independence no I get said I as far as I view it it's the institutional design is what gives you your independence so dr. Shelton let me ask you this same initial question do you believe in the independence absolutely and so if that is the case so what did you mean when you told a UBS executive in an interview four months ago that you quote don't see any reference to independence in the legislation that is defined the role of the Federal Reserve for the United States what did you mean by that statement in researching the language of the 1977 Federal Reserve Reform Act and in the humphrey-hawkins legislation I was searching for exactly that to make this statement as I say I was surprised it's not asserted more clearly but as dr. Waller was saying the operational autonomy of the Federal Reserve assures its independence overt above its political independence which is guaranteed by having members who think for themselves as I believe every member of the Federal Open Market Committee does and I mean the only one who can reverse an interest rate decision of the Federal Reserve are the members of the FOMC themselves as they did last year so you also said that you think that it is healthy that quote criticism from the White House of the Fed is out in the open so do you think it is healthy for the president besides the Fed well as I've said I think in the past some some Federal Reserve officials had have suggested they were quietly pressured so at least it's transparent but I've also said I don't censor what someone else says and I believe everyone has the right to criticize the Federal Reserve including the president including every member of Congress and and every citizen but isn't what the president is doing here isn't this an attempt to influence the Fed which wouldn't that suggest that the president doesn't believe in the independence of the Fed because he is in fact attempting to use his significant power in order to influence the Fed doesn't that mean that he doesn't himself believe in the independence of the Fed I don't think people in that position of responsibility as someone serving on the Fed is is easily intimidated I think that's what you're looking for is people who think for themselves and and that's why I appreciate this committee judging nominees for exactly that characteristic so I do not think that anyone on the FOMC is affected by political pressure well I you know my view it is that this is clearly the president attempting to undermine the independence of the Fed and this is an issue that I'm very concerned about I know I'm out of town mr. chair but thank you very much thank you senator Kennedy dr. Shelton I want you to assume a couple of facts for me assume that you're your queen for a day and you're running the Federal Reserve and you have unfettered discretion assume that economic circumstances in the United States and the world are the same as they are right now except the bottom is falling out of consumer confidence and spending unemployment has jumped from three and a half percent six and a half percent in a very short period of time and we're in a recession how would you get us out well thank you for the question you're welcome it's hard to imagine that situation but the first thing that's true and tell me if you could because they only give us five minutes well I do get how you would get us out how you would get a second be up to me even if I were queen or chairman that's the important where you're using my time doc let's please assume what I just told you and you're running the Federal Reserve and you don't have to answer anybody what would you do I think you understand the I would go to the mandate and I would talk with the other members of the FOMC about the appropriate monetary policy to help restore what is the appropriate monetary policy what would you do you don't to talk to anybody what would you do how you gonna get us out of the recession well the problem we have now is we're very close to zero on interest rates yes ma'am what would you do to get us out of the recession I think we're down to the other tools that the Federal Reserve has would you lower interest rates I would never go negative I think I mean I'm averse to that idea and so the alternative is more I'm not trying to be rude but quantitative easing us five minutes would you would you take him to zero at the maximum and I don't like to say you would eliminate courses of action but I'd be very reluctant to go below that the Fed can always engage in pursuit you wouldn't go negative I think it undermines the financial structure what you would go to quantitative easing very reluctantly but I think first I would make it clear that there are limits to monetary policy at some point you really can't stimulate growth I was but you would go to quantitative easing that's your only alternative if you're if you think what volume would you use now we've gone from three and a half to six and a half interest rate bottom falling out of consumer confidence how much you gonna buy a month well the every round of QE has been less effective than the prior rounds I understand how much you're gonna buy I would look at what the most recent one was so we're looking at approximately eighty billion a month okay do you think Congress ought to start well we're already deficit spending we're already like a problem gambler chasing his losses but would you recommend fiscal stimulus and then we we have a stimulus package obviously that's up to Congress not in your recommendation I get that well there might be incentives would you recommend that we go to a stimulus package it depends what it is if it's just spending more or projects that aren't shovel-ready I don't think that's good but if you can restore business confidence and encourage business capital investment through tax reform that could be helpful okay so you you you think we should just increase deficit spending I don't like deficits but I'm just asking what you do in an emergency situation I think the most important thing is to restore that constructive business would you would you recommend that we we deficit spend romantically reluctantly if it appears that there's stimulus potential in doing so but that would be a yes decision that's a yes if you're down to the wire okay I got 38 seconds yeah dr. Waller could you answer my question what would you do yeah this would be the standard monetary policy toolkit you'd cut interest rates probably as low as you could to zero step two you'd look typically used forward guidance which was trying to signal to the markets how long you intend to keep interest rates low yeah you try to talk him down trying talking down I would agree need some fiscal support since we're constrained by the lower bound because I personally would not want to go negative would you do quantitative easing quantitative easing would be a possibility if you wanted to try to lower longer-term how much that would be a quantitative measure I don't know in terms of good tell you my gut tell me yeah we've gone from three and a half to six and a half I'm gonna lay on this plane Florida number five hundred million five hundred me five billion thank you thank you thank you senator Cortes national thank you I appreciated the the line of questioning it was really enlightening so dr. Shelton let me ask you this in July of 2015 you presented at the Cato University excuse me and at that event in response to a question you said and I quote I don't trust government statistics on GDP growth or on inflation so what specifically about those statistics due to distrust I think it's a challenge to look at particularly with regard to inflation the variety of indices we're mostly familiar with the Consumer Price Index the Fed uses the personal consumption expenditures index I'm not sure that either really captures the impact of technological innovation that is a basket of goods priced at a certain level today might be delivering a lot more in terms of services and then say a telephone from 20 years ago and so I I'm not saying I distrust I'm just saying that it's it's difficult to measure consistently through time consumer price indices and then use that as as the the main tool for making monetary policy are there other government statistics that you feel the same way about I'm not sure what ones I would suggest let me ask you this there's been a lot of talk about the gold standard in your previous writings and your position on eliminating the federal deposit insurance and I was looking at your book money meltdown that you wrote in 1994 and and really the last paragraph from the section that talks about gold convertibility you basically state that eliminating the Federal Deposit Insurance would restore the essential character of banking as a vehicle for channeling financial capital into productive investments while striving to meet the risk and timing preferences of depositors so if you were appointed to the Federal Reserve would you still consider that is an opportunity or an option to focus on and advocate for the elimination of the Federal Deposit Insurance senator no I think that having Deposit Insurance is essential to maintain trust in the American banking sector and I was merely using an example to explain moral hazard by suggesting that in the presence of government insurance the owners of the bank of a failing bank may be motivated to engage in more risky behavior than they would in the absence of government insurance and I think it's important that the owners of the bank bear the brunt of the cost of paying for failure rather than having the government step in okay I guess I along with my colleagues I'm I'm concerned and let me just say this because you have a history of writings and you should be proud of them they're your writings are your belief and based on your background experience but when you come for us for this position it seems like you're taking a hundred and eighty degree position on all of this just to be appointed to this position so how do we trust that whether you're before us today and who you are today versus your writings in the past who are we getting that is going to be on the Federal Reserve and one final thing you said you're from Fredericksburg Virginia but you're gonna be representing California on the Federal Reserve how explain that to me I believe that issue you mentioned there at the end is decided by other people I'm not involved with that but my understanding is that all the the governors are assigned effectively to a district and that my correlation with the San Francisco district bank is is quite strong I was born and raised in California my family behind me he can verify that and I went to school in California in Oregon my graduate work in Utah all of states within the San Francisco district my husband and I owned homes in Utah and California my first after receiving my doctorate was at the Hoover Institution in San Francisco or in Palo Alto very near to San Francisco so I have a very strong affiliation with California and feel feel close to that area thank you so who are we getting who are we getting on the board the woman who wrote extensively and should be proud of it or the woman sits before us today and is countering everything that she has said in the past so help me with that senator you are getting the authentic Judy Shelton I feel I have been intellectually consistent throughout my career always focusing on monetary policy that is conducive to productive economic growth okay thank you senator cotton Thank You mr. chairman thank you both I know there's been a lot of talk about gold today there's an old saying worth its weight in gold which goes back to the fact that early current coins actually were weighed that's why peso means weight and the British Pound is called the pound and the lira means pound which has the same Latin root word as Libre the digital currency that Facebook and others have proposed as well which brings me to my point that I want to talk about with miss Shelton the need for digital currency to maintain the dollar's primacy in the world these examples are just a few of how throughout history currencies have always had the same properties whether they're liquid they're stable they're stores of values they eliminate inefficiencies of bartering and whether or not we need to add a new property to our currency namely that it be digital and to be clear I'm not talking here about crypto currencies or anything like that I'm talking about a central bank digital currency because that's exactly the direction that China intends to go with the digital one China like a lot of fragile developing economies you might say needs digital currencies primarily internally because they don't have the kind of institutions that we have whether that institution is the dollar whether the institution is the Federal Reserve or simply the rule of law and rights of property and contract for the United States we need the digital currency a little bit less I would argue internally but rather to help preserve the primacy of the dollar worldwide so for instance China has wide scale use of digital payment systems inside of China but they hope to use the digital one worldwide to replace the dollar as the reserve currency with all of the economic benefits that that brings to the United States and especially the security benefits it brings to enforce sanctions so just to use an example China buys a lot of agricultural products from Argentina they don't contract those and transact in pesos or in wine but in dollars which again gives us great leverage in enforcing our sanctions worldwide if we do not move to add digitisation to the dollar as a feature of those timeless historical properties of currency I worry a lot that a digital one could ultimately replace the reserve currency just as we replaced the pound in the last century so miss Shelton could you talk to us a little bit about what you on the Federal Reserve Board and what the Federal Reserve as a whole can do to help protect the dollars reserve currency and especially address the need to have digitization as a potential property of the dollar thank you senator cotton I think that's an extremely important discussion and and I agree with your assessment I think we're compelled to think about that the dollar is the most important instrument of soft power that we have around the world and yes it is the dominant reserve currency but we can't rest on our laurels in that regard because as as you suggested rival nations are working very diligently to have an alternative to the dollar and while they can't beat us as as a currency they can add features because there is a demand for digital access to banking services to payments and I think it's very important that we get ahead of the curve to ensure that the dollar offers continues to offer the best currency in the world the most respected the most utilized and we need FinTech innovation to keep us going in the right direction and to be a leader instead of passively observing what other countries might do yeah and again to reiterate I'm speaking here primarily about the primacy of the dollar worldwide not domestic purposes governor Brainard gave what I thought was a pretty good speech last week about central bank digital currencies and she cited some of the reasons why developing economies needed such as you know high degrees of cash use and weak financial institutions and under payment systems and the risk of inflation and domestic currencies you know we don't face those nearly for the same degree what I'm talking about is the need to have a dollar that is competitive in world markets that has it's earned its position over the last century that's why we replace the pound and it's maintained that position against competitors like say the euro and still to this day the wine I don't want to see a day when we wake up and have a Sputnik moment with our currency in which we are no longer the world's reserve currency my time is expired but thank you both for your willingness to serve Thank You senator Jones Thank You mr. chairman thank you both for being here today dr. Waller thank you for your work appreciate it I know you have not had as many questions we haven't had a chance to meet but I appreciate that I do want to direct my questioning to dr. Shelton dr. Shelton in 2011 there was a guy named Bernard Vaughn not house he's a creator of a fictional currency called a Liberty dollar he was convicted in a North Carolina federal jury making possessing and selling sixty million dollars worth of his own precious metal backed currency the US Mint had actually had to issue a warning about this because he was putting on this that they had an issue a warning that it was not legal tender even though that it was marked with dollar signs the work dollar USA and said trust in God instead of God we trust the prosecutor from North Carolina in that case called him accused him of domestic terrorism he had written in his book that he denied 9/11 had happened and compared it to those people who think that John Lee Harvey Oswald did not kill President Kennedy I would call this God pretty an outlier as my colleague senator Shelby had talked about outliers completely out of the mainstream with regard to things but in a 2012 interview you called this guy the Rosa Parks of monetary policy you know I got to tell you I'm a native Alabama in Rosa Parks has got a statue in the United States Capitol she had in one act of courage defied a the Jim Crow laws and tried to bring down the walls of oppression that kept a race of people from voting and for basic human and civil rights and this guy seems to be issuing defiance on a federal government policy monetary policy and you helped raise that you said because he is challenging what the federal government has done with regard to carrying out its constitutional responsibility to maintain the values of US currency at the Cato Institute when he praised you you said to him I very much admire your boldness and audacity I think you're really challenging the Fed in a way I respect what am I missing if that is not out of the mainstream of America of history I don't know what is so tell me what I'm missing when you think a guy like this needs to be compared and what he's trying to do to the monetary policy in the United States how that compares to the courage of someone like Rosa Parks well senator Jones the last thing I would ever do is demean the courage of Rosa Parks well you did you do realize that don't you I mean you I apologize for the comparison I truly do the gentleman you're referring to he did an audacious thing I would never condone did you did you admire what he did with the Liberty dollar and sixty million dollars and can being convicted in a federal in federal crimes in North Carolina do you admire that miss Shelton I believe that he was testing the idea that the Constitution in article 1 section 10 says that states can only use gold and silver as legal tender so within the federal reserve is that something you want to test I mean you're gonna be within this if you get confirmed is that something that you want to test are you now taking that admiration to inside the walls of the Federal Reserve is that what we're to think no senator and as I've said a number of times this morning it's important to acknowledge that the power to regulate the value of US money is granted to Congress by the Constitution not to the Fed Congress created the Federal Reserve as an independent agency and gave it a monetary mandate to promote maximum employment stable prices and moderate long-term interest rates and that is a framework under which I would make decisions if confirmed you have indicated at one point that you thought that we might want to go to a standard like the Euro creating something for North America currency called the Amero do you still believe that is that a good policy well senators sometimes I am asked to think out of the box and look at future scenarios I'm just asking you a quick question I've got 30 seconds I had a good policy or not I just want to clarify I'm not pursuing that as an initiative but I do think that when the currencies of our major trading partners depreciate against the dollar it changes the terms of trade even after they've been carefully negotiated well dr. Shelton I got to be in honest video I've heard the questions and answers and I've heard several senators here question what you have written in the past with what you're seeing today it reminds me of a comment that a my old boss senator Heflin who I sit in his seat now talked about a number of people having a confirmation conversion but I think you said it best that what we will get is the authentic Judy Shelton and that is what bothers me tremendously but thank you mr. chairman senator Tillis Thank You mr. chairman thank you both for being here congratulations to the family I'm sure that you're proud and to the Shelton family your heart rate will reduce about 10 or 20 beats a minute in about 30 minutes look I want to go back I hadn't planned on going through this I watched most of the hearing in my office before I came down here and I've heard a lot of people quoting your writing so I want to lay something out then get you to respond to it I want to make sure that people understand the difference there they're using quotes that you wrote there were actually quotations from other writings for example I think in one article that I believe use was used by senator tester and reference by others public law says full employment and balance growth Act of 1978 in that public law it says the attainment of these objectives should be facilitated by setting explicit short-term medium-term economic goals and improved coordination among the president the Congress and the Board of Governors of the Federal Reserve that's what you were quoting right exactly senator and and that was the basis for them thinking that you were asserting the other Judy Shelton was asserting something else in your words but in fact those weren't your words right I was quoting and in fact they're the words of Congress I also want to go back when we talk about independent I find it remarkable actually on this committee we're talking about chairman Powell's Hill here yesterday and we're talking about undue political influence on the Fed that's what we do every day when we bring the fed up before this committee we're trying to assert our political influence and I don't think the president is any more or less entitled to do that and I don't think any other president has failed to do it whether they do it publicly or privately you made a point about at least in this case it's transparent that's one thing you can say about the president and his communication style I think we're fooling ourselves if we think any president has not tried to have a discussion about their view of where you need to go but can y'all site either example mr. Waldo I'm going to give you a chance to talk because that you've been given a good pass and then maybe with dr. Shelton but dr. Waller give me an example where you've seen political pressure ultimately drive a political decision on the part of the Fed well there's been a long history of what used to be called bashing and coercion yeah so this has a long history of questions but I mean what I'm saying in an example where that political pressure because we're all talking about this fear uncertainty and doubt of the Fed being politicized I'm just trying to give an example where that political pressure actually drove the Fed to do make a decision that wasn't founded in the dual mandate so the classic example in that monetary history is Richard Nixon and Arthur burns Nixon put a tremendous amount of pressure on burns to keep interest rates low to help with his reelection which apparently burns followed through with that's the best-known example I have show you that sometimes I see may be political influence work in Reverse I'm sure both of your we're former governor Dudley's comments about making things go south so President Trump can't get reelected y'all think that's inappropriate hope so I thought it was totally inappropriate speaking for the Fed dr. Shelton most certainly all right now I want to talk about we also talked about independence I agree with what everybody said on both sides of the aisles about Fed independence from undue political pressure when I got a real problem with and a couple of examples right now is the Fed asserting its independence from oversight or asserting its independence from the Administrative Procedures Act chairman Powell yesterday in response to a question I had about Lissy and the GAO GAO s assessment about that not having been appropriately promulgate it concerns me because I get that you to be independent but you have to be answerable to the laws that other regulatory agencies are answerable to I'm not going to ask you to respond this question now because I'm going to finish on time but the general counsel in the middle of June last year in response to the GAO is assessment that the Lisak guidance had really risen to a rule and should have been promulgated in that manner said that we're assessing whether or not our guidance is accountable to the GAO that's an absolutely unacceptable answer and for anybody here you all know this chairman Powell can give a comment and an oversight hearing or make a speech and it could have a ripple effect rising to a level of a rule and to sit here and say that well guidance there's a isn't really rulemaking it's not material to the examination process defies any knowledge I have of how examinations go on and what goes on in those in those private those confidential meetings so I am going to set submit for the record roughly the same question I asked chairman Powell yesterday and I'd like your response thank you all in congratulations thank you senator Van Hollen I thank you mr. chairman thank both of you for being here miss Shelton I'm sure you've been covering or watching some of the articles that have been coming out with respect to your record years ago compared to now and there does seem to be a pattern of total flip-flopping if you look at the period of time when Bernanke and Yellen were the head of the Federal Reserve you were four you criticize them for let's see cheap money fake economy you were a deficit hawk you want to tight money then in 2011 you criticize the Federal Reserve for weakening the dollar to improve our exports in order to improve our economy back home the only pattern that I see here is a political one not an economic one and I think that's what concerns a lot of people because we want somebody on the Federal Reserve who's going to look at the economic facts and draw conclusions from those not the political facts and so I want to also ask you in that regard about the positions you've taken on the deficits and debt and I've actually had concerns myself over the years about deficits and debt but here's what you you wrote back in 2009 which of course was still during the economic downturn and so the economy was hurting obviously economic stabilizers taken to effect but you wrote in The Wall Street Journal unending fiscal deficits unconscionable accumulations of government debt these are trends that are shaping America's future and you go on to predict that there will be flight from the dollar will our the our nation's money's being severely compromised and it's going to be gloom and doom none of those predictions proved to be true did they I think it was a very unhappy period in the wake of the 2008 crisis that was devastating yeah across the country and we engaged with the Federal Reserve seeking monetary stimulus in extreme measures going to near zero interest rates and massive purchases of government assets and I think I heard an exchange earlier with Senator Kennedy where you said that if we had that kind of economic downturn you would look at using all those tools is that correct yes but you were very critical I mean just I mean the record is pretty clear you criticize them strongly for taking emergency provisions back then you said the increase in the national debt was unconscionable even though as you know when you have economic downturns you your GDP goes down and your economic stabilizers go into effects so there's more money spent on things like Medicaid but I guess my question is was it unconscionable for President Trump to add two trillion dollars to that already unconscionable debt in passing the tax cut which is actually now taken projected debt to GDP to much higher levels and what you predicted in our annual deficits the last year the Obama administration the deficit was 3.2 percent of GDP in 2019 its 4.6 percent of GDP so my question is in order to be consistent did those policies supported by the president are they unconscionable when it comes to our deficits in debt senator Van Hollen if I may take us back to 2009 to compare my consistency the immediate fiscal response was an 800 billion package of government spending that ultimately turned out not to have a stimulative effect as we might have hoped and there was talk of projects that weren't shovel-ready we went to these extreme monetary measures likewise trying to stimulate in the wake of this meltdown there's a cost to that for the years from time sorry you just not answering my question it was a pretty simple question and look look look we can all you know people are entitled their own opinions but not the facts the Congressional Budget Office is analysis of the fiscal stimulus disputes exactly what you just said and my question to you was is it unconscionable to increase the debt over the next ten years by two trillion dollars if it was already at unconscionable levels back in 2009 is it unconscionable to add another two trillion dollars to an already unconscionable debt yes or no I think we should always strive to reduce the deficit because it does put earned on future generations see this is the problem the problem is you've got a lot of writings strong writings of a very political nature and now your responses today are totally inconsistent with the positions you've taken in the past the only thing that has changed is who's in the White House Thank You mr. chairman senator Warner you're down to the last one I may thank both of you for the meetings that we had I enjoyed our conversations with with both of you I do hope dr. Sheldon in terms of our conversation about our common ties to Virginia and where we both leave and live in the fact that you uh you were nominated from Virginia to the European Bank of reconstruction that you're not you changing that status as well in terms of how the administration is but put you forward this time I'm I know we talked about your Washington Wall Street Journal editorial and I went back and read it again I think you you put forward some views I don't necessarily agree with but you put forward then clearly and the one thing we keep coming back to is humphrey-hawkins and you know what and cenar tell us raised that as well the thing you did at least mention in the article but I don't think you've mentioned in your commentary to most of the questions at least that I've heard is that you know humphrey-hawkins expired in 2020 that's true it's no longer the law of the land I'm not sure that's still a fair fair notion and you know I was going to also raise the questions senator Van Hollen raised as someone again we talked about this issue in my office I feel very strongly around debt and deficit again let me be clear I don't think either political party has much legitimacy on the issue anymore but I I do think there is a very much a change in consistency in your view under what was happening under Obama where a group of us in both parties tried to bring down the debt and deficit to the chagrin of folks on both sides yeah they suddenly got blessed under President Trump and I I know you've already addressed it but it is a real concern to me I don't doubt your integrity but I I question your consistency on this I want to go to one another you know in your in your your writings you said that would be appropriate instructed for the Fed to consider international monetary stability and an interest rate decisions in an area of worldwide currency exchange question I feel I mean and I agree with many of both parties against currency manipulation is a bad thing but I don't think currency manipulation falls within the gambit of the feds responsibilities do you do you want to speak to that it doesn't fall under the feds responsibility any other prior monetary arrangement had to be approved by Congress I'm just pointing out that in that humphrey-hawkins legislation and improved trade balance and improved global competitiveness are among the six objectives that are referred to as being in the national interest where it calls for more coordination the legislation does I do want to point out that in the article that you were referring to I specifically say that humphrey-hawkins expired in the you I know you know I wish but but I feel like in many of the conversation that you've had in some of your answers you've cited that without that full full explanation and I feel pretty strongly on on your change on on the debt and deficit issue I have concerns about the Fed in terms of playing a role in currency manipulation I think it's outside its its gambit I and I want to also reference one of my my colleagues points you know I don't fully agree that every president and every member of Congress is always trying to to overly influenced the Fed and I think the Fed independence I think dr. Waller your comments about President Nixon and Chairman Burns was a was a dead-on accurate one and I think it had an enormous blowback and I guess one of the challenges that I'm grappling with with dr. Shelton with your your nomination is I think you have had a series of views that go beyond the dual mandate I commend you frankly for some of them you know creative sets of views you have and somebody might agree with someone disagree with the challenge right now that I think is unprecedented we have a president that goes so far beyond the norms of trying to you know out Dulli influence all in Department independent parts of our of our government the feds independence being something that we generally share complete commonality with and when your views in some of your writings my takeaway is frankly would reinforce that effort to kind of more politically manipulate the Fed or go beyond the dual mandate and with this level of influence that that president Trump is willing to influence on every action and I think again unprecedented in terms of his his attacks on chairman Powell it raises grave concerns but I very much appreciate you both being willing to nominate and I've appreciate both of our conversation and again dr. Shelton I didn't enjoy our conversation yesterday but I appreciate the chance to raise those final views Thank You mr. chairman thank you and to our nominees although Senator Warner thought he was last Senator Brown would like to have another couple of questions so I've told him he'll have a couple of minutes so has Senator Shelby and so Senator Kennedy and Senator Warner if you want to I'm not encouraging it I'll give you another couple minute you're not encouraging more questions from I will remote has started 10 minutes ago so we don't have much time senator Brown mr. white as we were here mr. Waller given um given miss Shelton's answers on monetary policy in her 30 years of writing on the gold standard would you recommend we confirm her to the Fed senator that's your decision not mine I figured that would be your answer let me ask him a different way so you're at the st. Louis Fed right correct if you were interviewing for your research department would you hire her I have a very different research department in terms of the type of academic research we do Judy's been much more in the public light in terms of her research my departments all publishing for academic journals so someone brought her body of work in writing to you would you hire her or him what he said where her outlets are compared to what we expect our staff they're just two different outlets for your research mr. chairman in just a last statement the takeaway is that we don't know who we are nominating to the Federal Reserve miss Shelton has disavowed 40 years of her writing as so many on this panel have shown to say what she needs to say to be confirmed it isn't just my colleagues on the Democratic side of the aisle are concerned I heard Shelby's concerns I heard senator Toomey's I've heard others but conservatives outside of this body are concerned American Enterprise Institute Desmond Lachman urged the Senate to reject miss Shelton's nomination he wrote normally a person would be in favor of either an easy monetary policy to stimulate the economy or a hard monetary policy to exert discipline on the government either way one would not expect her to hold both views at the same time yet miss Shelton does exactly that ae is Ramesh Ponnuru wrote Shelton's prescription for monetary policy has changed so dramatically her rationale for it makes so little sense has to make her appointment to the Fed a gamble does she believe what she's now saying or she's just saying what Trump wants to hear this is from AEI if the latter then the Fed that the Fed would she revert to the rigid opposition to inflation at any cost that has marked most of her career or would she stick with whatever Trump wants there's a little bit too long of a question that wasn't change of subject just a little bit but still in economics for years economist as you both know adhered to the Phillips curve which describes an inverse relationship between inflation rates and unemployment rates this was in here this was mentioned earlier this today typically lower unemployment has generally produced higher inflation this is in the past I guess and vice-versa in recent years as unemployment has decreased inflation rates and remain low thank God what are your thoughts on the current relationship between unemployment and inflation and this high and how has the relationship between the two changed over time is there a new equation here doctor wallet well make two comments first of all if you were to go to any ph.d program in economics today and you were taught the fundamental model of unemployment there's no inflation in that model so even at that level of graduate training nobody talks about inflation and determining a level of unemployment second point but when you think of price stability you got to be thinking the specter of inflation somewhere correct so that was where I was going with my second point which was that one of the things we've learned on monetary policy research is that if you have a central bank who's very committed to a say 2 percent inflation target and that's very credible that their actions will keep inflation near that target that inflation never really moves off that target no matter what happens with the unemployment rate so the relationship looks like it's completely broken down but it's because the central bank has so much credibility in its inflation target that nobody deviates from it but if an equation stays low does that give as Senator Kennedy I think got into question does that give you would that give the Fed a tool in case of a crisis I think what it does is it gives us a different way to think about how to raise interest rates and that's I think what but that would it not a to correct option right so your credibility is everything for me that's it I think you laid it out it's the confidence in our currency it's a confidence so our institution if you lose that your dog confidence in the economy of the nation coordination itself right correct dr. Shelton what senator Shelby I think that's one of the most profound developments that has happened particularly in the last three years and the change in thinking and the realization at the Federal Reserve which is steeped in the Phillips curve trade-off mentality that you can have low inflation and low unemployment at the same time in fact it's a perfect stable foundation for productive economic growth and that's when you start to see not just the GDP increase but the increases in productivity which then justify gains in wages and the increased output is such that you don't get inflation so I think this is very important for the future monetary policy so long low unemployment and stable prices low inflation that's the two mandates of the Fed itself is that correct yes okay thank you Thank You mr. chairman all right thank you and I will take the last word we oh did you have a question I won't do it now then it's going to take longer than 30 seconds in a sense we as the Fed was draining reserves we thought there were plenty of reserves but it clearly wasn't distributed correctly and then the puzzle that we're trying to figure out is why didn't these reserves flow from some banks to those that needed it and that's something we've been studying trying to understand I think that it's partially a regulatory issue in the sense that excess reserves have almost become mandatory they're eight times higher than required reserves and I think that the stated liquidity preferences of bank examiners makes banks feel that they need to keep that ready cash and they were reluctant even to chase a ten and a half percent overnight repo rate I'm alright thank you I just like to make a final comment we all knew that there was going to be a this was gonna be a very aggressive hearing today particularly with regard to you dr. Shelton I think you have been very solid in explaining and defending your writings and your positions and by the way the reason that I introduced into the record in my opening statement an article from The Wall Street Journal entitled the war on Judy Shelton was just to help make the point that this is an orchestrated calculated effort I think you've you have done very well today I just wanted to tell you that you've explained I think very capably the positions that you take in there and the rationale for them and I just want to appreciate the effect that you've gone through that and that is mr. but if you're gonna but you're gonna enter into the record The Wall Street Journal article I'd like to enter the National Review article well you just quoted oh so you know get in there thank you and with that we are done and we're on our way to our vote thank you very much for being thank you mr. chairman thank you

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Id: AGzPl0EhH0E

Length: 111min 27sec (6687 seconds)

Published: Thu Feb 13 2020