tv Confirmation Hearing for Federal Reserve Board Nominees CSPAN February 19, 2020 1:13pm-3:08pm EST
>> coming up next on cspan2 a confirmation hearing for judy shelton, the president nominee for the federal reserve board government. and then a panel discussion analyzing the trump administration, immigration policy. "after words" a look into how technology can impact voter turnout. and then watched the national press foundation annual award dinner recognizing journalists. but first judy shelton a nominee to the federal reserve board of governors testified before the senate banking committee. >> this hearing will come to order. >> this morning we will consider the nominations of the honorable judy shelton to be a member of
the board of governors of the federal reserve system and doctor christopher, the member of the board of governors in the federal reserve system. welcome and congratulations to each of you for your nominations. i see friends and family in the room today and i welcome them as well. were fortunate to have these two highly qualified nominees appearing today. these positions are critical to ensuring a safe, sound and vibrant financial system in the 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 responsibility is conducting the nation monetary policy with the mandated promoting maximum employment, and moderate long-term interest rate. in addition to its monetary policy that oversees a significant portion of the sector including large, regional and community banks as well as
certain nonbanks. 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 perspective to the position of governors to ensure robust debate and more effective decisions. before turning to doctor shelton and doctor waller, i am interning to the record or lumber under letter from a hundred economists supporting the nomination and also an article from the wall street journal supporting doctor shelton titled the war on judy shelton. doctor shelton most recently served as executive director for the european bank for reconstruction and development. was confirmed by voice vote in 2018. doctor shelton experience working for nonprofits and academic institution forged her deep knowledge of democracy, economic theory and monetary policy that will broaden and diversify the perspective.
doctor waller has served as a research director of 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 in recommending u.s. monetary actions. his research on monetary theory and the micro foundation of money in payment systems will be valuable as we see a rise encrypted currency and digital currency in this country and abroad. i am confident that doctor shelton and doctor waller will bring strong leadership to the federal reserve system. as governors of the federal reserve, doctor shelton and doctor waller will play key roles in carrying out the fed supervisory activity consistent with the law. while also playing an important role in striking the balance between tailored regulations and supervision soundness. i appreciate the positive meetings i have had with each of you leading to today's hearing. i look forward to continuing a robust discussion on the following topics, the important
of rightsizing regulation and tailoring the framework to support a vibrant growing economy while also ensuring a safe and sound initial system. accepting market-based fixes to maintain stability and money market, the development of central-bank digital currencies and other technological innovations in the financial space which we also discussed with chairman powell yesterday. in 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 doctor shelton and doctor waller on these and other areas where the fed and congress can act to further reduce unnecessary burden and economic growth. congratulations again on your nomination and thank you and your families for your willingness to serve. senator brown. >> thank you, mr. chairman,
welcome and thank you for being leaders. this shelton, mr. waller would like to extend my greetings to your family and friends who have joined you. welcome. independence matters, economies with independent central banks have less price well until later, fewer bank mechanics and more stable communities. one of the nominees today before us does not believe in independent fed, it has spent her entire career advocating for policies that would make our economy more volatile yet families and businesses more to worry about in an uncertain world. the point of the independent federal reserve is to be a steady guiding hand to worry about the big picture of the out have to. but for ms. shelton, these are not hazards to avoid, they are the goal, to understand the economic issues, the servitors
and liberals and most people fall somewhere in the middle of the continuum, ms. shelton is not a conservative, she's outside of the mainstream, she is off the ideological spectrum. first three decades she's been a prominent advocate for returning to the gold standard. in making the case for ms. shelton's nomination her friend james grant wrote in the wall street journal with the nomination of judy shelton to the fed a discussion is still gold, gold is money or legacy, she can tends in the gold standard of the superior form of monetary organization. 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 followed ms. shelton's advice and not advanced beyond the gold standard nearly half a century ago, our nation would have been boom to bust without the monetary rules necessary to pull us out of the recession.
depressions would've been deeper and longer, millions of working families would've suffered a even more for no reason and certainly inextricable reasons to them. that is not the end of the story, ms. shelton clearly voiced her opposition to fdic's deposit insurance, the insurance that everyone takes for granted that has been part of our culture and economy for so many years, the insurance most important that protects the saving hard-working of americans. in other words she thinks if a bank fails, we all remember to vividly 10 - 12 years ago when they did indeed fail and all the families whose savings and paychecks who were stored in the bank should lose all their money. passing federal deposit insurance was one of president roosevelt first asked during the great depression under depression for a reason. that guaranteed your money is safe in the bank for the bedrock of modern economy. this is not an intellectual exercise about moral hazard,
this is the real world. i dare to explain to the working families in idaho or pennsylvania or alabama or louisiana or minnesota or new jersey or rhode island, i dare anyone to explain to working families that experience bank closures in the great recession or the savings-and-loan crisis the fdic's is a hugely distorting factor. but ms. shelton does not stop there, the money in your wallet is backed by the credit of the united states government yet michelle advocated with doing away with the dollar and replacing it with a common currency of north america. i'm serious to make math more effective, she's the dolly to be replaced with a common currency for north america called the marrow. another time she has called for the creation of a generic global currency backed by gold. that globalist ideology does not
belong anywhere near our fiscal and monetary policy. the american dollar is the world reserve currency, it should stay that way, we wanted that way, and we are proud of it. the bottom line, michelle has too many alarming ideas into many important issues to be confirmed for this job. we know she will 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 imposed tariffs on china before she was for them. and based upon the committee members heard in meetings with her it appears ms. shelton has changed all her positions on everything from the gold standard to steadfast opposition to fdic insurance. that is not the steady hand required at the fed. 11 years in the district covering more than the fed needs to be independent and careful,
not reactive to every tweets coming out of the white house. ms. shelton is a voting against that independence in the nation's reputation as a financial bulwark for the whole world. our other nominee to the board mr. waller's, an economist whose work and analysis has helped direct undertaking by the fed. i look forward to read more about how he will hold austria accountable if he is confirmed. last, i want to know there should've been a third chair at this table. we are not exactly sure why but ms. jesse lewis supposed to be considered by the 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 of this committee and i did not know as winky member. the position she was nominated for is responsible for overseeing the country's work for terrorist and drug cartel in economic sanctions.
now that her nomination has been withdrawn, that position will remain empty. once again protecting the president of the united states with the national security at risk. thank you, mr. chairman. we will now administer the oath. if you will preserve rise and raise your right hand. >> do you will swear or affirm that the testimony you're about to give is a truth, the whole truth and nothing but the truth so help me god and you agree to appear and testify before any constituted committee? thank you you may be seated. your written statement will be made a part of the record in their entirety. before you begin your statements, i invite you to introduce your family in attendance. thank you. you may start mr. unterman shelton. >> ranking 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. i'm grateful that this committee for considering me for this position. i'm also deeply grateful for the support of my husband of 42 years he was here today along with our son. and i want to give special thanks to my mother jenness jens potter and the healthy contingent of family member sitting behind me, jim, christie, rick and susie, they all flew out from california to be here 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 have current financial economic
conditions as well as historical tracing back to our constitution. one thing is very clear, the power to regulate the value of u.s. money is granted to congress, congress created the federal reserve as an independent agency and through the federal reserve 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 in considerable power to carry out its responsibility. along with the political independence and operational autonomy granted to the federal reserve comes an obligation to be wholly accountable to congress and the public. if confirmed my priority would be to support monetary policy that facilitates productive
economic growth while also ensuring the soundness instability of the u.s. financial system. in exercising the federal reserve 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 as a financial system. i am well prepared to conscientiously fulfill 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 analyze 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 examine the impact of currency movement on trade. i have testified numerous times as an expert witness for congressional committees in the house and senate. as u.s. executive director of the european bank for reconstruction and development, i demonstrated strong leadership to achieve high priority objectives in accordance with strategic interests. combining academic perspective with real-world insight. i hope to contribute intellectual diversity as a governor and work to promote found monesound from untrained d sound finances. in closing i wish to emphasize my commitment the constitutional authority to congress to regulate the value of u.s. money.
by fulfilling the statutory mandate congress has assigned to the federal reserve we ensure that america's money remained the world most respected currency and is 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. doctor waller. >> chairman crapo, ranking member brown and members of the committee, thank you for the opportunity to appear before you today, i am honored to be of nominated by the president for this prestigious position. in grateful to the committee for its consideration of my nomination. i would be humbled to be able to surmise country in this capacity. i am also think before the support of my family members who are here with me today, my loving wife lori and my three children, sarah, maggie and sam and my mother and who has been my hero throughout my life.
for the last 11 years i have served as a director of research at the federal reserve bank of st. louis. during that time i have attended over 60 federal open market committee meetings and served as the main policy advisor to my being president. but the results of this experience, i fully understand and support the dual mandate of the federal reserve. i also understand and appreciate the federal reserve role in pursuing policy to ensure a safe and stable financial system. if i am confirmed, i will continue to advocate for policies that achiever dual mandate ima maintain financial stability. i believe my background makes me uniquely qualified to fulfill the responsible these from a federal reserve governor. my decade-long experience at the senior reserve bank official, i was deeply involved in policy issues confronting the federal reserve. but in my role i also stand a
substantial amount of time talking to members of the community about how monetary policy affected their lives and businesses. that public input affected what i thought about policy and conflicts. 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 experiences federal reserve official, i was an academic for over 25 years and did a substantial researcher monetary theory, monetary policy, and central big 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 the 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 risk possibility by congress to use this policy to improve the lives. it's also in the federal reserve tremendous freedom to pursue the 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're being pursued. if i am confirmed, i pledge to work with my colleagues to implement policies and help us meet our dual mandate and i pledge to be accountable for those actions and 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 question. >> thank you very much for i will begin the questioning with a couple of questions for each of you to answer, you don't need to give long as long as is the right answer. first to agree with the importance of rightsizing regulation and tailoring the
framework of the vibrant growing economy while ensuring a safe financial system. >> you said you mr. chairman. >> yes, i do as well. >> thank you. that was the right answer. do you agree it's important to encourage the federal reserve to submit all rules to congress under the congressional review act as well as to submit significant guidance for purposes of the cra? >> absolutely. >> yes, i do. >> thank you. again this is for both of you, and you can give a longer answer to this one. the federal reserve independence is critical to enacting monetary policy into addressing long-term economic adopt this. i know i and every single member of this committee and the member of the senate want to ensure that the federal reserve is independent. there is strong bipartisan support for maintaining the fed independence, what are your perspective on the federal reserve maintaining its
independence? shelton ten you may start. >> thank you very much for the question mr. chairman. i believe the independence of the federal reserve is a vital aspect of the credibility with the public. congress has granted tremendous power to the federal reserve and citizens have to be assured that monetary authorities would be relying on their own best judgment in their own analytical capabilities and making the decisions not subject to political pressure. >> doctor mueller. >> i have lived and breathed for 35 years both my academic and my job as a federal reserve official, it is critical to do the right policies to give the best economic performance and to look at the data to determine how you want policy opposed to partisan influence. >> thank you.
this question -- i will ask both of you to answer. but i want to start with doctor shelton, doctor shelton some have tried to characterize your support for the gold standard outside of the mainstream thought and framework of this position. what exactly are your views on monetary policy and a gold standard? >> i would not advocate going back to a prior historical monetary arrangement, isaac 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 a monetary mandate, that is the framework on which i will make the decisions a if confirmed by the board of governors. i've looked at the historical system going back to the beginning of our country because i think if you gain valuable insight by comparing economic
performance on one set of monetary roles versus another. but money only moves forward and we see it evolving faster these days. so i only use it to get perspective on money. >> thank you. i like your views on this to doctor waller. >> i've studied monetary theory for the last 20 years and i've studied both monetary systems which we currently have. the fiat monetary system is pretty much what we have around the world, it works well if it's managed by the central bank. there is no need to have inefficiency of time to a metallic standard or any other relapse if needed. >> thank you. centered aroundsenator brown. >> thinks chairman. i like to talk about independence in a slightly different way, i appreciate his questions for do you think chairman powell has done a good
job making independent decisions regardless of what the president treats of him? >> i think truman powell husband very professional in his job in carrying out policy is best as he can on the committee. >> the exact same question to ms. shelton, do you think chairman powell has done a good job making decisions regardless of what the president treats. >> thank you ranking member brown. i think cheiro 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. >> is it okay that the president of the united states tweeted him and called him names and not doing good things to economy that's okay? >> i do believe every american and every member of congress even the president has a right to criticize or federal reserve.
>> based on what the president says about chair powell it lookd we all in this committee are watchers to a degree, you could watch as these attacks by the president on his chairman, our chairman it looks like the president and the federal reserve are not working well together, do you think the chairman is doing a bad job accommodating the president's wishes? >> i don't think the job of the federal reserve to accommodate political agendas, what i am saying that the fed operates independently as it should, working to the best interest of the nation. >> understanding i'll need your answer to the next? go with me a little bit here. what do you think about the president's criticism of chairman powell? >> as i said -- >> is chairman powell right? >> i'm not centering.
>> i'm not asking you to censor, we have something we never seen in american history where the president of the united states axes his own nominee and many of us, myself included loaded for trying to get him to do different things on economic policy, what do you think about what the president -- not censoring but what about chairman palmer he tells them to do? >> i think what we have seen historically some said the chairman felt like he was being pressure behind-the-scenes and some way it's refreshing out in the open. as i say everyone certainly business journalists that is uttered by the federal reserve official in its available, all the information and anyone can make a at any time. >> mr. waller, i think the
chairman of the federal reserve has done a good job remaining independent when he was here yesterday and testified yesterday. senator kennedy and senator brown's and senator crapo and i'm leaving out a couple all emphasized emphatically emphasized the independence. in emphasized how it poured independence is buried you place to be independent of regardless of what president trump told you to do. >> thank you, senator brown. i pledge to do what's best for the economy and how to read the data and what's best to do to achieve your dual mandate for that toy view the job and how i intend to do. >> do pledge your decision-making regardless of what the president told you to do. >> i pledge to be independent in my decision-making and frankly no one tells me what to do. >> ms. shelton, melos, and question per going back you had extensively 95 articles and boof
years, can you expand to the committee and the wall street journal praised for one set of provocative beliefs like the gold standard that low interest rates steal from investors in the fed of the marketplace should be abolished now when you come before congress you claim your firmly in the mainstream of economics. i am troubled with that. you have a paper drum for 30 years, you seem to have not -- you seem to be the new judy shelton told judy shelton. what do we make of that? >> i think i've been intellectual consistent since they wrote a book in 1994 called money meltdown restoring order to the global currency system. i did not claim to be in the mainstream economist but i don't think -- >> you not an economist for one thing. >> i am an economist. >> what your phd. >> with phd from the university
of utah to 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 doctor waller and doctor shelton, both of you have exchange eating experience and academically qualified, i have no problem with that. doctor shelton i do have -- i'm troubled by some of your writings and some of the articles as well as others have written about your writings and some of the stands and this is a good time to air them out i suppose. i think the question to me, i have been on this committee a long time and with senator brown were tasked with the senate to
evaluate and color before you are confirmed and some people say you're basically an outlier, you're not mainstream views in the economy. most people think, not everybody that the role of the federal reserve is stated by law despite its ability -- whatever, that's the goals we try to reach her. the federal reserve when you're nominated at the federal reserve and confirmed by the senate, he a long term, the probably the longest term that we have, up to 14 years i believe. so our views i believe should be mainstream. if people deem you, a lot of people have, that you are an outlier on mainstream, 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 involvement or would you continue to be 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 the capabilities and for their judgment. i think i would bring my own perspective but i think the intellectual diversity strengths strengthens and would be welcome. that's what i would hope to bring but certainly with the goal of working with the people who are there and together we would try to formulate monetary policy most conducive to production.
>> you have talked about it and other people have written about the gold standard. if you had all the gold in the world, all that's been mined and all the jewelry and storage, it would not be worth, i believe anything for what our economy is worth, what the gdp of this country is worth or the gdp of the european union or china or japan. >> that is true. so when you talk about gold standard, that in the old economy. >> yeah. >> how we progress beyond that in the confidence of the nation and the people backing all the
wealth we deem valuable today. >> definitely. >> so talk to us about your views on the gold standard and other people in the world. do you still believe that is important and why and where are you? >> thank you, senator shelby. first i totally agree with your assessment, you never go back with money. it keeps moving forward. and i'm surprised that people attempt to say that they have some thought about me advocating a gold standard in talking about the classical international gold standard, i would just point out that there's about 1.8 trillion in outstanding federal reserve bills. that is just the current state.
most of it is held outside the country. if you look at the market value of the u.s. government total holding of gold it would be less than a quarter of that amount. that is just the most basic form of money, i'm not sure. >> commodity is in a. >> it has a historical use as a monetary surrogate but it's mixed used today in as i said is useful to look at something from 1870 - 1913 when u.s. was a participant in the classical gold standard, it's worth it to look at the brentwood gold exchange standard with the inker from 1944 - 1971, that was 50 years ago when we had any kind of a monetary role for gold, we have to look toward the future. >> have you advocated returned to the brinton woods program? >> what i said about the
agreement, it did establish a level monetary plainfield in terms of exchange rate. >> it's in disarray at the time of the second world war. >> precisely. and a lot of nations still struggling in th the war was not over when it was being put together by the united states, were thinking is this going to be worth it to win, and for going back to what we had in the 1930s when you had competitive evaluation into telling tory tariffs and that created a downward spiral in international trade, that is not what were fighting for. the united woul states set up te brinton woods to give hope that there would be a better future and investment would be the highest used around the world and people would not use competitive depreciation to
undermine the principles of free trade. >> thank you. >> thank you, senator menendez. >> thank you mr. chairman. doctor shelton you're being considered for a very important position today. can you think of a more stimulating challenge than serving on the fed? >> a more stimulating challenge? >> than serving on the fed. >> that would be the ultimate for someone who study monetary policy and economic performance. >> can you think of a quote more meaningful responsibility than serving on the fed? >> i think it is gravely responsible position. >> can you think of a more important role than safeguarding our nation's vital interest in 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 with the ranking member for your nomination of the u.s. executive director of the european bank for reconstruction and redevelopment. in your testimony before the committee you said, given my background in analyzing the strategic implications of global financial development and my strong commitment to democracy i cannot imagine a more stimulating challenge, more meaningful responsibly, and to take the role of safeguarding our nations a vital interest in deeply rooted values at the edr d, i agree with you there. it's here in your brief tenure which you read your prematurely, you missed 11 of 26 board meetings, you are the u.s. representative to the bank, you are the senate confirmed position but you made it slightly over half of the board's meetings would you give someone a promotion if they missed half the most import proceedings that they were
assigned to? >> thank you for the question senator menendez. it's a matter of public record that actually my tenan attendans closer to 70%. let me explain something about multilateral. >> you dispute them number of how many missed. >> not only that but there's a perfect correlation which i'd like to explain when i was not there i was in washington meeting with the people to whom i reported at the treasury department, i was conferring with my inter-agent -- >> that's why we have telephone. >> as a matter of fact ambassadors are given telephones. they are given ways to communicate so they don't leave their post, it is unique that each of the meetings you missed you claim you were in d.c. but you needed to be at a bank voting on behalf of the united states in these all important issues.
i just cannot imagine that the relation committee would give ambassador a higher position if they weren't there nearly half of the time that they were supposed to be. so if you are confirmed, do you expect to serve your full term on the fed? >> i do. >> you do? that's what you told the foreign relations committee when you were confirmed as a director of the ebrd interior water so i fail to understand how i take the answers hearsay. showing up is a basic requirement of a job and if any of us missed half of our votes or hearings i don't think our constituents would send us back. let me ask a different topic. if we didn't have the deposit insurance, do you think consumers would trust a small unknown financial institution with their money or would they turn to bigger institution 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 in american banks hope this idea that i'm against deposit insurance, i try to find out where that even came from the only reference i find to me even commenting on deposit insurance goes back 25 years or in the course of explaining the theory of moral hazard, i said if there is government insurance and theory a bank might engage in riskier financial behavior seeking profit 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 rinse under ms. skinner financial system.
but if you support deposit insurance. i am concerned -- you also -- have you ever told the president that north america needs nose borders? >> no and if you're referring to something i wrote in 2000, i'd be happy to explain the context of this rumor. it had nothing to do -- it's what you wrote. >> had nothing to do with immigration, in 2000, i'm sure you are aware of, the persimmon 70 years mexico elected a president who had not been a member of the ruling party and they were saying he recognized mexico was experiencing a collapse in his currency every six years coinciding with electoral cycle. he wanted to be something new. and he wanted to bring mexico's finances into order, balance the
budget, align the regulatory approach to banking to something closer to what we have in the united states and i thought that would 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 the article was about. >> i'm happy to submit for the record mr. chairman some articles that speak quite differently to the view you just expressed in some of the other things and will let the members decide their judgment. >> senator toomey. >> thank you, mr. chairman and thinking to the nominees for being here today in the discussion we had in my office separately early this week. let me say for the record, i think using a price role that might include precious metals isn't intellectually to monetary policy just for the record.
it is a defensible approach. doctor shelton, i understand you have long advocated for stable international monetary systems, stability in exchange rates and i doubt they'd be any disagreement that that is preferable to the alternative. the concern i have is we don't control other countries monetary behavior, we don't have them on what they do. 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 and the wall street journal and interview that you gave on cnbc was characterized, is said
ms. shelton said on cnbc that central banks, europe, china and japan are developing their currency against the dollar through monetary policy when asked if the u.s. should file suit she said yes. looking at the interview it looks like that's an accurate characterization to me. in july 2019 you wrote in the wall street journal piece, when the united states trading partners engage in currency manipulation it is not competing, it's cheating that is why the vital to weigh the implications of the u.s. monetary policy on the dollars exchanging value against other currencies. in september of last year and a wall street journal op-ed you clarified your view that the fed should fight this alleged cheating, you said, in a worldwide currency exchange america central bank should not ignore the effects of movements by other major central banks, with no consistent free-trade principles governing global monetary policy, the fed must take proactive steps to ensure the u.s. can compete
successfully. so i guess my direct question after reading these things you have said and written, is it your view of the major american trading partner were to significantly devalue its currency intentionally, aren't you saying that the u.s. should match that evaluation and the fed should play a role in achieving that evaluation? >> thank you senator toomey for the question. and also for our discussion the other day which i thought was very substantive. i agree with what you are saying that monetary policy executed by the federal reserve is directed as achieving the domestic economic objective and they have been outlined clearly by congress. i had said that among the factors that we need to consider
in order to become a member of the board of governors, the political context of global economy and global finance and i think we have to be aware of what other central banks are doing, last year 49 central banks lowered their interest rate which caused their currencies to depreciate relative to the dollar and it wasn't until july that are federal reserve decided likewis- >> i know i only have five minutes and were down to one. my question is, i think the only rational conclusion one can come to from reading what you have written and what you have said is you believe the fed should actively seek to devalue our currency if other countries are doing that and i think that's a very dangerous path to go down. mutual currency devaluation is not in our interest.
and it is not the mandate of the fed to pursue it, i don't think it's achievable, your multiple currencies, which one would you be watching the euro, they could be using under moving in different directions. at that that has been o unable o achieve the inflammation market for many years, why we should think the fed by changing monetary policy will be able to achieve currency target is very, very unlikely. . . .
>> it can affect employment especially with our manufacturers. >> but we can observe that from domestic data and don't have to reference foreign-exchange rates to determine if there is an adverse problem with employment in the u.s. sorry, mr. chairman. >> senator. >> thank you, i want to thank you for both of you for being here in front of the committee and willingness to serve on the fed. i will start with you, ms. shelton, do you think it's a good idea to sell our public lands? >> to sell off public lands? senator tester, honesty, i've never considered that they don't have opinion. >> in 2009 book you wrote you
said for the purpose of balancing our budget we should consider and i paraphrase postal service, amtrak and federal lands. >> i do not recall taking that position and it's not something i'm strongly advocating the. >> it's an important issue and where do you live? >> i live in fredericksburg virginia. >> they don't have a lot of federal lands in montana we do have a lot of public lands. if we have got people out there in positions of power that are in the position of making sure that our employment is maximized as we do in the fed and we have people that have written about those selling off like the postal service and our federal land holdings that is a problem. >> would you see it as a problem? >> i understand what she said
that that would be a problem for the local economy or area you are speaking of. >> but not generally. >> well, i think it's always disconcerting to change employment or make some transition away. >> it's also important to note that these public lands drive an economy in montana montana has only one lane people's but about $7 million to our economy in montana but if someone would advocate this would have pretty significant impacts on the 72000 people who work in the outdoor industry in montana. >> i believe, senator tester, that is a decision of the congress but would have nothing to do with the federal reserve. >> you are right but it does have impacts on people that are in positions of power and i will tell you as been pointed out as the federal reserve is a position of power. one of the things i like invokes is consistency.
i want to quote you something that you wrote very recently, six months ago, because you said today that this is for independence of the fed spirit absolutely. >> six month ago in a wall street journal op-ed and i will quote this directly, it would be in keeping with the historical mandate if they were to presume a more coordinated relationship with both congress and the president. if that is not shipping the independence to 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 accountability and i was quoting from the 1978 humphrey hawkins act which was passed by the [inaudible] and what i was explaining is that that legislative language actually sets out six economic
objectives for the country and it says quote, attainment of these objectives should be facilitated by improved coordination among the president, congress and board of governors of the federal reserve. that is in the law. i did not write that. >> i am telling you that if you believe that you need to pursue a work-related relationship with congress and the president that these questions are about presidents tweeting then potential me -- israel. >> it is surprising to me to read that in the language. >> you wrote it. >> it surprised me to read it and that i revealed that and i have been surprised it's been attributed to meet rather than to congress who wrote it. >> because you wrote it. >> i was quoting from the legislation. >> lets go a different direction with the gold standard. also let's return to the gold standard and you hope the vice president pence with haste and the return to the gold standard
and you are talking about a new if that isn't advocating for returning to the gold standard what is. >> i would differentiate that brenton was a disagreement with the gold exchange standard when only the united states as the anchor for any kind of convertibility response bullies and what i would suggest there is that having a stable, international, level monetary plainfield is supportive of free trade, consistent with the pencils of comparative advantage and mutual benefit. >> doctor shelton, i appreciate your willingness to serve, i do. but i will tell you something when i read things and they say the things as directly as you said them, which i appreciate by the way, you come in here and, by the way, have tried to justify the dog does not hunt
and i'm just telling you, it doesn't. you have a lifetime of writings and not once are there things in there that would indicate anything other than what i pointed out in this committee meeting, whether sale for public lands or postal service or gold standard or independence of the fed, think he was determined. >> senator rounds. >> thank you, mr. chairman, first of all, welcome to the committee. i would like to go back a little bit we had the opportunity to have the chairman in front of us yesterday and i would like to remind my colleague what the chairman, front of mine, said about groupthink. chairman powell agreed to pay the groupthink is unhealthy and i'm strongly inclined to think that you need to hear all sides of the case and to that end, doctor waller, doctor shelton, i think both of you that would
provide fresh perspectives and that is healthy. i did have the opportunity to delve into separate items and i will begin with doctor waller and i would like to talk about from the st. louis fed and could you talk about the differences between with regard to the aggie economy versus what we find and allow which is been significant in terms of its growth and yet the aggie economy has been proven slow and perhaps in a large part because we been on the tip of the spear for the trade negotiations going on. could you share about what you've seen in your previous work? >> thank you, senator. as i mentioned in my opening statement in large part of my job as we talked to members of the committee bankers, business people we have a big act
section. in fact our district's largest soybean producer in the united states and the trade wars with china have a huge fact on our aggie sector and we hear that all the time we got in talk. we hope some of the deals that have assigned will reverse this and will be persistent decline and also hopefully this will put support under land prices which had been drifting down for the last five years which could potentially create problems for rural and act banks if that continues but we have some of the trade uncertainty with china will alleviate pressure. >> thank you. doctor shelton, they made it clear that they think that you come from a unique perspective with regard to your discussions in an academic sense with regarding to the gold standard. they have suggested or at least some of your critics have
suggested that you would not be independent and i've looked at some of your writings and it would appear to me that you have taken almost a devil's advocate approach in some cases and i think the chairman of the fed, chairman powell has made it clear that he looks for different points of view and at the same time we ask a question and we leave the question a little bit but at like to give you a few minutes and we have one minute 53 seconds left but would you take some time to 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 as regard to being both 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 is important. i would like you to share your thoughts without being led into
any question. >> thank you, i appreciate that, senator rounds. i keep going to the fact that power to regulate the value of u.s. money is granted by our constitution to congress. it is in article one section eight. in the very same sentence congress is given the power to define official weights and measures for our country and any 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 is important that it serve that purpose as a reliable measure so that people can plan their lives and 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 is through money that we transmit market signals and you need clarity of those signals for supply and demand so they can figure out the optimal solution. i think that the importance of dealing responsible in discussions at the federal reserve is the response ability to remember that the money has to work for everyone and that, in a sense, it's a moral contract between the government and assistance. >> thank you, thank you, mr. chairman. >> thank you, senator smith. >> thank you. thank you for both of you for being here and for being willing to serve and welcome to your families also. as you can see many of us on the committee have great interest and concern about the independence of the fed so i want to pursue this a little bit. doctor waller, do you believe that the fed was designed for the independent institution, yes. >> yes, i do.
>> and do you think that independence is an important feature that allows the fed to work. >> yes, i do. the structure of the fed is designed to give the fed the response ability to conduct monetary policy as it sees fit according to achieving the goals of congress that is laid out. congress gives us the goals and give up the freedom to do what we think is best. >> because the opposite of an independent fed is the fed that is politicized that would allow short-term interest of a political leader to trump what isn't the best interest of americans and the american economy in the long run. so what would be your judgment of a statement like this that this is a quote that noting that quote, don't see any reference to independence in the legislation that is defining the
role of the federal reserve for the united states or think it is healthy that "-right-double-quote, criticism from the white house at the fed is out in the open. what to think of that, doctor waller? >> the institutional design to the central bank is what gives us independence and accommodation of having political confirmed board members plus regional fed presidents were not regional appointees or provide a check in 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 and the fact that we don't make policy by one person that it is a group that has to make that decision requires some degree of consensus of how you develop policy and that is the tough j job. >> but the fact there isn't a statement that there isn't reference independence in the legislation that defines the role of the federal reserve to think that means there isn't independence?
>> no, as i said, i view it as the institutional design. >> doctor shelton, let me ask you the same initial question but do you believe in independence? >> absolutely, senator smith. >> if that is the case what did you mean when you told a ubs executive and an interview for month ago that you quote don't see any reference to independence in the legislators that is defined the role of the federal reserve for the united states but 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. as i say, i was surprised it was not asserted more clearly but as doctor waller was saying the operational autonomy of the federal reserve assures its independence over and 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. 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. >> you also said that you think this is healthy that quote criticism from the white house or the fed is out in the open. do you think it is healthy for the president to criticize the fed? >> as i have said in the past some federal reserve officials have suggested they were quietly pressured so at least it is transparent but i have 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 every citizen. >> but isn't what the present didn't doing here at an attempt to influence the flood which one
that suggest the president doesn't believe in the independence of fed because he is, in fact, attempted to uses his inuvik and power to influence the fed but doesn't that mean he doesn't himself believe in the independence of the fed? >> i don't think people in that position a response ability as someone is serving on the fed is easily intimidated. i think that is what you are looking for, people who think for themselves and that is why i appreciate this committee judging nominees for exactly that characteristic. i do not think that anyone on the fomc is affected by political pressure. >> well, my view it is clearly the president attempting to undermine the independence of the fed and this is an issue are very concerned about. i know i am out of time, mr. chair, but thank you. >> senator kennedy, thank you. >> doctor shelton, i want you to
send a couple facts for me. i assume you are queen for a day and you're running the 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 and except the bottom has fallen out of consumer confidence and spending, unemployment has jumped from three and half percent, 6.5% in a very short period of time and we are in a recession. how would you get us out? >> thank you for the question. >> you are welcome. >> it is hard to imagine that situation but. >> assume it is true and tell me if you could because they only give us five minutes and how you would get us out. >> it wouldn't be up to me even if i were queen or chairman. that is the importance --
>> you're using my time, doc. let's please assume what i just told you and you're running the federal reserve and i thank you understand the question. >> i would go to the mandate and 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 have to talk to anybody what would you do and how will you have a recession. >> the problem we have now is we are very close to zero on interest rates. >> yes, ma'am what would you do to get us out of the recession? >> i think we are down to the other tools at the federal reserve has. >> would you lower interest rates? >> i would never go negative and i'm adverse to that idea and so the alternative is -- >> i'm not trained to be rude but i only have five minutes but would you take them to zero? >> at the maximum and i don't
like to say -- you would not illuminate courses of action but i'd be reluctant to go to back to that and the fed can always engage in -- >> you've taken them to zero but you would not go negative. >> i think it undermines the financial structure. >> you would go to quantitative easing? >> very reluctantly but i think first i would make it clear there are limits to monetary policy and at some point you really can't stimulate growth. >> i'm sorry, i'm sorry to drop but you would go to quantitativ- >> that is your only alternative. if you think -- >> what volumes would you use? we've gone from the .526.5 and how much would you buy? a month. >> every round of two ee has been less effective than the prior round. >> i understand so how will you -- >> i would probably look at what most recent one was so we are
looking at approximately 80 billion a month. >> do you think congress ought to start -- we are already debt so we are already like a problem gambler teasing his losses. would you recommend fiscal stimulus and then we had a stimulus package? >> obviously that is up to congress. >> again, i'm asking your recommendation. >> there might be incentives. >> would you recommend we go to a stimulus package? >> it depends what to disparate if it is just spending more for projects that aren't ready i don't think that is good but if you can restore business confidence and encouraged business capital investment to tax forms that could be helpful. >> so you think we should just increase deficit spending. >> i don't like deficits. >> i understand but i'm liking what you would do. >> in an emergency situation the
most important thing is to restore that consumer. >> i get that but would you recommend that we deficit spend dramatically? >> reluctantly, if it appears, stimulus potential in doing so but that would be -- >> that is a yes. >> if you are down to the wire. >> i have 38 seconds. could you answer my question? what would you do? >> this would be the standard monetary policy toolkit. you cut interest rates probably as low as you could to zero and step two you would typically use forward guidance which we try to signal to the markets how long you intend to keep interest rates low. >> you try to talk them down. >> right, took them down. i would agree you need fiscal support since were constrained because i personally would not want to go negative. >> would you do quantitative easing? >> quantitative easing would be a facility if you try to lower
longer-term. >> how much? >> that would be a quantitative measure and i don't -- >> what does your gut tell me. >> we gone to 3.5 to 6.5 and i will land this plane. [laughter] >> 500 million. >> thank you. thank you. >> and cupid senator cortez master was. >> i appreciated the line of questioning. it was enlightening. doctor shelton, let me ask you this, in july 2015 you presented at the cato university and at that event in response to a question you said in a quote, i don't trust government statistics on gdp growth or on inflation. what is specifically about those specifics do you distrust? >> i think it's a challenge to look at particularly with regard to inflation the variety of industries and mostly familiar with the consumer price index
and the fed used the personal consumption expenditures index and i am 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 then say a telephone from 20 years ago and so i'm not saying i distrust but i am saying that it's difficult to measure consistently through time consumer price industries and use that as the main tool for making monetary policies. >> are there other government statistics you feel the same way about? >> i am not sure but what i would suggest. >> let me ask you this. there has 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 really the last paragraph on the section that talks about gold convertibility you basically say eliminating the federal deposit insurance would restore the essential character banking as a vehicle for channeling financial capital and productive investments while striving to meet the risk and timing preferences of depositors. if you were appointed to the federal reserve would you still consider that as an opportunity or option to focus on and advocate for the elimination of the federal deposit insurance? >> senator, no. i think that having to deposit concerns isn't essential to maintain trust in american banking center and i was merely using an example to explain moral hazards 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 is
important the owners of the bank bear the brunt of the cost of paying for failure rather than having the government stepping. >> okay, i guess along with my colleagues i am concerned and let me just say this, you have a history of writings and you should be proud of them. they are your writings and your belief based on your background and expires but when you come before us for this position it seems like you're taking a 180-degree position on all of this just to be appointed to this position. how do we trust that whether you're before today or who you are today versus your writings in the past who are we getting that will be on the federal reserve? one final thing, you said you're from fredericksburg, virginia but representing california on the federal reserve, 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 governors are assigned effectively to a district and at my correlation with the san francisco district bank is quite strong. i was born and raised in california and my family behind we can verify that. i went to school in california and in oregon, my graduate work in utah and although states within the san francisco district. my husband and i owned homes in utah and california and my first position after receiving my doctorate was at the hoover institution in san francisco or in palo alto near to san francisco so i have a very strong affiliation with california and feel close to that area. >> thank you. who are we getting on the board? the woman who wrote extensively and should be proud of it or the
one that sits before us today and is countering everything she has said in the past. help me with that? >> senator, you are getting the authentic judy shelton. i feel like i have been intellectually consistent throughout my career always focusing on monetary policy that is conducive to productive economic growth. >> thank you. >> senator cotton. >> thank you, mr. chairman. i know there's been a lot of talk about gold today and there is an old saying work it's worth its weight in gold which goes back to the fact that early coins actually were weighed and that is why peso means weight and the british pound is called the pound and the lira means a pound which has the same latin root word as libra, digital credits and see that facebook has proposed as well which
brings me to my point that i want to talk about with ms. shelton, the need for digital currency to maintain the dollars primacy in the world. these examples are just a few of how throughout history currencies have always had the same properties whether they are liquid, stable, values, eliminated inefficiencies of bartering. and whether we need to add new property to our currency, namely that it be digital. i'm not talking here about crypto currency but 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 constant institutions we have whether institution is the dollar or the federal reserve or simply the rule of law and rights to property and contacted the
united states we need the district currency last, i would argue, internally but rather to help preserve the privacy of the dollar worldwide. for instance, china has widescale use of digital payment systems inside china but they hope to use the digital line worldwide to replace the dollar as the reserve currency. with all the economic benefits that brings to the united states and especially the security benefits it brings to enforced sanctions so to use an example china buys a lot of agricultural products from argentina and they don't contract those in transact in pesos or in [inaudible] but in dollars and it would give us great leverage in enforcing our stations worldwide. if we do not move to add digitization to the dollar as a feature of those timeless a struggle properties and
currencies i worry a lot at the digital one could ultimately replace the reserve currency just as we replaced the pound in the last century. missus shelton, could you talk to us about what you on the federal reserve board and what the federal reserve board 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 is an extremely important discussion and i agree with your assessment. i think we are compelled to think about that and the dollar is the most important instrument of soft power that we have around the world. yes, it is the dominant reserve currency but we can't rest on our laurels in that regard because as you suggested rival nations are working very
diligently to have an alternative to the dollar and while they can't beat us as a currency they can add features because there is a demand for digital access to baking services into 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 and the most utilized and we need and tech innovation to keep us going in the right direction and to be a leader instead of passively observing what other countries might do. >> again, to reiterate speaking properly about the primacy of the dollar worldwide not to mastic purposes. governor gave what i thought was a pretty good speech last week about central bank, digital currencies and she cited one of the reasons why the developing companies made such high degrees of cash use and weak financial
institutions and underdeveloped payment systems and risk of inflation and mustard currencies. we don't base those to the same degree. what i am talking about is the need to have a dollar that is competitive in the world market that has earned its position over the last century and it is why we replaced the pound and is maintained that position against competitors say like against the euro and i don't want to see the date where we wake up to have a moment with our currency which we are no longer the world reserve currency. my time has expired but thank you for your willingness to serve. >> thank you. senator joseph. >> thank you, the determined doctor waller, thank you for your work and i appreciated that you not had as many questions but i appreciate that and i do want to direct my questioning to doctor shelton. doctor shelton, in 2011 there was a guy named bernard -- a
creator of a fictional currency called the liberty dollar and convicted in a north carolina federal jury making, possessing and selling $60 million worth of his own precious metal backed currency and the u.s. mint had to issue a warning about this because he was putting on this that they had to issue a warning that was not legal tender even though it was marked with dollar signs the more dollar usa in said trust in god instead of god we trust and the prosecutor from north carolina in that case called him and accused him of domestic terrorism. he'd written in his book that he denied 911 that happened compared it to those people who lee harvey oswald did not kill president kennedy. i would call this guy an outlier as my senator said outliers were completely out of the mainstream but in a 2012 interview you called this guy the rosa parks
of monetary policy. i've got to tell you i'm a native albanian and rosa parks has got a statue in the united states capitol and she had in one act of courage defied the jim crow laws and try to bring down the walls of oppression that kept a race of people from voting and from basic human and civil rights. this guy seems to be issuing defiance on a federal government policy, monetary policy and you helped prays that because he is challenging with the federal government has done with regard to carrying out the constitutional response fully to maintain a thing of value at the currency cato institute and when he prays you sent him i very much admire your boldness and all density and i thank you are challenging the fed in a way i respect and what am i missing here, that is not out of the mainstream of america and of history. >> i don't know what is. tell me what i am a scene 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 and how that compares to the courage of someone like rosa parks? >> senator jones, the last thing i would ever do is demean the courage of rosa parks. >> well, you did. you do realize that? >> i apologize for the comparison. i truly do. the gentleman you are referring to he did an audacious thing and i would never condone violence. >> did you admire what he did with the liberty dollar and $60 million and being convicted in a federal crimes in north carolina? do you admire that? >> i believe he was testing the idea that the constitution in article one section ten says that states can only use gold
and silver as legal tender. >> within the federal reserve is that something you want to test? you will be within this and you will be in this if you get confirmed. is that something you want to test or are you not taking that inspiration inside the federal reserve? is that what we are to think? >> no, senator. as i have said a number of times this morning is important to a knowledge the power to regulate the value of u.s. money is granted to congress by the constitution, not to the fed. congress created the federal reserve as an independent agency and gave it monetary mandate to promote maximum employment stable prices and moderate long-term interest rates. that is the framework on which i would make decisions it confirmed. >> you have indicated at one time that you thought we might want to go to a standard like a euro creating something for north america currency called -- do you still believe that? is it a good policy?
>> senator, sometimes i am asked to think out of the box and look at future scenarios. >> i am just asking you a quick question, i have 30 seconds. >> 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 appreciate against the dollar it changes the terms of trade even after they've been carefully negotiated. >> doctor shelton, i have to be honest with you, i've heard the question answers and have several senators here question what you've written in the past with what they say today and remind me of a comment that my old boss, senator who i said it is he now, talked another people having a confirmation conversion but i think he said it best that what we will get is the authentic judy shelton and that is what bothers me tremendously but thank you, mr. chair. >> senator tillis. >> thank you, mr. chairman. thank you both for being here and congratulations to the family. i am sure you are proud into the
shelton family your heart rate will reduce ten-20 beats a minute and about 30 minutes. i want to back -- i had not planned on doing this but i watched most of the hearing before i came down here and i have heard a lot of people quoting your writings. i want to write something out and get you to respond to it. i want to make sure that people understand the difference they are using quotes that you wrote that were actually quotations from other writings. for example, in one article was used by senator tester and referenced by others that public loss has full employment and balanced growth act of 1978 and in that public 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, congress and the
board of governors of the federal reserve. that is what you are quoting, right? >> exactly, senator subject and that was the basis for them thinking you were asserting the other judy shelton was asserting something else then your words but those weren't your words, right? >> i was quoting. >> and in fact, they are the words of congress. also, when we talk about -- i find it remarkable on this committee that we are talking about chairman powell was here yesterday and we are talking about undue political influence on the fed and that is what we do every day when we bring the fed up before this committee. we are trying to exert our political influence and i would say that the president is 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 preview it made a point about at least in this case it's transparent and that is one thing you can say about the president and his munication style. i think we are fully ourselves if we think any president has
not tried to have a discussion about their view of where you need to go. could you all site and i will give you a chance to talk because you get been given a good path with doctor shelton but doctor waller, give me an example of where you've seen political pressure ultimately drive a political decision on the part of the fed. >> while, there has been a long history of what used to be called bashing and coercion from the administrator of the fed but there is a long history. >> but an example of where that political pressure -- we will all talk about the sphere, uncertainty and doubt and politicized but i'm just try to give an example of where that political pressure actually drove the fed to do or make a decision that wasn't founded in the mandate. >> so the classic example in
that monetary history is richard nixon and arthur burns. nixon petronas amount of pressure on burns to keep interest rates low to help with his election with burns follow through with and ask the best-known example i have. >> i will tell you some type of us see political influence work in reverse and both are aware the former governor comments about making things go south so president trump can get reelected and do think that's inappropriate? >> i hope so. >> i thought it was totally inappropriate speaking. >> most certainly. >> now i want to talk about -- we also talk about independence and i agreed with whatever was that on both sides of the aisle about independence. from undue political pressure what i've got a real problem with in a couple of examples right now is the fed asserting its independence on oversight or the omission of procedures accurate chairman powell in
response to a question i had about [inaudible] the gao assessment by not having been appropriately promulgated concerns me and i get that you need to be independent but you have to be answerable to the laws that other regular agencies are answerable to. i will not ask you to respond to this question out because will finish on time but the general counsel in the middle of june last year in response to the gao assessment that guidance had risen to a role and should be promulgated in that matter said we are assessing whether or not our guidance is accountable to the gao and that's an absolutely unacceptable and separate for anyone hear you all know this. chairman powell can give a comment in an oversight hearing or make a speech and it can have a ripple effect rising to a level of a rule and to sit here and say that well, guidance isn't really rulemaking or material to the examination process defies any knowledge i
have of how examinations go on and what goes on in those confidential meetings so i am going to set and submit for the record roughly what i asked the chairman and i would like your response, thank you all and congratulations. >> thank you, senator. [crowd boos] thank you. i think both of you for being here. ms. shelton i am sure you have 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 -- or the head of the federal reserve you criticize them for let's see, cheap money, fake economy and you are a deficit hawk and wanted tight money then and in 2011 you criticized the federal reserve
for weakening the dollar to improve our exports in order to improve our economy back home and the only pattern that i see here is a political one, not an economic one. i think that is what concerns a lot of people because we want somebody on the federal reserve who will look at the economic facts and draw conclusions from those not 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 actually had concerns myself over the years about deficits and debt but here is what you wrote back in 2009 which, of course, during the economic downturn and so the economy was hurting and obviously economic stabilizers kicked into a fact but you wrote in "the wall street journal" on any fiscal deficits, unconscionable acute relations 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 and our nation's money is being severely compromised and it will be gloom and doom. none of those predictions proved to be true, did they? >> i think it was a very unhappy time in the wake of the 2008 crisis that was devastating across the country and we engaged with the federal reserve seeking monetary stimulus and extreme measures going to near zero interest rates and massive purchases of government assets. >> right, i think i heard a news change earlier where and 70 kennedy said if we had that kind of economic downturn you would look at using those tools, is that correct? >> yes. >> but i mean, the record is pretty clear. you criticized them strongly for
taking emergency provisions back then and you said the increase in the national debt was unconscionable even though, as you know, when you have economic downturns your gdp goes down in your economic stabilizers go into effect so there is more money spent on things like medicaid but i guess my question is was it unconscionable for president trump to add $2 trillion to that already unconscionable debt in passing the tax cut which is now taking projected debt to gdp to much higher levels than what you predicted and our annual deficits for the last year the obama administration, the deficit was 3.2% of gdp and in 2019 it is 4.6% 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 and 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've 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 and there is a cost to that for the years. >> i'm sorry, are you are just not answering my question but it was a simple question but look, we can -- people are entitled to their own opinion but not the facts that the congressional budget office is an analysis of the fiscal stimulus disputes exactly what you just said. my question to you was is it unconscionable to increase the
debt over the next ten years by $2 trillion if it was already at unconscionable levels back in 2009, is it unconscionable to add another to join dollars to an already unconscionable debt, yes or no? >> i think we should always strive to reduce the deficit because it does but a burden on future generations. >> see, this is the problem with this is a problem, you have a lot of writings, strong ratings of a very political nature and now you are sponsored a are totally inconsistent with the positions you've taken in the past and the only thing that is changed is who is in the white house. thank you, mr. chairman. >> senator warner. >> you are down to the last one but let me thank both of you for the meetings we had. i enjoyed our conversations with both of you. i do hope doctor shelton in terms of our conversation about common ties to virginia and the
fact that we both live in nominated from virginia to the european bank that changing that status as well and how the administration has put you forward this time. i know we talked about your wall street journal editorial. i went back and read it and i thank you put forward some views i don't necessarily agree with but you put them forth clearly. the one thing i keep coming back to is humphrey hawkins and what senator tillis raised as well as the think they did mention in the article but i don't thank you mentioned in your commentary to most of the questions, at least that i heard, is that humphrey hawkins expired in 2020 and it is no longer the law of the land. i'm not sure that is still a fair notion and i was going to
also raise the questions, senator van hollen raised, is that we talk about this issue in my office. i feel very strongly around debt and deficit and let me be clear, and of the either clinical party has much legitimacy on the issue anymore but 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 and both parties tried to bring down the debt and deficit to the chagrin of folks on both sides of the isle. that suddenly got blessed under president trump and i know you have already adjusted but it is a real concern to me. i don't doubt your integrity but i question your consistency on this but i want to go to another piece.
in your writings you said that would be appropriate in structure for them [inaudible] in an area of worldwide currency exchange and question i feel and i agree with both parties against currency manipulation and it is a bad thing but i don't think current statement of relation falters in the fed's responsibility and do you want to speak to that? >> it doesn't fall under the fed's response ability. any other prior monetary arrangement had to be approved by congress and i am 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 calls for more coordination,
legislation does and i do want to point out that in the articles that you are referring to specifically say at humphrey hawkins expired in the year -- >> i feel like many of the conversations that you have had in your answers you have cited that without full explanation and i feel strongly on your change on the debt and deficit issue and i have concerns about the fed in terms of playing a role in the currency manipulation and i think it is outside and gambits and i want to also reference one of my colleagues points that i don't fully agree that every president and every member of congress is always trying to overly influence the fed. i think the fed -- doctor waller, your comp comments about president nixon and chairman burns wasn't dead on accurate one.
i think it had enormous blowback. i guess one of the challenges that i am grappling with is that the nomination that i thank you have had a series of views to go beyond the dual mandate. i commend you frankly for some of that creative sets of views you have and some i agree with and some i do not agree with but the challenge right now is unprecedented that we have a president that goes so far beyond the norms of trying to outdo the influence all independent parts of our government and the fed independence being something we generally share complete commonality with and when your views and some of your writings might take away is frankly with reinforced that effort to more politically manipulate the fed or go beyond the mandate and with this level of influence
that president trump is willing to influence on every action and again unprecedented in terms of his attacks on chairman powell it raises great concerns. i very much appreciate you both being willing and i appreciate doctor shelton, i did enjoy our conversation yesterday. >> i did to. >> i raise -- i thank you for the chance to raise those concerned. >> to our nominees, senator warner, i'm glad he was last, senator brown would like to have another couple of questions so i told him he will have a couple of minutes. so will senator shelby and senator kelby and i'm not encouraging it but i can give you another. >> you not encouraging more questions. [inaudible conversations] >> the vote started ten minutes ago siu don't have much time. [laughter]
>> mr. waller, given ms. shelton's answers on monetary policy and her 30 years of writing on the gold standard would you recommend [inaudible] with the fed? >> senator, that is your decision not mine. >> i figured that would be your answer but let me ask in a different way. here in st. louis. >> correct. >> if you are interviewing for your research to permit when you hire her? >> i have a very different researched apartment in terms of the type of academic research we do. judy has been much more in the public light in terms of her research. my department is all publishing for academic journals. >> someone brought her body of work in writing to you would you hire her or him. >> like i said her outlets are compared to what we expect our staff are two different elements for your research.
>> mr. chairman, last statement put the take away is we don't know who we are nominating to the federal reserve. ms. shelton had disavowed for years of her writing as so many 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 who are concerned, senator shelby is concerned and i've heard senator toomey's and others but conservatives outside of this body are concerned, american enterprise institute urge the senate to reject ms. shelton's nomination and wrote normally a person would be in favor of either an easy monetary policy to simile the economy or a hard monetary policy to exert discipline on the government paid either way one would not expect her to hold both views at the same time yet ms. shelton does exactly that. aei's -- wrote, shelton's prescription for monetary policy is changed so dramatically her rationale for it makes so little sense and it is to make her appointments to the fed a gavel.
does she believe what she is now saying or is she just saying what trump wants to hear? if the latter, and the fed would she revert to the rigid opposition to inflate at any cost and that has marked most of her career over to stick with whatever trump wants? >> that was a little bit too long of a question. >> that was an answer. >> senator shelby. >> change of subject, just a little bit but still in economics. for the years the communist hat as you know adhere to the phillips curve. it describes an inverse relationship between inflation rates and unemployment rates. this was mentioned earlier today. typically lower unemployment has generally produced higher inflation and this is in the past, i guess. in recent years as unemployment
has decreased, inflation rates remain low, thank god. what are your thoughts on the current relationship between unemployment and inflation and how has the relationship between the two changed over time? is there a new in equation here, doctor waller? >> i will make two comments. first of all, if you were to go to any phd program and economics today and you were to talk to fundamental model of an opponent there is no inflation in that model. even at that level of graduate training nobody talks about inflation or determining a level of unemployment. second point,. >> but when you think of prize stability you think the spectrum of inflation. >> correct. >> that is where i was going with my second point is that one thing we learned on monetary policy research is that if you have a central bank who is committed to a 2% inflation target that is credible that
their actions will keep inflation near that target and that inflation never really moves off that target no matter what happens with the unemployed bit rates. the relationship looks like it is completely broken down but because the central bank has so much good ability in its inflation target the nobody deviates from it. ... >> is a different way to think about how to raise this. >> an option it would be. it. >> your credibility is everything. and that is it. you laid it out, it is the confidence in our currencies. in our answers and our intuition. >> the confidence in the nation itself right.
>> correct. >> senator shelby, i think that's one of the most profound developments that is happened particularly in the last few years. the change in thinking in the realization that the federal reserve, which is deep in the trade-off mentality that you can have low-inflation and low unemployment at the same time. in fact, it is a perfect stable foundation for economic growth and that is when you start to see not just the gdp increased but the increases in productivity which then justifies gains in wages and the increased output such that you don't get inflation. i think this is a very important for the future. >> so low unemployment and stable low-inflation. >> that is correct.
>> thank you. i will take the last word. or did you have a question. i will do that now then. [inaudible question]. >> that will take longer than 30 seconds. in the sense as they fed was draining the reserves, it clearly was not distributed correctly. why didn't these reserves flow from some banks to those who needed it. that is been something we've been trying to study and understand. >> i think it is partially a regulatory issue in the sense that excess reserves have almost become mandatory. there eight times higher than required reserves. i think that the quantity preferences of bank examiners makes banks feel that they need to keep that ready cash and that
they were reluctant even to chase and tenant have percent overnight repo rate. >> thank you. i just wanted to make final comments. all new there was going to be a very aggressive hearing today. i think you have been very solid in explaining and defending your positions. the reason that i introduced it into the record an article from the wall street journal, was just to help make the point that this is an orchestrated calculated effort. i think you have done very well. i just wanted to tell you that you have explained, i think, very capably the positions that you take and the rationale for them.
>> if you will enter into the record, i would like to refer the article. >> will you just quoted. and with that, we are on her way to her vote. thank you very much. [background sounds]. >> this week we are featuring tv ramps showcasing what is available every weekend on "c-span2". tonight starting at 8:00 p.m., former secretary of state, talks about u.s. china relations in the 21st century. then the cory, a retired service officer served in the middle east for 25 years, talks about u.s. policy in the region.
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