S. HRG. 116–171 NOMINATIONS OF JUDY SHELTON AND CHRISTOPHER WALLER HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED SIXTEENTH CONGRESS SECOND SESSION ON NOMINATIONS OF: JUDY SHELTON, OF CALIFORNIA, TO BE A MEMBER OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM CHRISTOPHER WALLER, OF MINNESOTA, TO BE A MEMBER OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FEBRUARY 13, 2020 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: https://www.govinfo.gov/ U.S. GOVERNMENT PUBLISHING OFFICE 40–240 PDF WASHINGTON : 2020 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS MIKE CRAPO, Idaho, Chairman RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio PATRICK J. TOOMEY, Pennsylvania JACK REED, Rhode Island TIM SCOTT, South Carolina ROBERT MENENDEZ, New Jersey BEN SASSE, Nebraska JON TESTER, Montana TOM COTTON, Arkansas MARK R. WARNER, Virginia MIKE ROUNDS, South Dakota ELIZABETH WARREN, Massachusetts DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada MARTHA MCSALLY, Arizona DOUG JONES, Alabama JERRY MORAN, Kansas TINA SMITH, Minnesota KEVIN CRAMER, North Dakota KYRSTEN SINEMA, Arizona GREGG RICHARD, Staff Director LAURA SWANSON, Democratic Staff Director CATHERINE FUCHS, Counsel BRANDON BEALL, Professional Staff Member ELISHA TUKU, Democratic Chief Counsel COREY FRAYER, Democratic Professional Staff Member CAMERON RICKER, Chief Clerk SHELVIN SIMMONS, IT Director CHARLES J. MOFFAT, Hearing Clerk JIM CROWELL, Editor (II) CONTENTS THURSDAY, FEBRUARY 13, 2020 Page Opening statement of Chairman Crapo ................................................................. 1 Prepared statement .......................................................................................... 37 Opening statements, comments, or prepared statements of: Senator Brown .................................................................................................. 2 Prepared statement ................................................................................... 38 NOMINEES Judy Shelton, of California, to be a Member of the Board of Governors of the Federal Reserve System ............................................................................ 5 Prepared statement .......................................................................................... 39 Biographical sketch of nominee ....................................................................... 41 Responses to written questions of: Senator Brown ........................................................................................... 70 Senator Sasse ............................................................................................ 78 Senator Rounds ......................................................................................... 82 Senator Reed .............................................................................................. 84 Senator Menendez ..................................................................................... 88 Senator Tester ........................................................................................... 89 Senator Warren ......................................................................................... 94 Senator Schatz ........................................................................................... 102 Senator Cortez Masto ................................................................................ 105 Senator Sinema ......................................................................................... 114 Christopher Waller, of Minnesota, to be a Member of the Board of Governors of the Federal Reserve System ............................................................................ 6 Prepared statement .......................................................................................... 53 Biographical sketch of nominee ....................................................................... 54 Responses to written questions of: Senator Brown ........................................................................................... 115 Senator Sasse ............................................................................................ 117 Senator Tillis ............................................................................................. 118 Senator Reed .............................................................................................. 122 Senator Tester ........................................................................................... 124 Senator Warren ......................................................................................... 126 Senator Schatz ........................................................................................... 134 Senator Cortez Masto ................................................................................ 134 Senator Sinema ......................................................................................... 142 ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD Letter from the Project on Government Oversight ............................................... 143 ‘‘The War on Judy Shelton’’, by the Editorial Board, Wall Street Journal, 2/12/2020 ............................................................................................................... 145 Letter of Support for nominee Christopher Waller ............................................... 148 ‘‘Banking and Government: An Unholy Alliance’’, Judy Shelton, Cato Journal 152 ‘‘North America Doesn’t Need Borders’’, by Judy Shelton, Wall Street Journal, 8/29/2000 ............................................................................................................... 157 ‘‘Trump Fed Pick Missed Almost Half of Board Meetings’’, Paul Kiernan, Wall Street Journal, 7/15/2019 ............................................................................ 160 (III) NOMINATIONS OF JUDY SHELTON AND CHRISTOPHER WALLER THURSDAY, FEBRUARY 13, 2020 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 9:02 a.m., in room SD–538, Dirksen Sen- ate Office Building, Hon. Mike Crapo, Chairman of the Committee, presiding. OPENING STATEMENT OF CHAIRMAN MIKE CRAPO Chairman CRAPO. 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 Fed- eral Reserve System and Dr. Christopher Waller to be a member of the Board of Governors of 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. We are fortunate to have these two highly qualified nominees ap- pearing today. These positions are critical to ensuring a safe, sound, and vibrant financial system and a healthy, growing econ- omy. 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, it oversees a significant portion of the banking sector, including large, regional, and com- munity banks, as well as certain nonbanks, and 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 posi- tions of Governors to ensure robust debate and more effective deci- sions. Before turning to Dr. Shelton and Dr. Waller, I am entering into the record a letter from over 100 economists supporting the nomi- nation of Dr. Waller and also an article from the Wall Street Jour- nal 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. (1) 2 Dr. Shelton’s experience working for nonprofits and academic in- stitutions forged her deep knowledge of democracy, economic the- ory, and monetary policy that will broaden and diversify the Fed’s 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 presi- dent of the St. Louis Fed in analyzing the economy and recom- mending U.S. monetary actions. His research on monetary theory and the microfoundations of money and payment systems will be valuable, as we are seeing a rise in cryptocurrencies and digital currency in this country and abroad. I am 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 Fed’s regulatory and super- visory activities consistent with the law, while also playing an im- portant role in striking the balance between tailored regulations and supervision and safety and soundness. I appreciate the positive meetings I 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 su- pervisory framework to support a vibrant, growing economy while also ensuring a