Terça-feira Jul 22 2025 10:20
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Shelton argues that the challenges facing the Fed go beyond short-term interest rate decisions, pointing to systemic issues within the institution itself. "What we're actually seeing is a deeper problem with the Fed, its model, its structure, and the way that the Fed staff orchestrates meetings," she said.
She further emphasized the need to integrate the Fed into a broader economic and national security strategy. Shelton also challenged the long-held argument defending Fed independence, calling it utterly undemocratic.
"The head of a federal agency… can't be fired by anyone, whether it's Congress or the president, anyone, that violates democratic governance," she said.
To highlight the Fed's current dysfunction, Shelton pointed to the institution's operational losses since September 2022 while emphasizing its "over $900 billion of unrealized capital losses in its own portfolio."
One of her strongest criticisms involved the Fed's policy of paying interest to commercial banks to incentivize them to hold reserves rather than lend, saying that this disincentivizes productive investment, "If you pay banks more money to hold their money risk-free at the Fed at very sizable interest rates, that is a more profitable use of funds for them than making loans."
Shelton's remarks come amid growing speculation that Fed Chair Powell could be removed "for cause" over a $2.5 billion headquarters renovation project.
More than a month ago, Texas Republican Senator Ted Cruz pushed to repeal interest on reserve balances (IORB), saying it would save a value of $2 trillion in deficit over the next ten years.
Cruz's push was supported by veteran economist Jeremy Siegel, who said: "This is not a trivial concern. The Fed going from a profit-contributing institution to a deficit-enhancing institution could trigger a more rigorous examination of its operating framework."
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