WASHINGTON – A Nobel Prize isn't enough to change Sen. Richard Shelby's mind about Peter Diamond. The Alabama Republican said Tuesday that Diamond's still not qualified to sit on the Federal Reserve.
Shelby, the highest-ranking Republican on the Senate Banking Committee, said he plans to oppose the Massachusetts Institute of Technology professor's nomination to the Fed for a third time. The opposition, which he stated at the panel's hearing on the nomination, raises the likelihood that President Barack Obama's choice for the Fed will be blocked again.
The Senate Banking Committee twice approved Diamond's nomination last year along partisan lines. He was never confirmed by the full Senate because Democrats lacked Republican support.
In October, Diamond and two other economists shared the Nobel Prize in economics for their work explaining why unemployment can remain high despite large numbers of job openings — a trend that is playing out now.
Obama nominated Diamond a third time in January.
Shelby on Tuesday called the Nobel Prize a major honor.
"Yet, being a Nobel recipient does not mean one is qualified for every conceivable position," Shelby said at the hearing, noting that Diamond lacks hands-on experience regulating banks and managing financial crises.
The committee's chairman, Sen. Tim Johnson, D-S.D., wants the panel to vote on the nomination soon. But no date has been set.
Shelby disagrees with Diamond over policy matters, including the nominee's support for action by the Fed and Congress to stimulate the economy and lower unemployment.
"In short, Dr. Diamond is an old-fashioned, big government Keynesian," Shelby said.
Sen. Patrick Toomey, R-Penn., at the hearing voiced concerns that rising prices for food, oil and other commodities could lead to lead to an inflation problem in the United States.
Diamond said he doubts that would happen. Consumers aren't spending at a rate that would trigger inflation, he said. And workers have little bargaining power to demand higher wages because the jobs market is healing only slowly.
Diamond said the Fed has the tools to slow inflation once the economy is strong again. At that time, the Fed will take steps to soak up money all the money it pumped into the economy during the recession. It also will start boosting interest rates. Most economists think that process will start early next year.