CNBC

The Federal Reserve has long been regarded as independent from political influence. But its reputation has been called in to question in recent months after unprecedented pressure to lower rates from President Donald Trump.

Potential Federal Reserve nominee Judy Shelton sees some grey area when it comes to the independence of the central bank. When asked by Markets Insider whether the central bank was currently an independent institution, Shelton said it would be "superficial" to answer yes or no.

Shelton is a former adviser to the Trump campaign and transition team. She often expresses support for the president's thinking and policies.

She pointed to administrative operations between the Federal Reserve and the Treasury Department, calling the agencies "fiscally incestuous."

Potential Federal Reserve nominee Judy Shelton, a former adviser to the Trump campaign and transition team, sees some grey area when it comes to the independence of the central bank.

The New York Times and Bloomberg reported in May that Shelton is being vetted for a seat on the Fed, and she told Markets Insider she has been contacted by the Office of Presidential Personnel.

When asked by Markets Insider whether the central bank was currently an independent institution, Shelton said it would be "superficial" to answer yes or no. She pointed to administrative operations between the Federal Reserve and the Treasury Department, calling the agencies "fiscally incestuous."

"The Fed itself calls itself an agency of government, an independent agency," she said. "But as I think I just walked you through, the Fed purchases the debt issued by Treasury and takes the interest from that and then remits that back to the Treasury as revenues to the federal budget. Then I think okay, so not so independent in a way."

President Donald Trump has attempted to fill the Fed with political allies, raising concern about its independence. He had previously considered conservative commentator Stephen Moore and former pizza china executive Herman Cain, staunch supporters of the president, for spots on the Board of Governors. Both ultimately withdrew amid scrutiny.

Trump has been known to lash out at the Fed, arguing that its policies have thwarted economic growth. While the central bank sets policy independent of the White House, the president and his administration have called on the central bank to lower interest rates.

"That's a hot-button issue," she said. "It's the kind where people will say, oh, she doesn't believe in the independence of the Federal Reserve. So then, it will take a longer answer. Whereas I suppose, it's easy to say no, it's 100 percent independent and they should never even talk to each other. That it should be more strict and I don't think they should be allowed to read newspapers. You could say that. But I don't think that's realistic."

"I would say my most true answer in my opinion is that you choose professional people, they rise to the position and they have integrity, and they don't wear blinders," Shelton said of whether the bank was independent from political influence. "And I just think you give responsible people the benefit of the doubt that they are not unduly influenced, that the primary goal of their service is to conduct it responsibly. I don't think people are intimidated or they wouldn't be in that position."

Read the full interview with Shelton here:

The White House is said to be vetting Judy Shelton for a seat on the Fed. She told us what she would bring to a central bank whose policies she has long criticized.

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