WASHINGTON (AP) — Federal Reserve Chair Jerome Powell has asked an inspector general to review the cost of the central bank's building renovations that White House officials have attacked as "ostentatious."
A spokesperson for the inspector general, an independent watchdog, confirmed the request and declined further comment. The request was previously reported by Axios.
The Fed has been renovating two of its office buildings in Washington for several years at a current cost estimate of about $2.5 billion, $700 million more than originally expected. The project was first approved by the Fed's governing board in 2017. Trump administration officials have seized on the expense and some alleged amenities in the remodeled buildings to extend their criticism of Powell, whom the president has attacked for not reducing the Fed's short-term rate.
On Thursday, Russ Vought, the president's top budget advisor, said that President Donald Trump is "extremely troubled" about the "ostentatious overhaul" and suggested that it may be violating local building rules.
The letter represented a sharp escalation in the Trump administration's efforts to gain greater control over the Fed, an independent agency charged with seeking stable prices and maximum employment. Independence from day-to-day politics has long been seen as a critical element in the Fed's ability to achieve those goals.
Trump has repeatedly demanded that Powell cut the short-term interest rate that the central bank controls, in part because the president believes it will lower the government's borrowing costs.
Trump in April threatened to fire Powell, though he later backed off those threats after stock prices fell in response. The Supreme Court has since signaled that the president doesn't have the authority to remove the Fed chair over a disagreement about interest rates.
The law governing the Fed does say that the chair can be fired “for cause,” such as wrongdoing by the chair or neglect of duty. Powell's term as chair ends in May 2026.
Vought's letter criticizes Powell's management of the Fed, suggesting that the administration could be trying to build a case to remove the chair for cause.
“I still think it’s unlikely, but not impossible that Trump would try to replace Powell before his term was up,” Stephen Moore, a former adviser to Trump and an economist at the Heritage Foundation, said.
The letter also charges that the Fed altered its building plans without notifying a Washington planning commission, known as the National Capital Planning Commission, and may be in violation of its rules. Trump recently has appointed two close aides to the commission.
Over the weekend, the Fed said in a post of "frequently asked questions" on its website about the building project that it is "not subect to the direction" of the commission and has only complied with its directives voluntarily. The Fed also said that it is accountable to the Senate and House of Representatives, and is also overseen by the independent inspector general, not the White House.
The Fed is not directly funded by taxpayers and instead uses proceeds from interest payments on its huge bond holdings and fees from banks to pay for its operations.
In the FAQ, the Fed said that the higher costs for its project stem from rising costs for materials, labor, and equipment. Construction costs generally have soared in recent years as a result of the 2022-2023 inflation spike, the largest in four decades. The central bank also says more asbestos has been discovered than expected, and it has had to comply with height restrictions in Washington by building more underground, at greater expense.
During a Senate hearing last month, Sen. Tim Scott, a Republican from South Carolina and chairman of the banking committee, criticized the Fed for “lavish renovations” that he said included “rooftop terraces, custom elevators that open into VIP dining rooms, (and) white marble finishes.”
Powell, however, disputed that characterization: “There’s no VIP dining room. There’s no new marble. ... There are no special elevators.” The Fed did change its building plans in 2023, he added.
The Fed also said in the FAQs that a “garden terrace” that it referenced in 2021 planning documents is a “ground-level front lawn” on top of a parking garage that is used to “help with stormwater management and to increase building efficiency and roof longevity.”
Meanwhile, Trump on Monday attacked Powell again, saying he has been “terrible” and “doesn’t know what the hell he’s doing.”
Powell has held off on further reductions given Trump’s tariffs, saying that Fed officials want to see how the import taxes influence inflation and economic growth.
The Fed’s concern is that rate cuts on the scale discussed by Trump could worsen inflation if, in fact, his tariffs result in higher prices across the U.S. economy. There is also the possibility that tariffs harm economic growth in ways that require rate cuts in order to limit job losses.
Trump and some of his officials have urged Powell to resign, though there is no indication he will leave before his term ends in May.
“Absent revelations of related misconduct by the Fed chair –- for which there is zero evidence to date -– that led to a collapse of support in the Senate, we are 100% confident Powell will not resign,” Krishna Guha, an analyst at investment bank Evercore ISI, wrote Monday.
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AP White House Writer Josh Boak contributed to this story.
Credit: AP
Credit: AP
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