Watchdog finds problems but no Fed misconduct in Powell-era renovation project

The Federal Reserve's Inspector General ​on Wednesday said it found no grounds for a criminal referral or evidence of administrative misconduct tied to ‌cost overruns ​in a US central bank renovation project that drew scorn from President Donald Trump and prompted a since-abandoned investigation of former Fed chief Jerome Powell. The Fed watchdog's report, however, did highlight extensive problems with project oversight that contributed to a roughly $1 billion cost overrun for the renovation of the central bank's two historic buildings on the National Mall in Washington.

Trump had latched onto the cost overrun on the project, which now has a price tag of about $2.4 billion, in his effort to ‌engineer Powell's ouster and gain influence over the direction of monetary policy. Trump also is trying to sack Fed Governor Lisa Cook over alleged wrongdoing in an unrelated matter. But the IG's report noted that "at no point during our evaluation did we find reasonable grounds to believe that a violation of federal criminal law had occurred requiring a referral to the US attorney general."

"Further, while our report outlines deficiencies in the management of the renovation project, resulting in our recommendation of corrective actions in accordance with the Inspector General Act, we did not identify administrative misconduct during our evaluation," it added. Powell declined to comment on the report, the latest chapter in an ongoing feud with Trump that goes back ‌to 2018, when the president first criticized the Fed chief for not cutting interest rates. Trump had nominated Powell for the top Fed job in late 2017.

Whether the report is the end of the saga, however, now depends on how Trump reacts to its conclusion that lax internal oversight contributed to the project's ballooning ‌cost, and whether he uses that finding as grounds to try to remove anyone from the Fed's Board of Governors "for cause." Besides Powell, who led the Fed through most of the project, Fed Vice Chair Philip Jefferson heads the central bank's Committee on Board Affairs and serves as the "administrative governor" most directly involved in project oversight.

Jefferson did not have any immediate comment on the report. Fed Chairman Kevin Warsh, who took over from Powell in May, said he would follow the report's recommendations on project management and hire an independent auditor to "verify accuracy and compliance" of all awarded costs to date.

Cost overruns on government projects are common. Trump's own budget for White House ballroom renovations, now underway, doubled from initial estimates to at least $400 million. Reaction from US lawmakers split along party lines.

"Inflation does not change the Fed's responsibility to manage ⁠its resources prudently and ​be accountable to Congress," said Republican Senator Tim Scott, who chairs the Senate Banking Committee, calling ⁠the cost overruns "egregious" and promising "rigorous oversight" of the Fed. Senator Elizabeth Warren, the committee's top Democrat, said the report's findings showed "no basis to restart the president's witch hunt" against Powell.

Congress oversees the Fed, though the central bank sets its own budget and is not subject to the political appropriations process. WHITE HOUSE PRESSURE CAMPAIGN

Trump had for years chafed at Powell's leadership of the Fed, publicly and incessantly berating him ⁠for not lowering interest rates. The spiraling cost of the Fed renovation project arose early in the president's second term as a fresh focal point for the White House's attacks on Powell. Key members of the Trump administration and their allies in Congress suggested wasteful spending on luxury upgrades had ballooned the project's budget to hundreds of millions of dollars more than earlier estimated.

Powell countered ​that the extra costs reflected unexpected challenges, such as asbestos abatement and higher-than-estimated prices for materials and labor as the construction went deep underground. He also asked the Fed's IG to take a fresh look at the project and its costs. The report on Wednesday said design elements like marble, water features ⁠and a garden terrace cited by critics in the White House "did not materially contribute" to the cost overruns.

The 120-page document did, however, outline extensive management shortfalls, including a failure by the Fed to follow through on what it intended to be a "guaranteed maximum price" contract that would make the contractor responsible for cost overruns. The maximum price, in effect, was never actually established, with Fed project managers awarding subcontracts that continued to escalate the ⁠price ​and timeline of the project. The central bank, for example, ultimately paid $346 million for plumbing and air conditioning on the project, triple the initial estimate.

As controversy over the renovations escalated, Trump, accompanied by Scott, visited the renovation site in July 2025 to press his criticisms. The visit led to a memorable on-camera incident in which Powell appeared to fact-check the president's stated cost-overrun number. Tensions rose sharply in January 2026, when US Attorney for the District of Columbia Jeanine Pirro issued subpoenas to the Fed Board seeking information about the cost overruns and Powell's testimony to Congress about them.

Powell disclosed the Department of Justice's threat to criminally indict him in an unusual Sunday night video statement, ⁠calling it an attempt to intimidate an institution that sets interest rates based on what is best for the country rather than according to the president's preferences. The revelation of the DOJ probe prompted an outcry against political interference in the central bank, not only from Powell's global peers and economists but also, closer ⁠to home, from lawmakers, including some of Trump's fellow Republicans.

A federal judge quashed the DOJ's ⁠subpoenas in March, agreeing with Powell that they were a pretext for pressuring the Fed chief into lowering rates, as Trump wished, or resigning. Pirro's subsequent decision to close her investigation and refer the matter to the Fed IG convinced Republican Senator Thom Tillis to allow Trump's nomination of Warsh as Powell's successor to proceed. Powell, however, has stayed on at the Fed as a governor.

"I have said that I will not leave the Board until this investigation is well and truly over, with ‌transparency and finality, and I stand by that," Powell said ‌at his final press conference as Fed chief in April. Pirro's office said on Wednesday that it had received the report and was reviewing it.