By Howard Schneider, Michael S. Derby and Ann Saphir
WASHINGTON, Sept 30 (Reuters) – The Federal Reserve’s Inspector General on Wednesday said it found no grounds for a criminal referral or administrative misconduct tied to cost overruns in a US central bank renovation project that had drawn scorn from President Donald Trump and an 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.
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 Fed IG’s report.
Fed Chairman Kevin Warsh, who took over from Powell in May, said he will follow the Fed IG’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.
TRUMP’S 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 Republican Senator Tim Scott, the chairman of the US Senate Banking Committee, 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 IG’s 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 escalated sharply in January 2026, when US Attorney for the District of Columbia Jeanine Pirro issued subpoenas to the Fed’s Board of Governors 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.
(Reporting by Howard Schneider, Michael S. Derby, Ann Saphir; Editing by Paul Simao)
Comments