Watchdog Says the Federal Reserve Building Renovation Was Mismanaged, Not Criminal

By Christopher Rugaber

The Federal Reserve’s internal watchdog said Wednesday that the agency has broadly mismanaged an expansive building renovation project but did not find any criminal violations, as alleged by Trump administration prosecutors.

The Fed’s inspector general said that a variety of missteps by its Board of Governors inflated the cost of the $2.4 billion renovation. The board did not secure a comprehensive cost estimate at the beginning of the project, nor did it nail down a maximum overall cost, a step that could have forced the building contractor to absorb the impact of inflation, the IG said in a 120-page report. Prices spiked after construction began in 2022.

“Our review found that the Board has not effectively managed and executed its ... contract and repeatedly deviated from its cost-management provisions,” the report said. Former Chair Jerome Powell requested that the IG review the renovation project last year.

The building renovation project became a high-profile flashpoint in the Trump administration’s attempts to pressure the Fed into cutting its key interest rate. President Donald Trump even visited the construction site last July, when Powell corrected Trump’s estimate of the project’s expected costs as the two stood before TV cameras in hard hats.

Trump’s Justice Department then launched an investigation into whether Powell had committed perjury during brief testimony on the building renovation before a Senate committee. That investigation was dropped in April after a judge quashed subpoenas issued by Jeanine Pirro, the U.S. Attorney for the District of Columbia. Pirro said then she would await the outcome of the inspector general’s investigation before deciding whether to take any further action.

“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 U.S. Attorney General,” the IG’s report said.

The report said that the construction costs to renovate two Fed buildings more than doubled from an original estimate of $921 million in February 2020 to $2.018 billion by December 2024. Construction is expected to last until December 2027, long past its originally slated completion date of mid-2024.

Some aspects of the project that were criticized by the Trump administration and Republican members of Congress for being luxurious — water fountains, private elevators and marble facades — were not significant drivers of the excessive costs of the project.

Instead, the IG said that a design change by the Fed in 2023 from a mostly open workspace to one with mostly closed office space caused a significant delay in the project’s design. It also delayed the Fed from seeking a maximum cost ceiling for the project at that time.