Federal Reserve Chairman Asks Inspector General To Review Cost Overruns on Controversial $2.5 Billion Renovation Project

The Federal Reserve’s chairman, Jerome Powell, already under fire from President Trump for not reducing interest rates, has asked the agency’s inspector general to review expenses associated with a controversial renovation of its Washington headquarters, the cost of which has ballooned to $2.5 billion so far, or $700 million more than original estimates.A spokesman for the inspector general confirmed to The New York Sun the request for the review, which Mr. Powell reportedly made over the weekend, adding in an email message that “we respectfully decline” to offer any additional comment.The White House has used the project’s cost overruns as another attack on Mr. Powell’s tenure as the Fed chairman and as possible justification for President Trump to remove him. Mr. Trump has repeatedly badgered Mr. Powell to resign and complains that he is keeping interest rates artificially inflated, which suppresses economic growth.“Every point costs us $360 billion. Think of that,” Mr. Trump said late Sunday.The Federal Reserve is overhauling and modernizing two historic buildings that the Fed says have not been comprehensively renovated since their construction in the 1930s.The project dates back to 2017, before Mr. Powell, an appointee of Mr. Trump to the Fed, became the chairman. The agency recently created a web page to answer frequently asked questions and to try to dispel some claims being made about the project.The site states that cost overruns are attributable to changes to the original building designs “as a result of consultation with review agencies”; unexpectedly high labor, materials, and equipment costs; and unforeseen conditions relating to asbestos, toxic contamination in soil, and a higher-than-expected water table, among others.It adds that contrary to claims, no new VIP dining rooms are being constructed and no VIP elevator is being added. It notes that while designs initially called for new water features outside of the building, they have been eliminated and fountains that are original to the building are being restored.Nonetheless, several Trump administration officials have criticized the chairman’s leadership on the project. The chairman of the Federal Housing Finance Agency, Bill Pulte, says that Mr. Powell should be investigated for the building project, and called the overruns grounds for his firing.“Jerome Powell’s $2.5B Building Renovation Scandal stinks to high heaven,” Mr. Pulte wrote in a letter to Congress. “This is nothing short of malfeasance and is worthy of ‘for cause.'”The director of the National Economic Council, Kevin Hassett, said the lawmakers who created the Federal Reserve could never have imagined where the Fed would be today, either in its policies or its facilities.“The idea that the Fed could print money and then spend $2.5 billion on a building without real congressional oversight, it didn’t occur to the people that framed the Federal Reserve Act,” Mr. Hassett told CNBC. “We’ve got a real problem of oversight and excess spending.”The Federal Reserve is not funded with tax dollars, and its spending is not supervised by the Office of Management and Budget. Instead, it makes its money by serving as a bank for other banks and government agencies and earning interest on securities it buys in the open market. However, with a current operating budget that is $188 billion in the red, the board is under pressure to put its figurative as well as its literal house in order.The Office of Management and Budget’s director, Russ Vought, sent a letter last week to the chairman, condemning his management of the project and claiming he has misled Congress on it. Mr. Vought wrote that the president is “troubled” by the “ostentatious overhaul” of the facility, which averages 512 square feet of space per employee, compared to the federal recommendation of 150 square feet per employee. Mr. Vought added that Mr. Powell’s answers to Congress raise “serious questions about the project’s compliance with the National Capital Planning Act,” which guides federal agency planning for the National Capital region.In its fact sheet, the Federal Reserve notes that the board is “not generally subject to the direction of the (National Capital Planning Commission) with respect to its building projects” because the Federal Reserve Act vested the board with control of its buildings. However, it voluntarily collaborated with the planning commission in 2021 when it submitted project designs for review.

Federal Reserve Chairman Asks Inspector General To Review Cost Overruns on Controversial $2.5 Billion Renovation Project

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