On Friday, when the Justice Department subpoenaed the Federal Reserve Board in a criminal investigation, it focused on the multi-year renovation of the central bank’s headquarters in Washington, D.C.
But it’s not just the cost of multibillion-dollar construction projects that’s at issue here. It is also the extent to which it has become a means for the White House to exert political pressure on an agency designed to operate independently of the federal government.
The dispute over the renovation costs comes as President Donald Trump publicly criticizes Federal Reserve Chairman Jerome Powell over the central bank’s analysis of interest rates and repeatedly presses Fed leaders to lower borrowing costs.
But while President Trump has been publicly pressuring Powell over interest rates for years, it’s only in the last six months that he has also become critical of the multibillion-dollar price tag for the renovations.
Historic renovations themselves are far more complex and take longer than disputes over costs.
The project centers on two historic buildings: the Mariner S. Eccles Building, completed in 1937 as the Federal Reserve’s headquarters, and the 1951 Constitution Building, completed in 1932. Built in 1951, the building has been used for various purposes throughout its life, and was officially handed over to the Central Bank in 2018.
The Eccles Building is located at 20th Street and Constitution Avenue NW, overlooking the National Mall and three blocks from the White House.
The current reforms were proposed and approved by the Fed’s Board of Governors in 2017, when Powell was a board member but not yet its chair. Since then, the project has been subject to annual budget reviews by Fed leadership.
The central bank said the project will include a complete overhaul of the building, which has not undergone comprehensive renovation since the 1930s. Updates include removing hazardous materials such as asbestos and lead, replacing decades-old electrical, plumbing, heating, ventilation and air conditioning, and upgrading structural work to bring the building up to modern standards.
The renovations, scheduled to be completed in 2027, will total $2.5 billion, according to Fed documents. But this is not money from US taxpayers.
Unlike most federal agencies, the Federal Reserve primarily funds its operations through income from interest on government bonds and fees charged to banks. Excess profits are returned to the U.S. Treasury. This avoids expense to the taxpayer.
Still, President Trump and his allies argue that the renovations reflect wasteful spending and mismanagement of funds.
The Fed is pushing back on those claims, saying a variety of factors, including the age and condition of buildings, are contributing to project costs increasing over time. Both structures are listed on the District of Columbia National Register of Historic Places, and the 1951 Constitution Avenue Building is on the National Register of Historic Places.
These designations require that renovations be conducted in extensive collaboration with multiple federal and local preservation agencies. This resulted in changes to the original building design.
Fed officials also pointed to higher labor and material costs since the project was first approved in 2017, including supply chain shocks related to the coronavirus pandemic and President Trump’s tariffs.
Those explanations have been harshly criticized by some Trump allies, including Office of Management and Budget Director Russell Vought, who has called for increased scrutiny of the project.
In Senate testimony on June 25 that drew attention from the White House, Republican Sen. Tim Scott of South Carolina asked Mr. Powell about the Fed’s overhaul.
Scott accused Powell of spending “billions of dollars on lavish renovations” that included “a rooftop terrace, a custom elevator leading to a VIP dining room, white marble finishes, and even a private art collection.”
Mr. Powell answered each of Mr. Scott’s questions. “There is no (VIP) dining room. There is no new marble. We are removing the old marble and putting it back in. Some of the old marble has broken, so we have to use new marble. But there is no special elevator, just the old elevator that has been there. There is no new plumbing. There is no beehive, there is no terrace garden on the roof.”
On July 10, Mr. Vought wrote a letter to Mr. Powell setting out a new phase of renovation work.
Mr. Vought told the chairman that Mr. Trump himself was “very troubled by the management of the Federal Reserve.” Mr. Vought called the construction project “an ostentation,” citing many of the features that Mr. Scott asked about and that Mr. Powell said no longer existed.
Days later, Vought told CNBC that an investigation was needed into whether the Fed had misled members of Congress about the cost of the project by calling the office building a “palace.”
In Chairman Powell’s formal response to the accusations, he said in a letter to Vought that the Fed had taken “extreme care” to ensure that the renovation project was closely supervised throughout its life.
The Fed’s renovation project received further attention after the president made a rare high-profile visit to the Fed on July 24, making him the first sitting president to visit central bank headquarters in nearly 20 years.
Mr. Trump toured the construction site with Mr. Powell, and the two, both wearing helmets, answered questions from reporters.
In a surprising exchange during the tour, Mr. Trump and Mr. Powell got into an argument over the cost of the project, after Mr. Trump claimed that the price had jumped to $3.1 billion. With cameras rolling, Mr. Powell disputed the president’s numbers, saying they improperly included a third renovation of the building completed several years ago.
Afterward, Trump appeared more friendly, telling reporters he wanted to see the renovations completed.
“I don’t want to get personal,” he said at the time. “In many ways, it’s a disappointing start, but it’s a start. And it’s been under construction for a long time.”
But even though the day’s focus was on construction projects, President Trump did not rule out larger issues with the Fed.
Asked what else he would like to see from Mr. Powell, the president said, “Well, I would like to see interest rates lowered.”
