Fed Watchdog Clears Criminality in $2.5 Billion Headquarters Renovation, Faults Mismanagement

The Federal Reserve's independent watchdog concluded Wednesday that the central bank badly mismanaged its multi-billion-dollar headquarters renovation but found no grounds to believe a federal crime was committed, closing off one line of attack against former Chair Jerome Powell while confirming the runaway costs that drew President Donald Trump's scrutiny.

"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 in accordance with the Inspector General Act," the report from the Fed's inspector general states. The review was led by Inspector General Michael Horowitz, who was appointed in June 2025, with the investigation requested by Powell a month later.

The findings thread a narrow needle. The watchdog faulted management and oversight failures that helped drive major cost overruns on the historic Eccles building that houses the Fed, yet it stopped well short of the criminality Trump and his allies had alleged.

The Fed's 2025 budget allocated $2.5 billion to the renovation, roughly $700 million more than earlier estimates. Costs swelled by about a billion dollars from the initial projections as the project absorbed design changes, gaps between estimated and actual costs for materials and labor, and unexpectedly poor environmental conditions at the building site. The board was not involved in day-to-day decisions, the report notes, and the watchdog said it would expect the board to delegate the daily management of a large construction project.

A Push for Accountability, and a Clean Bill on Crime

The report also addressed the claim that Powell misled Congress. Some critics alleged he perjured himself in Senate testimony about the project in June 2025. The inspector general's office did not set out to assess that claim directly, but it reviewed materials related to Powell's testimony and made no finding of misconduct tied to it. Sen. Tim Scott, R-S.C., who questioned Powell during that hearing, said earlier this year that he considered Powell inept but did not believe he committed a crime.

Trump sharply criticized Powell over the renovation, calling it "disgraceful," and the two toured the construction site together in a tense July 2025 visit captured on video. In December, U.S. Attorney for the District of Columbia Jeanine Pirro opened a criminal investigation into Powell and the Fed over the project. In March, Chief Judge James E. Boasberg of the D.C. Circuit quashed subpoenas Pirro had issued to the Fed, finding evidence the subpoenas were intended to "harass and pressure Powell." Powell said in January that the criminal investigation was a pretext meant to force him to lower interest rates.

Powell finished his term as chair on schedule after a judge blocked the federal criminal investigation. He remains on the Fed's board as a governor, with a term that runs to January 2028. Kevin Warsh, Trump's appointee as Fed chair, welcomed the findings and said the central bank would take steps to adopt the report's recommendations. The Board of Governors declined to comment.

The Department of Justice could reopen its investigation into Powell based on the new findings, or Warsh could ask for his resignation. The report lands as the Fed confronts a separate policy fight with the White House over interest rates. The central bank raised rates for the first time since 2023 this month in its push to tame inflation, a decision Trump has blamed on what he called a "hostile" board even though his own appointee as chair supported it.

What the watchdog delivered is transparency. The review, awaited across the central bank since it began in July 2025, lays out in detail how a marquee federal construction project drifted a billion dollars off course, and it hands the Fed's new leadership a concrete list of fixes to enact. For an institution Trump has long argued must answer to the public, the accounting is now on the record -- and the man he installed at the top says he intends to act on it.