Federal Reserve Criticized for Mismanagement of $2.5 Billion Headquarters Renovation

A scathing report from the Federal Reserve's Inspector General has detailed severe mismanagement of the central bank's headquarters renovation project, which ballooned to $2.5 billion. While the report criticizes Fed leadership for cost overruns and botched oversight, it has cleared former Fed Chair Jerome Powell of any criminal wrongdoing.

The 120-page review, ordered after The Post reported last year on the project's escalating costs, slammed Fed officials for a "pay-as-you-go" approach that allowed expenses to increase dramatically from an initial estimate of $921 million. Investigators concluded there were "no reasonable grounds to believe that a violation of federal criminal law had occurred" in relation to Powell's involvement.

Despite the clearance, former President Donald Trump called the report "disgraceful" and stated on social media that he had asked Attorney General Todd Blanche to "study the report." Trump added that Powell "should be forced to resign" due to his inability to manage the building project and his interest rate policies.

The report identified several major blunders contributing to the cost overruns. Notably, the Fed abruptly shifted from open workspaces to private offices mid-project, causing a 21-month halt in design progress. Mechanical and plumbing costs alone increased by nearly $500 million, with contractors often not securing the required three competitive bids, according to the findings.

Fed leadership was also criticized for failing to obtain a comprehensive cost estimate until January 2026, more than three years after construction began. By that time, approximately $2 billion had already been committed to the renovation. The report stated that the central bank "had not successfully managed and executed" the work, and that the lack of a defined cost ceiling prevented senior officials from accurately assessing the project's performance.

While the initial design included elements like marble interiors and a rooftop garden terrace, the report suggested these did not significantly inflate the overall cost. Luxury water features were removed in June of the previous year due to concerns raised by external stakeholders, including Congress and the media.

Senator Tim Scott (R-SC), chair of the Senate Banking Committee, commented that "Inflation does not change the Fed’s responsibility to manage its resources prudently and be accountable to Congress," a remark perceived as a subtle criticism of the Fed's explanation that rising material costs during the pandemic were solely responsible for the overruns.

The Federal Reserve and the White House have been contacted for comment. The Department of Justice had previously attempted to investigate Powell for an alleged false statement made during Congressional testimony about the renovation costs, but judges quashed the subpoenas against him.