A multi-billion dollar makeover of the Federal Reserve's offices in Washington, D.C., has become the latest skirmish in an ongoing battle between the White House and the central bank.
The cost of the building project has soared from $1.9 billion to $2.5 billion in recent years. That's become a new line of attack for the Trump administration, which is already unhappy with the Fed for not moving more aggressively to lower interest rates.
"The bottom line is that this is the most expensive project in D.C. history," said Kevin Hassett, director of the administration's National Economic Council on ABC This Week on Sunday. "So the Fed has a lot to answer for."
Fed chairman Jerome Powell was also grilled about the project by Republican members of the Senate Banking Committee during a hearing last month.
"It sends the wrong message to spend public money on luxury upgrades that feel more like they belong in the Palace of Versailles than a public institution," said committee chairman Tim Scott, R-S.C.
Powell defends renovations
Powell told the committee some of the most sensational claims about the renovation are exaggerated, while other features have been scaled back.
"There's no new marble," Powell said. "We took down the old marble. We're putting it back up. We'll have to use new marble where some of the old marble broke. But there's no special elevators. They're old elevators that have been there. There are no new water features. There's no beehives and there's no roof garden terraces."
The Fed says what's driving the cost overruns are unexpected developments like excess lead and asbestos, as well as inflation which has raised the cost of building projects nationwide.
Last week, White House budget director Russell Vought sent a letter to Powell, saying the president was "extremely troubled" by his management of the Fed, including the renovation.
Vought took issue with the "ostentatious" elements of the project. At the same time, he suggested leaving those features out would run afoul of the National Capital Planning Commission, since they were included in the plan the commission had approved.
Trump recently installed several White House loyalists to serve on the commission. The Fed says it's not generally subject to the direction of the commission on its buildings.
Powell asks for watchdog's review
Powell has now asked the Fed's inspector general to review the project, in an effort to address complaints about the price tag — a move that was first reported by Axios. But the dustup over the building renovation is just a superficial sign of the underlying tension between the administration and the central bank.
"I think it's a sideshow," longtime Fed watcher David Wessel of the Brookings Institution told Morning Edition last week. "This seems just another way the administration is trying to make life miserable for Powell since it can't legally fire him unless it can make the case that he has mismanaged things."
Trump's real beef with the Fed chairman is that Powell hasn't moved more aggressively to cut interest rates.
After lowering its benchmark rate by a full percentage point last year, the Fed has kept borrowing costs steady in 2025, as it tries to assess whether Trump's tariffs and other policies will rekindle inflation.
Markets are betting the Fed will again leave rates unchanged when policymakers meet later this month. But a rate cut of at least a quarter percentage point is likely in September.
That's not good enough for Trump, who wants much lower rates to make it cheaper for the federal government to finance its $36 trillion debt.
"Our Fed Rate is AT LEAST 3 Points too high," Trump wrote on social media last week.
New leader at the Fed?
Powell's term as Fed chairman runs out in ten months, giving Trump an opportunity to install a more malleable leader of the central bank. One of the candidates for that job is former Fed governor Kevin Warsh, a Trump ally who offered his own critique of the Fed this weekend.
"I think what we need is regime change at the Fed," Warsh told Fox News. "And that's not just about the chairman. It's about a whole range of people. It's about changing their mindset and their models. And frankly, it's about breaking some heads."
The central bank is designed to be insulated from just this kind of White House pressure. If financial markets start to believe the Fed is taking orders from the Oval Office, it could lose a credibility as an inflation-fighter. And that could be costly for all Americans.
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