Trump calls Fed renovation 'disgraceful' as watchdog details what went wrong

WASHINGTON, DC: President Donald Trump's attacks on the Federal Reserve's headquarters renovation gained new ground on spending and management, but not on criminal wrongdoing.

A 121-page report released on Wednesday, September 30, by the Fed’s inspector general found no reasonable grounds to believe that federal criminal law had been violated and identified no administrative misconduct.

Trump first called the Federal Reserve renovation “pretty disgraceful” on July 15 last year as he questioned whether the project’s ballooning cost could justify removing then-Fed Chair Jerome Powell.

Speaking to reporters after returning to Washington, Trump said at the time, “When you spend two and a half billion dollars on really a renovation, I think it’s pretty disgraceful.”

He also questioned why the central bank needed what he described as a project costing billions of dollars.

More than a year later, a Federal Reserve inspector general’s report has delivered a mixed verdict on Trump’s criticism. It found no criminal or administrative misconduct, but identified significant failures in project management and cost controls as the renovation’s price climbed to about $2.4 billion.

The findings add detail to a controversy that had already drawn Justice Department scrutiny and become part of Trump’s broader confrontation with former Fed Chair Jerome Powell.

Watchdog finds no criminal wrongdoing

The inspector general said its review found no basis for a criminal referral and did not substantiate allegations of administrative misconduct.

It also examined concerns surrounding Powell’s congressional testimony about the construction project.

The findings follow a separate Justice Department investigation that focused on possible criminal implications surrounding the renovation and Powell’s Senate testimony.

That probe was closed in April after a federal judge had earlier quashed subpoenas issued during the investigation.

The report also rejected a central feature of the White House criticism: that expensive design choices were responsible for the dramatic increase.

Marble, a private elevator, a garden terrace and skylights did not materially contribute to the cost escalation, according to the watchdog.

Project controls failed as costs climbed

The sharper findings concerned project management. 

The inspector general said the Fed did not obtain a construction cost estimate from its general contractor and failed to establish a guaranteed maximum price even after construction had been underway for years.

The project’s internal governance was also deemed insufficient for an undertaking of its scale.

Inflation contributed to higher costs, the report said, but the increases exceeded inflation alone. 

Earlier reports stated that some subcontractor costs, including plumbing and HVAC work, rose substantially during the project.

The renovation began after approval in 2017 and involves the Fed’s Eccles and 1951 buildings.

Its projected cost rose from roughly $1.9 billion to about $2.4 billion.

The Fed has attributed increases to design changes, higher labor and material costs and unexpected conditions including asbestos and soil contamination.

Kevin Warsh orders audit as spending questions remain

New Fed Chair Kevin Warsh is now changing how the project is supervised.

He has moved oversight to the General Services Administration and ordered a comprehensive audit of construction spending. 

The review is intended to establish the value of services the Fed paid for but did not receive and pursue reimbursement or credits where appropriate.

That places the focus on whether additional taxpayer-linked resources can be recovered, rather than on the criminal allegations that surrounded the project earlier this year.

The inspector general’s findings leave the criminal allegations unsubstantiated while putting project controls and spending accountability at the center of the next phase.