By Adam Cancryn, Matt Egan, CNN
(CNN) — An inspector general review of the Federal Reserve’s headquarters renovation found no sign that then-Chair Jerome Powell broke the law or committed misconduct in his management of the costly project, even as it sharply criticized him and the central bank’s board for allowing the price tag to balloon beyond $2 billion.
The conclusions released Wednesday undercut President Donald Trump and his allies’ accusations that Powell had been criminally negligent in his oversight of the renovations — a charge that Trump seized on as part of a monthslong bid to pressure Powell to resign.
“We did not find reasonable grounds to believe that a violation of federal criminal law had occurred and did not identify violations of Board policy warranting an administrative misconduct finding,” the Fed’s inspector general wrote in the 120-page report on the renovations.
The report follows a yearlong investigation into a renovation project that has seen its total cost nearly double from initial estimates in 2020, the inspector general found, with the Fed now budgeting roughly $2.4 billion for the project.
Fed Chair Kevin Warsh, who took over the top post in May, concurred with the review’s findings in a separate letter to the inspector general. He also committed to conducting an independent audit of the project’s contractor. A Federal Reserve spokespesron declined to comment beyond the contents of Warsh’s letter.
Trump, who had soured on Powell over his refusal to lower interest rates despite nominating him to the position in 2017, had highlighted the cost overruns in a series of attacks on the then-chair last spring. At one point, he personally visited the Fed headquarters to inspect the renovations, putting the tensions between the two men on full display. During that visit, Powell even fact-checked Trump’s cost estimates in real time before the cameras.
The criticism prompted congressional scrutiny and spurred the Justice Department to briefly open a criminal probe into Powell, before suspending it amid intense backlash from some Republican lawmakers.
‘Could have better controlled costs’
Yet while the inspector general report dismissed the most serious accusations levied against Powell, it faulted the Fed’s board for mismanaging the renovations project at several points, concluding that it “could have better controlled costs and mitigated some of the significant construction cost increases.”
The project was troubled from the beginning, the review found, with the board failing to set price caps or ensure that firms bidding on the construction submitted estimates for how much it would cost them to complete the total renovation.
The Fed board also did not monitor the project’s day-to-day developments closely enough, the inspector general wrote, and at one point decided against seeking more competitive bids for elements of the project in order to “keep the project moving.”
“We also found it concerning that a project of this magnitude had no formally established success measures to monitor the project’s progress,” the report said, later concluding that “the Board did not take numerous actions available to it that could have better controlled costs and mitigated some of the significant construction cost increases.”
However, one heavily scrutinized aspect of the renovations did not drive the cost overruns, the report found: The water fountains, marble restoration and other flourishes that Trump and congressional Republicans had highlighted as evidence of the Fed’s largess.
“These initial design plans included certain design features that have been highlighted and questioned by members of Congress and other external stakeholders,” the report said. “We did not find that these design features materially contributed to the substantial construction cost increases.”
The report did not blame Powell or any individual Fed board governors for the shortcomings, describing a process that was instead managed largely by a web of committees inside the central bank.
But the inspector general recommended that the Fed’s board take seven corrective actions, including launching an audit of the project and a search within its existing contracts for costs that might be recouped.
Warsh in his letter agreed to implement all of those recommendations, pointing to the necessity “of completing the work in the most efficient and transparent way possible.”
He also disclosed that he had already asked the Government Services Administration to examine the project and help oversee the completion of the renovations — a notable step that effectively involves a federal agency in the activities of the independent central bank.
The president has faced ongoing scrutiny over the price tags of his own set of renovation projects at the White House and across Washington. Most notably, he’s overseeing the construction of a White House ballroom that has already far exceeded its initial $200 million estimate, with the administration offering little clarity on how it’s covering those additional costs.
Punctuating Trump’s attacks on Powell — but not the Fed generally
The report appears to close perhaps the most striking chapter in Trump’s long-running efforts to influence the Federal Reserve and its decision-making, which included targeting Powell and separate attempts to remove Fed board member Lisa Cook.
Trump has also frequently pressed the Fed in public to slash interest rates, breaking with previous presidents’ reluctance to meddle with the central bank’s independence. That has continued since Warsh took over in May, even as the Fed has since moved to raise interest rates. While Trump expressed frustration with the decision, he has so far declined to personally target Warsh.
Powell stepped down as Fed chair in May when his term expired but took the rare step of remaining on the central bank’s powerful board of governors. Powell explained his decision by citing “the series of legal attacks on the Fed which threaten our ability to conduct monetary policy without considering political factors.”
“I had long planned to be retiring,” Powell told reporters in late April. “The things that have happened really in the last three months have, I think, left me no choice but to stay until I see them through.” Powell added that he would not leave the Fed board until the investigation was “well and truly over with transparency and finality.”
Jeanine Pirro, the US attorney for the District of Columbia, dropped an extraordinary criminal investigation into Powell in April. However, Pirro said her office would review the inspector general report and indicated the criminal probe could be restarted, if warranted.
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