Fed watchdog clears Powell of crimes in $2.4B renovation, but Trump vows legal action

Key points

• The Fed’s inspector general found no evidence of criminal violations or administrative misconduct in the headquarters renovation, clearing former Chair Jerome Powell of legal wrongdoing.
• The report criticized the Fed board for failing to enforce cost controls, allowing the project budget to nearly double from $1.3 billion to $2.4 billion due to design changes and inflation.
• President Trump rejected the findings, demanding Powell’s immediate resignation and threatening federal lawsuits for corruption or incompetence, while new Chair Kevin Warsh accepted the recommendations for an independent audit and GSA oversight.

Background

The renovation controversy began in 2020 when the Fed estimated the project would cost $1.3 billion. By August 2026, the board-approved budget had soared to $2.4 billion, with construction costs alone rising by $960 million. Trump had launched a criminal investigation into Powell related to the renovations, which was dropped in April 2026 to clear the way for Kevin Warsh’s confirmation as Fed chair. Powell stated in April 2026 that he would remain on the board until the investigation was resolved.

How outlets are covering it

The Washington Post and CNBC both reported that the inspector general found no grounds for a criminal referral, but emphasized the Fed’s failure to manage costs. Trump, however, seized on the report to argue that Powell should be forced to resign, claiming the Fed’s mismanagement was a sign of incompetence. Senator Elizabeth Warren, a Democrat, stated that the report underscored the need for more transparency at the Fed and that the Justice Department had no basis to restart the investigation. Senator Tim Scott, a Republican, welcomed the report but noted that inflation does not change the Fed’s responsibility to manage resources prudently.

Why it matters

The report highlights the ongoing tension between the executive branch and the Federal Reserve, with Trump using the renovation controversy to pressure the central bank. The findings could influence future oversight of federal agencies and the independence of the Fed, as well as the potential for legal action against Powell.

What to watch

Kevin Warsh has tasked the General Services Administration with completing the project and plans to hire an independent auditor. The Justice Department is reviewing the report, but Senator Elizabeth Warren stated that there is no basis to restart the investigation. Powell can remain on the board through January 2028.