Fed watchdog clears Powell of crimes but blames board for $2.4B renovation overrun

Key points

• The Office of the Inspector General found no reasonable grounds for criminal referral or administrative misconduct in the renovation project.
• The report cites inflation, design changes, and poor governance as causes for the cost increase from $1.3 billion to $2.4 billion.
• Trump demanded Powell resign immediately and threatened to sue him for corruption or incompetence despite the clean bill of health.
• New Fed Chair Kevin Warsh agreed to implement all seven corrective actions recommended by the watchdog, including a full audit.
• The report confirmed that controversial design features like marble and water fountains did not materially drive the cost overruns.

Background

This development follows a year of intense political pressure on the Federal Reserve. In January 2026, the DOJ opened a criminal probe into Powell regarding his congressional testimony on the renovation, which was later blocked by a judge and closed in April to facilitate Kevin Warsh’s confirmation. Powell remained on the Fed board after his chair term ended in May to see the investigation through. Recent archive coverage notes that Trump has continued to press the Fed on interest rates, though he has not personally targeted Warsh as aggressively as he did Powell.

How outlets are covering it

Outlets agree on the core finding: no criminality exists. However, they differ on the severity of the management failures. CNBC and CNN emphasize that the Fed board failed to enforce guaranteed maximum prices and that specific costs, like plumbing, rose by 223%, far outpacing general inflation. Axios highlights that the report blames a web of committees rather than individuals. Trump and the White House dismiss the report as evidence of 'gross mismanagement,' while Senator Tim Scott welcomes the findings but maintains that the Fed must remain accountable to Congress. Senator Elizabeth Warren views the report as proof that the DOJ’s prior investigation was a 'witch hunt.'

Why it matters

The report resolves the immediate legal threat to Jerome Powell but leaves the Federal Reserve facing significant reputational and financial scrutiny. The admission of poor governance undermines the central bank’s image of fiscal prudence. Furthermore, the involvement of the General Services Administration in overseeing the project marks a shift in how the independent central bank manages its infrastructure, potentially setting a precedent for future federal oversight of the Fed’s operations.

What to watch

The Federal Reserve is expected to conduct a full audit of the renovation project and search existing contracts for potential cost recoupments. The General Services Administration will now serve as the project executive. Meanwhile, the Justice Department is reviewing the inspector general’s report, with U.S. Attorney Jeanine Pirro indicating she may restart a criminal investigation if she deems the facts warrant it, despite the watchdog’s clear findings.