Fed watchdog exonerates Powell in renovation probe, but Trump demands resignation

Key points

• The Office of Inspector General concluded that no reasonable grounds existed to refer the case to the U.S. Attorney General, finding no criminal violations or administrative misconduct by Powell.
• The report criticized the Fed board for poor oversight, noting that construction costs more than doubled from an initial estimate to $2.5 billion due to a lack of cost controls.
• Specific design features, including marble, water features, and a garden terrace, were found not to have materially contributed to the cost increases, though four fountains were removed in June 2025 due to external scrutiny.
• President Trump rejected the report’s conclusions, stating on Truth Social that Powell should resign immediately or face a lawsuit from the U.S. government.
• New Chair Kevin Warsh accepted the report’s recommendations, including an independent audit and oversight by the General Services Administration, while Powell remained on the board after his chair term ended in May.

Background

The renovation project became a central point of contention in President Trump’s broader campaign against the Federal Reserve. In July 2025, Trump toured the construction site with Powell and publicly challenged him over the soaring costs. A subsequent Justice Department investigation focused on Powell’s June 2025 congressional testimony, which he argued was part of an effort to pressure the Fed on interest rates. The DOJ closed its investigation in April 2026, allowing the Fed’s inspector general to complete its review. Powell had remained on the board after his chair term ended in May 2026, citing the need to see the investigation through to its conclusion.

Why it matters

The report’s findings highlight a significant disconnect between the legal exoneration of the former Fed chair and the political pressure from the White House. While the watchdog cleared Powell of wrongdoing, the criticism of the Fed board’s management and the subsequent threat of legal action from the president underscore the ongoing tension between the executive branch and the central bank. This dynamic may influence future oversight mechanisms and the independence of the Federal Reserve in setting monetary policy.

What to watch

The Federal Reserve is expected to implement the report’s recommendations, including an independent audit to seek reimbursement for unperformed work and increased oversight by the General Services Administration. President Trump’s threat of legal action may lead to further legal challenges or political pressure on the Fed board, while Powell’s continued presence on the board may remain a focal point for critics and supporters alike.