No one welcomes construction disputes, but when the initiator is the President of the United States, it’s even less welcome.
Last Thursday, President Donald Trump’s director of the Office of Management and Budget (OMB), Russell Vought, used X/Twitter to accuse Jerome Powell, chairman of the Board of Governors of the Federal Reserve System – known as the “Fed” – of having “grossly mismanaged” the Fed, citing a $700m cost overrun on the ongoing renovation of two of the Fed’s large office buildings: the Marriner S. Eccles Building and the 1951 Constitution Avenue Building in Washington, DC, both built in the 1930s.
The Fed is the independent body that sets interest rates in the US.
During his second term in office, Trump has been pressuring Jerome Powell to lower interest rates but Powell, whom Trump appointed in his first term, has refused to bow to political pressure, saying he would only lower rates if inflation and other factors allow.
“The President is extremely troubled by your management of the Federal Reserve System,” Russell Vought wrote in a letter to Powell on Thursday, which Vought attached to his tweet.
It went on: “Instead of attempting to right the Fed’s fiscal ship, you have plowed ahead with an ostentatious overhaul of your Washington, DC headquarters.”
In his letter, Vought repeated claims that the renovated buildings would have “rooftop terrace gardens, VIP dining rooms and elevators, water features, premium marble, and much more”.
Claims denied
Powell denied these claims in testimony to the Senate Banking Committee last month.
However, in his letter, Vought wrote that Powell’s testimony “raises serious questions about the project’s compliance with the National Capital Planning Act”, and that Powell’s testimony “appears to reveal that the project is out of compliance with the approved plan”, which would “require the Fed to immediately halt construction and obtain a new approval” from the National Capital Planning Commission (NCPC).
The letter went on to ask Powell 11 questions probing what Vought cast as deviations from a project plan for the 1951 Constitution Avenue Building that was approved by the NCPC in 2021, and gave Powell seven days to respond.
The Fed’s view
After receiving the letter, the Fed published a “Frequently Asked Questions” document about the renovations that addresses the claims without referring to Russell Vought’s accusations.
It said the cost overruns since the project got underway several years ago were down to “changes to original building designs as a result of consultation with review agencies”; the “differences over time between original estimates and actual costs of materials, equipment, and labour”; and “unforeseen conditions (for example, more asbestos than anticipated, toxic contamination in soil, and a higher-than-expected water table)”.
It flatly denied there were plans for a VIP dining room or elevators, and said the “rooftop garden terrace” was actually the ground-level front lawn of 1951 Constitution Avenue, which serves as the roof of the parking structure underneath.
Concerned investors
One Fed scholar told The Wall Street Journal that the White House may be using the issue as a way to fire Powell for malfeasance.
“We are in a high-stakes moment in the history of the Federal Reserve,” said Peter Conti-Brown, an associate professor of financial regulation at the University of Pennsylvania.
“It seems clear to me that the Trump administration, using various mechanisms, [has] now cooked up a post-hoc explanation for Powell’s removal.”
The newspaper noted that investors are watching closely because “firing a Fed chair for political reasons would shatter decades of established norms that underpin global confidence in the US dollar”.
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