The Federal Reserve’s internal watchdog released a 120‑page report Wednesday detailing how the central bank’s massive $2.4 billion renovation of two Washington buildings was broadly mismanaged, though it found no criminal violations.
Key findings on cost overruns
The inspector general noted that the Board of Governors failed to secure a comprehensive cost estimate or a firm maximum price before work began in 2022. Without a cost ceiling, the Fed could not force the contractor to absorb inflation‑driven price spikes, allowing expenses to balloon from an original $921 million estimate in February 2020 to $2.018 billion by December 2024.
Design changes in 2023—shifting from an open‑plan layout to mostly closed offices—caused significant delays and prevented the Fed from establishing a cost ceiling at that time. Additional factors such as post‑pandemic inflation, asbestos remediation, and extra demands from review agencies contributed, but the report emphasized that “key project management and contract execution decisions” were the primary drivers of the overruns.
Political backdrop
The renovation became a flashpoint for the Trump administration, which sought to pressure the Fed to cut interest rates. President Trump visited the site in July 2024, where then‑Chair Jerome Powell corrected the President’s cost estimate on camera. Congressional criticism followed, prompting Powell to ask Inspector General Michael Horowitz to investigate in July 2025.
The Justice Department, under Trump appointees, launched a criminal probe into whether Powell committed perjury in Senate testimony. That investigation was dropped in April 2026 after a judge dismissed subpoenas issued by U.S. Attorney Jeanine Pirro.
Responses from officials
Current Fed chair Kevin Warsh welcomed the IG’s findings, noting that the General Services Administration will now manage the project and that an independent auditor will review all contracts and seek reimbursement for any unperformed work.
Senator Tim Scott (R‑SC), chair of the Senate Banking Committee, reminded that “inflation does not change the Fed’s responsibility to manage its resources prudently and be accountable to Congress.” Massachusetts Sen. Elizabeth Warren, a frequent critic of Powell, dismissed the investigation as a “witch hunt” by Trump‑aligned attorneys.
What’s next
The Fed expects construction to continue through December 2027, well beyond the original mid‑2024 target. With the GSA and an independent auditor now overseeing the project, the agency aims to tighten cost controls and restore confidence in its stewardship of taxpayer‑funded facilities.
Original reporting: KTBS 3 (Shreveport) — read the source article.
