By Dan Burns
(Reuters) -The White House on Thursday launched a fresh attack on Federal Reserve Chair Jerome Powell, with a top Trump administration official saying Powell had “grossly mismanaged” the central bank, chastising him for running a deficit and for extensive cost overruns for building renovations.
Office of Management and Budget Director Russell Vought, in a letter addressed to Powell and posted on social media platform X, said: “Instead of attempting to right the Fed’s fiscal ship, you have plowed ahead with an ostentatious overhaul of your Washington, D.C., headquarters.”
The letter’s reference to cost overruns in building renovations marked a new line of assault from the administration against Powell, who has been criticized repeatedly by President Donald Trump and his aides over the Fed chief’s decision to keep interest rates steady since Trump returned to office in January.
“While continuing to run a deficit since FY23 (the first time in the Fed’s history), the Fed is way over budget on the renovation of its headquarters.
Now up to $2.5 billion, roughly $700 million over its initial cost,” Vought wrote in an X post accompanying the letter. “These renovations include terrace rooftop gardens, water features, VIP elevators, and premium marble.
The cost per square foot is $1,923–double the cost for renovating an ordinary historic federal building. The Palace of Versailles would have cost $3 billion in today’s dollars!”
The Fed’s Washington-based Board of Governors, which Powell chairs, declined to comment.
In comments to CNN, Chicago Fed president Austan Goolsbee said the project was not a “luxury” overhaul, but involved needed rehabilitation.
“The Fed building is not a luxury building.
It is a very old building,” Goolsbee said. “They needed to be renovated.”
The Fed is required by law to return any of its excess earnings to the Treasury, but for about three years it has run an operating deficit.
Higher interest rates imposed by the Fed to combat inflation starting in 2022 led to its outlays to commercial banks for the reserves they deposit at the Fed exceeding the interest it earned on its large but shrinking bond portfolio and other fees it collects for providing services to the financial sector.
As of Wednesday that deficit had reached more than $235 billion, Fed data shows.
Meanwhile, the Fed has been renovating two buildings adjacent to its current Washington headquarters. Powell was pressed by U.S.
lawmakers about the cost overruns during his testimony last month to the congressional committees charged with Fed oversight.
Powell rejected reports that the project included lavish features but conceded it had run over budget, saying, “the cost overruns are what they are.”
“There are no new water features, there’s no beehives, and there’s no roof terrace gardens,” Powell said in response to questioning from Senator Tim Scott, a South Carolina Republican and chair of the Senate Banking Committee.
“We do take seriously our responsibility as stewards of the public’s money,” he said as he defended the need to upgrade the buildings.
Vought said Powell’s testimony “raises serious questions about the project’s compliance with the National Capital Planning Act.” He gave Powell a list of 11 questions regarding the project and changes to it.
He requested answers within seven business days.
Section 10 of the Federal Reserve Act would appear to give the Fed wide autonomy with regard to its buildings and facilities, so the authority of the White House to intervene was not clear.
The law states that the Fed Board of Governors may “cause to be constructed on any site so acquired by it a building or buildings suitable and adequate in its judgment for its purposes and proceed to take all such steps as it may deem necessary or appropriate in connection with the construction, equipment, and furnishing of such building or buildings.”
It adds: “The Board may maintain, enlarge, or remodel any building or buildings so acquired or constructed and shall have sole control of such building or buildings and space therein.”
The Fed last cut rates in December and since then has left them in the range of 4.25% to 4.50% as officials wait to see if inflation strengthens in the wake of Trump’s global wave of tariffs.
The Fed is broadly expected to resume cuts in September, but Trump has said the Fed’s policy rate should be lowered sharply now.
Trump, who has considered trying to fire Powell, on Tuesday said the Fed chief should resign if his testimony to Congress about the project was misleading.
Powell’s current term as chair runs until May 15.
The Federal Reserve Act stipulates that the Fed chair or board members may be removed only for cause, not policy disagreements.
Vought’s letter raises the question of whether the administration is trying to build a case for removing Powell for cause, in this case fiscal mismanagement.
A recent Supreme Court opinion in a case involving Trump’s firing of Democrats from two independent labor boards, however, appears to confer protection for top Fed officials from removal by a president.
(Reporting by Dan Burns; Editing by Matthew Lewis and Shri Navaratnam)
