Watchdog Finds No Evidence Of Misconduct By Fed In Hq Renovation

The Federal Reserve’s inspector general on Wednesday found no grounds for the Justice Department to reopen its investigation into the central bank’s management of its massive headquarters renovation, removing a potential avenue for President Donald Trump to oust former Chair Jerome Powell from the Fed board.

The long-awaited watchdog report said the Fed should have done more to rein in the project's cost, which has ballooned to an estimated $2.38 billion, more than $1 billion over a 2020 projection. But the agency said there were no “reasonable grounds to believe that a violation of criminal law had occurred,” nor was there misconduct by the Fed board. In a letter accompanying the report, Fed Chair Kevin Warsh said the General Services Administration will take over management of the project.

The findings are critical to the future of the Fed, which has faced an onslaught of criticism from Trump for not moving quickly enough to lower interest rates, and they call into further question the merits of the administration’s criminal probe into the matter.

Then-Chair Powell revealed in January, in an unprecedented video message, that the DOJ had issued subpoenas to the Fed regarding the renovations. He said the move “should be seen in the broader context of the administration’s threats and ongoing pressure” over borrowing costs. A judge later quashed those subpoenas as a “mere pretext to pressure the Fed,” and U.S. Attorney for the District of Columbia Jeanine Pirro dropped the investigation in April, saying she would defer to the Fed inspector general’s inquiries.

The report shows that the inspector general met with Pirro’s office eight days before she announced the suspension of her probe.

The document released Wednesday details a number of ways the Fed did not follow best practices to keep costs in check for the renovations, including that it did not negotiate a guaranteed maximum price ahead of time. That kind of agreement would not necessarily have prevented the total bill from going above the agreed amount — asbestos was found in the course of the renovations, which could have required a renegotiation of the price — but it could have put the contractor on the hook for much of the overruns.

Multiple factors played into why the costs went up so much, the inspector general found, “including inflation, limited subcontractor bidding, substantial Board design changes, and site conditions.”

The watchdog agency said management of the project was mostly delegated to staff, with “limit requirement for senior leadership to review key decisions affecting budget or scope.”

There were “various internal oversight entities” with no one person in charge of decision-making, though there was a Fed board member designated with hearing updates on the project as head of an advisory committee on the project.

Michael Horowitz became head of the Fed inspector general’s office in June 2025, after serving for 13 years as the DOJ’s watchdog. He previously won praise from Trump supporters for uncovering problems in the FBI’s handling of the investigation into potential collusion between Trump’s 2016 campaign and Russia.