By Ann Saphir
(Reuters) -The spiraling cost of the Federal Reserve’s years-long renovation of two historic buildings in Washington, D.C., has become the latest flashpoint in the Trump administration’s escalating pressure campaign on Fed Chair Jerome Powell, whom Trump wants out of the central bank because he hasn’t delivered the interest-rate cuts he wants.
The Powell Fed has held rates steady since December on concern Trump’s tariffs could reignite broad-based increases in prices, still top-of-mind for Americans bruised from a recent bout of 40-year-high inflation.
The situation has the potential to plunge the U.S. central bank into crisis and test one of the underpinnings of the global financial system: the Fed’s monetary policy independence from political meddling. A recent Supreme Court opinion reinforced a longstanding interpretation that the law shields Fed governors from dismissal over interest-rate decisions. The law does allow for removal “for cause.”
White House officials have accused the Fed of loose oversight of its renovation project, mismanagement of public funds and even fraud. The Fed counters that the higher costs are a function of a complex attempt to turn large old buildings into energy-efficient, functional spaces that also retain their historic look. Here are five things to know about the renovation:
What are the buildings the Fed is renovating that have drawn Trump’s scrutiny?
They are the Eccles Building, constructed between 1935 and 1937 as the Fed’s headquarters, and the 1951 Constitution Avenue Building, completed in 1932 for the U.S. Public Health Service and used over the years for various purposes, including in World War II to house the Combined Chiefs of Staff. By 2018, it was transferred by the first Trump administration to the Fed to allow a renovation that would put “a vacant building back in productive use, allow the Federal Reserve Board to consolidate several leases and result in savings for taxpayers.” The 1951 Constitution Avenue Building is listed on the National Register of Historic Places.
How much are they over budget?
Russell Vought, the director of the Office of Management and Budget, says the cost overrun is “$700 million and counting.” The Fed’s budget shows the project’s current estimated cost at $2.46 billion up from $1.88 billion in 2024, a difference of about $580 million.
The document also shows that the Fed eliminated the planned renovation of a third building, cutting about $510 million in costs.
Why are they over budget?
It comes down to three things: higher-than-estimated labor and materials costs, design changes to preserve the historic buildings and their appearance, and unforeseen problems including lead contamination in the ground and higher-than-anticipated amounts of asbestos.
Do they include lavish elements?
Built nearly a century ago and never renovated, the buildings required new plumbing, electrical, heating, water, and other infrastructure, as well as updating to allow access for people with disabilities, a basement for one of the buildings and an addition for the other to make enough room for existing staff currently occupying other leased offices.
There is no Governors-only elevator or VIP dining room, the Fed says, and a new water feature in the original plans for the 1951 Constitution renovation was eliminated. There are no “rooftop terrace gardens” as Vought asserts. One building has a ground-level front lawn that doubles as the roof of an underground parking structure that planning documents referred to as a “garden terrace.” Plans also refer to “vegetated roofs” used to help with stormwater runoff and building efficiency.
What about oversight of the project?
The Fed by law has authority to determine its spending on capital projects. Its Office of Inspector General receives monthly reports on the project, conducted a review in 2021, and is now charged with conducting a fresh review.
The Fed consulted a number of planning bodies, including the Fine Arts Commission and the National Capital Planning Commission, on the design and development of the project. The Fed says it made some changes to the original plans to save money, but the changes were not substantial.
(Reporting by Ann Saphir with reporting by Howard Schneider; Editing by Nick Zieminski)