Fed Watchdog Clears Powell of Criminal Wrongdoing but Faults Oversight, Prompting Fresh Trump Resignation Demand

The Federal Reserve's internal watchdog has concluded that a roughly $1 billion cost overrun on renovations to the central bank's Washington headquarters does not warrant a criminal referral, a finding that nonetheless triggered a renewed demand from President Donald Trump for former Fed Chair Jerome Powell to step down.

In a report released Wednesday, the Fed's Inspector General stated that its evaluation uncovered no reasonable grounds to believe a violation of federal criminal law had occurred that would require referral to the U.S. attorney general. The watchdog also said it found no evidence of administrative misconduct during its review, even as it documented significant shortcomings in how the renovation project was managed.

The report focuses on the ballooning costs of modernizing two historic Federal Reserve buildings situated on the National Mall. What began as a substantial infrastructure undertaking has seen its price tag climb to approximately $2.4 billion, with cost overruns of about $1 billion attributed in part to lax oversight, according to the findings.

While the Inspector General's conclusions spared the central bank's leadership from criminal exposure, the report's sharp criticism of project management provided fresh ammunition to the president, who has waged a long-running campaign against Powell. Trump has seized on the renovation costs as a political cudgel in his broader effort to reshape the Fed's leadership and influence the direction of U.S. monetary policy.

Writing on his Truth Social platform, Trump insisted that Powell should at minimum be removed from the Fed's board. The president argued that Powell's inability to manage a construction project underscored his broader unfitness to oversee interest rate policy, and he threatened legal action should Powell refuse to resign. Trump said he had instructed Attorney General Todd Blanche to review the report and determine an appropriate course of action.

Powell, who led the Fed for most of the renovation period, declined to comment on the watchdog's findings. His tenure as Fed chair ended in May, when Kevin Warsh assumed the role. The report marks the latest development in a contentious relationship between Powell and Trump that stretches back to 2018, when the president first began publicly criticizing the Fed chief for declining to cut interest rates. Trump had originally nominated Powell for the top job in late 2017, making the subsequent friction a notable break between a president and his own appointee.

The ongoing feud has extended beyond Powell. Trump is separately attempting to remove Fed Governor Lisa Cook over allegations of wrongdoing in a matter unrelated to the renovation project, a move that has raised concerns about the central bank's independence from political pressure.

The Inspector General's report emphasized that while deficiencies in project management were evident and corrective actions were recommended under the Inspector General Act, the evaluation did not identify administrative misconduct. The distinction is significant: it means the watchdog found poor execution and oversight failures, but not conduct rising to the level of criminal or administrative violations.

Beyond Powell, the report's implications touch other senior Fed officials. Vice Chair Philip Jefferson chairs the central bank's Committee on Board Affairs and serves as the administrative governor most directly involved in project oversight. Jefferson did not immediately comment on the findings.

Current Fed Chair Kevin Warsh responded to the report by pledging to implement its recommendations on project management. He also said the central bank would hire an independent auditor to verify the accuracy and compliance of all costs awarded to date on the renovation effort. The commitment signals an attempt to restore confidence in the Fed's stewardship of its own facilities while the political storm around the project continues.

Cost overruns on major government construction projects are hardly unusual, a point that supporters of the Fed have been quick to note. Trump's own budget for renovations to the White House ballroom, currently underway, doubled from initial estimates to at least $400 million, offering a parallel that critics of the president's attack on Powell have highlighted.

Reaction on Capitol Hill split along familiar party lines. Republican Senator Tim Scott, who chairs the Senate Banking Committee, said inflation does not diminish the Fed's obligation to manage its resources prudently and remain accountable to Congress. He described the cost overruns as egregious and vowed rigorous oversight of the central bank. Senator Elizabeth Warren, the committee's ranking Democrat, countered that the report's findings provided no basis to revive what she characterized as the president's witch hunt against Powell.

The episode underscores the intensifying political pressure surrounding the Federal Reserve at a moment when its independence is already under scrutiny. The central bank occupies a unique position in American governance, charged with setting interest rates and managing monetary policy free from direct political control. Trump's repeated efforts to influence Fed leadership—through demands for rate cuts, attempts to remove officials, and now the push for Powell's resignation—have tested that norm in ways unusual in modern U.S. history.

For Powell, the watchdog's report removes the specter of criminal referral but does little to quiet his critics. For the Fed, the findings present a dual challenge: addressing genuine management failures on a high-profile project while defending its institutional independence against political encroachment. And for Trump, the report offers a new opening to press his case against a Fed leadership he has long sought to remake, even as the legal and political paths to removing Powell remain uncertain.

The coming weeks will likely bring further scrutiny, as lawmakers weigh the watchdog's findings, the Fed implements corrective measures, and the president decides whether to escalate his campaign against Powell through the Justice Department or other channels.