The Federal Reserve’s internal watchdog just gave the central bank a pass on a headquarters renovation that more than doubled in cost, proving that while Main Street gets squeezed by inflation and higher interest rates, the architects of those rates play by their own rules.
Inspector General Michael Horowitz concluded the Fed “repeatedly deviated” from cost controls and failed to set basic budget limits with its contractor, but found no criminal or administrative misconduct. It’s the fox clearing the henhouse. When ordinary Americans make a financial mistake, the Fed punishes them with rate hikes; when the Fed blows over a billion dollars, it just gets a list of recommendations.
The numbers are staggering. The Fed’s headquarters renovation was budgeted at $921 million in February 2020. By December 2024, construction costs had surged to $2.018 billion, according to The Guardian. President Trump, who toured the site and estimated the true cost closer to $3.1 billion, has slammed the project as a “disgrace.”
The IG report detailed gross incompetence at the top. The Fed did not even obtain a construction cost estimate from its general contractor at the outset, nor did it share a cost limitation, CBS News reported. The project timeline is equally disastrous: construction was supposed to wrap up in mid-2024 but is now delayed until December 2027. Two buildings haven't been renovated since the 1930s, the Fed claims, though Trump flagged “ostentatious” features like a VIP dining room and garden terrace. The IG found no fault with those features.
“At no point during our evaluation did we find reasonable grounds to believe that a violation of federal criminal law had occurred,” the report stated. Horowitz added, “we did not identify administrative misconduct during our evaluation.”
The renovation has been at the center of a bitter power struggle. Former Fed Chair Jerome Powell faced a Justice Department criminal probe led by D.C. U.S. Attorney Jeanine Pirro, who issued grand jury subpoenas. A federal court quashed those subpoenas, finding they were a pretext to pressure Powell into lowering interest rates or resigning. Powell called the probe a “pretext” in a January video statement, arguing it was about whether monetary policy would be “directed by political pressure or intimidation.” Pirro dropped the criminal investigation in April.
The political fallout briefly stalled the confirmation of current Fed Chair Kevin Warsh, after Republican Sen. Thom Tillis refused to vote for any nominee until the probe ended. Federal Housing Finance Agency chief Bill Pulte also pushed Congress to investigate Powell for “deceptive” testimony, though he offered no evidence.
Pirro’s office told CBS News she will review the IG report and decide whether to reopen the criminal investigation. For now, the central bank that demands strict fiscal discipline from the American public gets a pass for failing to practice it itself.
