In a report released Wednesday, the Fed’s inspector general determined that management and oversight failures contributed to significant cost overruns in the central bank’s headquarters renovation, but said it found no basis for criminal referral.
“At no point in our evaluation did we find reasonable grounds to believe that a violation of federal criminal law requiring referral to the United States Attorney General under the Inspector General Act has occurred,” the Fed inspector general’s report said.
The independent watchdog’s findings could soften a line of attack against former Federal Reserve Chairman Jerome Powell, who President Donald Trump and other critics have accused of mismanaging the project and misleading Congress.
The IG’s report makes little concession to Powell’s critics beyond his responsibility as head of the organization to manage the project. Instead, it details a renovation project at the Washington facility that cost about $1 billion more than originally estimated as the Fed struggled with design changes and other issues.
Some critics claim Mr. Powell perjured himself in testimony about the project to the Senate in June 2025. The IG’s office did not specifically say it would evaluate the allegations, but the report said the watchdog reviewed material related to Mr. Powell’s testimony. This report does not allege any wrongdoing in connection with its testimony.
The Fed’s Board of Governors is not involved in day-to-day decisions regarding the project, the report said.
“In fact, we expect (boards) to delegate the day-to-day management of large construction projects,” the report states.
Trump blamed the Fed’s “hostile” board for recent interest rate hikes, even as the decision of his new Fed chairman, Kevin Warsh, was upheld. Fed officials and central bankers had anxiously awaited the results of the investigation, which has been in place since July 2025, believing it could give Trump an opportunity to renew his attacks on Powell.
Trump harshly criticized Powell over the issue last year. That sparked months of speculation that the president would use that as a reason to fire Powell. The two nervously toured a construction site together in July 2025, which was captured on video. Powell ended his term as chairman as scheduled after a judge blocked a federal criminal investigation into the renovations.
U.S. President Donald Trump speaks next to Federal Reserve Chairman Jerome Powell during a tour of the Federal Reserve Building currently under renovation in Washington, DC, on July 24, 2025.
Kent Nishimura | Reuters
Mr. Trump has long argued that the Fed should lower interest rates and said he would apply that litmus test to the person he chooses to chair. Powell said in an extraordinary video statement in January that the criminal investigation related to the renovations was a pretext to force a rate cut.
The Justice Department could reopen its investigation into Powell based on the new findings, or Warsh could ask for his resignation. Powell will remain on the Fed’s board of directors as president until January 2028.
The Fed’s Board of Governors declined to comment on the report. The publication includes a letter from Mr. Warsh that welcomed the findings and said the Fed would take steps to adopt the report’s recommendations.
The investigation was led by Federal Reserve Inspector General Michael Horowitz. He was appointed by Mr. Powell in June 2025, and Mr. Powell requested an investigation a month later.
Mr. Trump and his Republican allies claim Mr. Powell mismanaged the expensive renovations and misled Congress about it in Senate testimony in June.
The Fed’s 2025 budget allocates $2.5 billion to renovate the historic Eccles building that houses the Fed, about $700 million more than previously estimated. The Fed blamed this on a number of factors, including rising costs for renewal designs based on discussions with other federal agencies, differences between estimated and actual costs for materials and labor, and unexpectedly poor environmental conditions at the construction site.
Congress designed the Fed to be independent from the rest of the executive branch. The institution is self-funded and manages its own budget.
Republican senators who attended Mr. Powell’s testimony last year said they did not believe Mr. Powell committed a crime in his testimony.
“I’m the one who asked the question,” Sen. Tim Scott (RS.C.) said in a February interview on FOX Business. Scott found Powell incompetent, but said, “I don’t believe he committed a crime during the hearing.”
Nevertheless, the president claimed that the renovation issue involved “crime.”
In December, U.S. Attorney Jeanine Pirro of the District of Columbia opened a criminal investigation into Mr. Powell and the Fed over the renovations. In March, Chief Judge James E. Boasberg of the D.C. Circuit rescinded the subpoena Pirro had issued to the Fed. The judge found that although there was evidence that the subpoena was intended to “harass and pressure Mr. Powell” over interest rates, there was no evidence of wrongdoing on Mr. Powell’s part.
Pirro agreed in April to halt the investigation to pave the way for Warsh’s confirmation.
But Pirro said at the time that he was awaiting the inspector general’s report and would consider reopening the matter.
“If the facts warrant it, we will not hesitate to reopen the criminal investigation,” Pirro said.
Pirro and the White House did not immediately respond to requests for comment on the IG’s report.
In an interview with Fox before taking office, Warsh called the cost overruns “extraordinary.” At a press conference in June after approval, Warsh said he looked forward to reading the report and said it focused on “what we can do to be good stewards of taxpayers’ money.”
In a letter accompanying the report, Warsh said he plans to conduct a full audit of the renovations and has asked the General Services Administration, which oversees other federal building projects, to serve as project manager going forward.
