The White House Budget Director accused Federal Reserve Chairman Jerome Powell of having "mismanaged" the agency, citing the renovation project of the Fed headquarters that has exceeded its budget by hundreds of millions of dollars and shows signs of violating legal regulations. This is seen as the next step in the escalating tension between President Donald Trump and the head of the world's most powerful central bank.
The Director of the U.S. Office of Management and Budget (OMB), Mr. Russell Vought, has publicly criticized Fed Chairman Jerome Powell with heavy words, claiming he has "managed this agency extremely poorly." Mr. Vought specifically emphasized the Fed's budget deficit since the 2023 fiscal year – something that has never happened before in the agency's history.
The focal point of criticism is the renovation project of the Fed's main headquarters in Washington, which has exceeded its budget by up to $2.5 billion – $700 million higher than the initial estimate. "The cost per square meter reaches $1,923, double the normal rate for renovating federal buildings of historical value. If calculated equivalently, today's Palace of Versailles would only cost $3 billion," Mr. Vought sarcastically compared on social media X.
What items have led the White House to suspect that the Fed is wasting budget?
In the letter to Chairman Powell, Mr. Vought referenced the Senate hearing on June 25, arguing that the contents presented by Mr. Powell showed signs of "misleading" Congress. According to Mr. Vought, the original design of the project included luxurious items such as a rooftop garden, a private dining room for VIP guests, a private elevator, decorative water features, and high-end marble.
However, in his testimony before Congress, Mr. Powell denied everything: "There is no VIP dining room, no new marble, no special elevator, no water fountain, no rooftop garden, or beehive." This raised questions for OMB: if the original design included those items but they were not implemented, then the Fed is diverging from the approved plan; and if they were implemented, then Powell's testimony is inaccurate.
An important point raised by Mr. Vought is the possibility that the Fed headquarters renovation project has not complied with the National Capital Planning Act (NCPA). This law stipulates that all such projects must be approved by the National Capital Planning Commission (NCPC). If there are significant changes to the approved design, the Fed must reapply for approval.
"Mr. Powell's testimony indicates that the project is not in accordance with the plan approved by the NCPC. This could put the entire project in a state of legal violation and require an immediate halt to construction," Mr. Vought asserted.
He also asked the Fed Chairman to answer 11 questions related to the project within 7 working days, including details about construction items, costs, and compliance with legal regulations.
Is this a move to remove Mr. Powell from the Fed?
The tension between Mr. Trump and Mr. Powell is not new. The President has repeatedly publicly criticized the Fed for not lowering interest rates as he expected. In fact, Mr. Trump has considered dismissing Chairman Powell before his term ends next spring.
However, a recent ruling by the U.S. Supreme Court shows that Fed Board members have special protection from being arbitrarily dismissed by the President. Nevertheless, Mr. Vought's letter raises the question of whether the Trump administration is looking to build a "justifiable" reason to dismiss Mr. Powell.
Currently, the Federal Reserve has not made any official comments regarding the letter from the OMB Director. This silence is seen as a cautious step, as the political tension between the White House and the Fed could affect market confidence.
In the past, the Fed has always defended its independence in monetary policy making, avoiding political influence. Being accused of "wasting the budget" or "misreporting" could seriously harm the agency's reputation without a clear response.