The Trump administration intensifies criticism of the Federal Reserve's renovation project, expected to conduct an on-site visit in about a week
Criticism of the Federal Reserve's $2.5 billion renovation project has intensified under the Trump administration, with White House OMB Director Russ Vought stating that the $700 million cost overrun has angered the president. Vought described the project as poorly managed and mentioned that the Federal Reserve has not returned profits to the Treasury, primarily due to quantitative easing policies. Although it is unlikely that the president will fire Powell, he has the right to express his views on Federal Reserve policies. The Federal Reserve stated that design changes are intended to simplify construction and reduce the risk of cost overruns
The Trump administration has intensified its criticism of the Federal Reserve's $2.5 billion renovation project. Russ Vought, director of the Office of Management and Budget (OMB), stated that this shocking cost overrun has left the president furious. Vought said on Thursday local time:
This is not a discussion about the Federal Reserve and its independence. This is simply a renovation project that is very poorly managed and has led to massive cost overruns.
This is a shocking cost overrun. The president "is a builder," and now the renovation project of the Marriner S Eccles building on the National Mall has exceeded its budget by $700 million, which has made the president "angry."
OMB officials hope to conduct an on-site visit to the Federal Reserve in "about a week."
When asked if concerns about the renovation project could lead to Powell's dismissal, Vought stated that the president has repeatedly indicated it is unlikely he would fire Powell, but he still has the right to express his views on Federal Reserve policy. Vought later added that the Federal Reserve has been poorly managed for years and is no longer returning profits to the Treasury.
The reduction in profit returns is mainly attributed to the Federal Reserve's quantitative easing (QE) policy, under which the Federal Reserve purchased trillions of dollars in U.S. Treasury bonds to stabilize the market and drive inflation. QE began after the 2008 financial crisis, initiated by then-Federal Reserve Chairman Ben Bernanke, and continued under his successors Yellen and Powell.
Powell attempted to reassure lawmakers about concerns regarding the headquarters renovation project during a June congressional hearing, stating that several planned features had been canceled and denying that the Federal Reserve intended to install an executive-only elevator and special dining facilities.
In response, Vought stated, "They either misled Congress or need to go back to the National Planning Commission to reassess the project. These are important matters we need to clarify."
The Federal Reserve stated in its FAQ on its website that it did not contact the National Planning Commission because these design changes "are intended to simplify and expedite the remaining construction, reduce complexity, and lower the likelihood of further cost overruns and delays."
Powell also stated that Federal Reserve Inspector General Michael Horowitz will investigate the cost overrun issue. However, Vought said on Thursday that such an investigation is far from sufficient. "We want to sit down with the project leaders, hear their briefings, and see the current progress."
The Federal Reserve has not yet responded.
Trump Administration's Attacks on the Federal Reserve Escalate
Trump has been criticizing Powell for months, calling him a "stubborn mule." Trump insists that interest rates should be significantly lowered, well below the current 4.25% to 4.5%. The Trump administration only recently turned its attention to the renovation project.
On Wednesday, multiple media outlets reported that Trump had asked a group of Republican lawmakers whether Powell should be fired, causing market turbulence and a temporary drop in the dollar. However, Trump later stated that such an action is "extremely unlikely."
Despite the escalating attacks from the Trump administration, some Republican lawmakers believe the independence of the Federal Reserve is important:
On Thursday, Republican Senator Thom Tillis criticized the White House for attacking the independence of the Federal Reserve, stating that this independence is crucial. "Removing Chairman Powell would trigger a protracted legal battle, potentially leading to the economic turmoil we saw yesterday in the Treasury and dollar markets. Dismissing Powell would bring severe volatility and cause significant harm to the prospects of American wage earners."
Republican Senator John Kennedy from Louisiana also criticized the White House's attack on the Federal Reserve and defended Powell.
Analysis points out that Vought's latest criticism of the Federal Reserve and its Chairman Powell highlights that the Trump administration is attempting to portray this as a management failure, rather than merely a critique of its monetary policy.
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