Key Points
- White
House National Economic Council Director Kevin Hassett confirmed the Trump
administration is actively investigating the Federal Reserve’s $2.5
billion headquarters renovation, citing a $700 million cost overrun. - Hassett
stated on ABC’s “This Week” that President Donald Trump’s decision to
attempt firing Fed Chair Jerome Powell will depend on answers to questions
sent to the Fed by Office of Management and Budget Director Russell Vought. - Vought
compared the renovation to the Palace of Versailles and criticized Powell
for an “ostentatious overhaul,” highlighting features like rooftop gardens
and premium marble. - Trump
has repeatedly called for Powell’s resignation, criticizing him for not
lowering interest rates and labeling him “very bad for the country”. - The
Federal Reserve responded by updating its website with a FAQ section
defending the renovation, denying construction of new VIP dining rooms and
clarifying the project’s necessity and funding sources. - Legal
questions remain as to whether the president can fire the Fed chair, with
recent Supreme Court decisions leaving the issue unresolved. - Hassett
is considered a potential candidate to replace Powell if the president
moves to remove him before his term ends in May 2026. - The
controversy has raised concerns about the independence of the Federal
Reserve and market stability, with previous threats to fire Powell causing
market volatility.
The White House has launched a high-profile investigation
into the Federal Reserve’s $2.5 billion headquarters renovation, with top
economic adviser Kevin Hassett confirming that President Donald Trump is
weighing whether he has authority to fire Fed Chair Jerome Powell over the
project’s $700 million cost overrun. The administration’s actions have
intensified long-standing tensions between the White House and the central
bank, raising questions about the future of Fed independence and the stability
of U.S. monetary policy.
Why Is the White House Investigating the Fed’s Renovation
Project?
As reported by David Lawder of Reuters, Kevin Hassett stated
on ABC’s “This Week” that the Trump administration is scrutinizing the Federal
Reserve’s renovation costs at its Washington headquarters, focusing on what the
administration calls a $700 million cost overrun.
Hassett said,
“The Fed has a lot to
answer for any decision by President Trump to try
to fire Powell is going to depend a lot on the answers that we get to the
questions that Russ Vought sent to the Fed”.
Russell Vought, Director of the Office of Management and
Budget, last week sent a letter to Powell criticizing the “ostentatious
overhaul” and demanding detailed answers about the $2.5 billion project.
Vought’s letter, shared on X, compared the project to
France’s Palace of Versailles, referencing rooftop gardens, water features and
premium marble.
What Are the Specific Concerns Raised by the White House?
According to CNBC’s reporting, Vought accused Powell of
“grossly mismanaging the Fed” and targeted the project’s features, including
terrace rooftop gardens, water installations, VIP elevators, and high-end
marble. Vought calculated the renovation’s cost per square foot at $1,923—twice
the expense of refurbishing a typical historic federal building. He also
referenced Powell’s testimony before the Senate Banking Committee, where the
Fed chair was pressed about the project’s compliance with the National Capital
Planning Commission’s approved plans.
Vought’s letter posed nearly a dozen questions about the
renovation, including whether the project deviated from the approved plans and
if it prioritized luxury over fiscal responsibility. The administration’s
criticism comes amidst the Fed’s first operating deficit since 2023, further
fueling concerns about financial stewardship.
How Has the Federal Reserve Responded to the Criticism?
As reported by CNBC, the Federal Reserve quietly updated its
website with a new FAQ section to address the administration’s objections. The
Fed denied that new VIP dining rooms were being constructed and clarified that
existing rooms were being preserved for mealtime meetings. The FAQ also
explained that cost increases stemmed from changes required by review agencies,
higher-than-expected asbestos removal, and unforeseen conditions like toxic
soil contamination.
Importantly, the Fed emphasized that taxpayers are not
funding the renovation, as the central bank is self-sustaining through interest
on securities and fees charged to banks. The FAQ stated,
“No new VIP
dining rooms are being constructed as part of the project,”
directly countering
Vought’s assertions.
What Has President Trump Said About Powell and the Fed?
According to Fox Business, President Trump told reporters on
Sunday that Powell’s resignation “would be a great thing” for the country,
reiterating his criticism of the Fed chair for not lowering interest rates:
“Jerome Powell has been very bad for our country. We should have the lowest
interest rate on Earth, and we don’t. He just refuses to do it”.
Trump has repeatedly threatened to fire Powell over his
reluctance to cut rates and has labeled him with derogatory nicknames, such as
“Too Late Powell”. While Trump stated as recently as Friday that he was
not planning to fire Powell, Hassett’s comments have “cracked the door open
again,” according to Axios.
Does the President Have the Authority to Fire the Fed Chair?
In an interview with Jonathan Karl on ABC’s “This Week,”
Hassett was asked if Trump has the authority to remove Powell. Hassett
responded,
“That’s a thing that’s being looked into, but certainly if there’s
cause, he does”.
NBC News noted that the question of presidential
authority to fire the Fed chair is under legal review, and a recent Supreme
Court ruling on independent agencies may not apply to the Federal Reserve,
which is considered a “uniquely structured, quasi-private entity”.
Neither the White House nor the Federal Reserve Board of
Governors has provided immediate responses to requests for further
clarification on this legal question.
What Are the Broader Implications for the Fed and the
Economy?
As reported by Fortune, the dispute over the renovation has
raised concerns about the independence of the Federal Reserve and the potential
for increased political pressure on monetary policy. The mere threat of firing
Powell earlier this year caused a sell-off in financial markets, sending
interest rates soaring. Experts warn that undermining the Fed’s
independence could destabilize markets and erode confidence in U.S. economic
policy.
Hassett is widely seen as a leading contender to replace
Powell if the administration moves to oust him before his term expires in May
2026. Other names reportedly under consideration include former Fed
Governor Kevin Warsh.
What Happens Next?
According to Axios, Vought’s letter to Powell gives the Fed
seven business days to respond to the administration’s questions, setting the
stage for a critical decision point at the end of the week. The outcome
could determine not only the fate of Powell’s chairmanship but also the future
direction of U.S. monetary policy and the relationship between the White House
and the central bank.
What Are the Key Statements from All Sides?
- As
reported by David Lawder of Reuters: U.S. President Donald Trump has the
authority to fire Federal Reserve Chair Jerome Powell for cause if
evidence supports that, White House economic adviser Kevin Hassett said on
Sunday, adding that the Fed ‘has a lot to answer for’ on renovation cost
overruns at its Washington headquarters. - Russell
Vought, in his letter (as reported by Reuters and CNBC): Rather than
making efforts to correct the Fed’s fiscal course, you have proceeded with
an extravagant renovation of your Washington, D.C., facility. - Federal
Reserve FAQ statement (as cited by CNBC and Fortune): No new VIP dining
rooms are being constructed as part of the project. Various factors have
driven cost increases, including changes to original building designs due
to consultations with review agencies and unforeseen conditions such as
more asbestos than expected. - President
Trump to Fox Business: Jerome Powell has been very bad for our country.
We should have the lowest interest rate on Earth, and we don’t. He just
refuses to do it. - Kevin
Hassett to ABC News: That’s a thing that’s being looked into, but
certainly if there’s cause, he does.
Could This Lead to a Major Shift in U.S. Monetary Policy?
The ongoing investigation and the possibility of firing
Powell have injected significant uncertainty into the future of the Federal
Reserve’s leadership and policy direction. As reported by multiple outlets, the
administration’s actions have already triggered market volatility and raised
alarms about the politicization of the central bank.
While the White House waits for Powell’s response, the
broader financial community is bracing for potential upheaval in the leadership
of the world’s most important central bank. The coming days will be
critical in determining whether the administration proceeds with efforts to
remove Powell and what that could mean for the U.S. economy and global markets.
