The Federal Reserve's independent watchdog has concluded that the central bank's headquarters renovation suffered from significant management failures, but it found no administrative misconduct and no grounds to refer anyone for criminal prosecution. The finding legally clears former Fed Chair Powell, yet the political battle surrounding the affair is far from over.

According to a recent Wall Street Journal report, the 120-page report released Wednesday by the Fed's Office of Inspector General represents the final formal obstacle to potential legal action against Powell by the Trump administration. The report showed that the renovation's cost had ballooned from an estimated $1.3 billion in 2020 to roughly $2.4 billion, but investigators also noted that the lavish designs cited by critics were not the main driver of the overruns.

Hours after the report's release, Trump posted on social media demanding that Powell resign from the Fed's Board of Governors, saying he had asked Attorney General Todd Blanche to review the report and decide on next steps. Trump said that if Powell refused to step down, the government would sue him on grounds of corruption or dereliction of duty.

Project mismanagement, but no basis for criminal violation

The inspector general's report stated explicitly that at no point in our evaluation did we find reasonable grounds to believe a federal criminal violation occurred, while also finding no administrative misconduct.

The report leveled multiple criticisms at the Fed's project management: the Board of Governors' existing governance and oversight framework was inadequate for a project of this scale and complexity; after the project began, the Board did not receive updated cost estimates from the construction manager until January of this year, by which time more than $2 billion in construction contracts had already been awarded; in addition, the Fed set no cost ceiling for the project and took no other steps to incentivize the outside construction manager to control costs.

The report also questioned some of the causes of the overruns. Mechanical, electrical and plumbing work cost about $500 million, far above the initial 2022 estimate of $200 million, a jump that cannot be fully explained by inflation. However, the report did not judge whether the final cost of the entire project was reasonable.

Powell once faced a criminal investigation

The renovation controversy began with a congressional hearing in June 2025. At the hearing, Powell testified on matters related to the renovation project, and White House officials subsequently accused him of giving false testimony. In July 2025, Powell himself asked Inspector General Michael Horowitz to review the project's planning, budgeting and management.

Events escalated from there. In January of this year, the office of then-Washington federal prosecutor Jeanine Pirro sent two subpoenas to the Fed, opening a criminal investigation into Powell's congressional testimony. Powell then announced he would remain on the Fed's Board of Governors and said he would not leave until the investigation was brought to a thorough conclusion in a transparent and final manner.

In March, a federal judge quashed the subpoenas on grounds that the investigation appeared to have a harassing and coercive character. In April, the Justice Department announced it was closing the criminal investigation into Powell, but told Senator Thom Tillis that the case could be reopened only if the Fed's inspector general made a criminal referral — a statement that also cleared the way for the confirmation process of current Chair Warsh, who took office in May.

Renovation cost nearly doubled

The renovation of the Eccles Building and the adjacent 1951 Constitution Avenue building was approved by the Fed's Board of Governors in 2017. At the time, Powell was overseeing the Board's administrative affairs as a governor. Because the Fed is self-funded, the project is paid for entirely out of the central bank's own earnings, and the work is scheduled for completion next year.

In a letter to the inspector general on Tuesday, Warsh said he had invited the head of the General Services Administration (GSA) to lead an external review of the renovation and that, effective immediately, the GSA would serve as the project's executing agency, reporting directly to him and the Board.

Warsh accepted all of the inspector general's recommendations and wrote: If any government agency should be vigilant about cost control, it is this nation's central bank.

White House pressure shifts to Board seat

From a legal standpoint, the report provides Powell with clear protection. From a political standpoint, however, the dispute is not over.

In April of this year, weeks before his term as chair expired, Powell announced he would stay on as a governor, with a term running through January 2028. Trump administration officials had previously said that if the inspector general's report failed to give prosecutors a basis to reopen the investigation, they hoped Powell would voluntarily leave the Board within the year.

The focus of White House pressure has now shifted from the chair position to the composition of the Board. After Warsh led the Fed to announce a rate hike on September 16, Trump and White House advisers portrayed him as a chair hemmed in by an opposition Board. The White House's push to remove Governor Lisa Cook has not let up, and whether Powell chooses to give up his seat voluntarily will directly affect whether the White House can gain another vacancy on the Board it has spent two years pressuring to cut rates.