The Federal Reserve is moving forward with a spectacular $2.5 billion revamp of Washington, DC HQ, despite increased losses as it denounced officials acting like French royals over certain ex-utilitarian spending.
The rubber project, first stamped by the government’s penpusher in 2021, is now effectively subsidized by US taxpayers as the Fed has not made any profit since 2022.
“The Federal Reserve is building the Palace of Versailles at the National Mall,” said Andrew T. Levin, a professor of economics at Dartmouth University in New Hampshire, referring to the official housing of the long-standing French monarchy on the outskirts of Paris.
Levin, who served on the Fed’s board from 1992 to 2012, added: “Congress must put his feet down and look at this in more detail and decide what authority the Fed must spend on the building.”
The expensive makeover is controversial after the Fed posted an operating loss of $77.5 billion last year.
This is still down from the $114.6 billion loss in 2023, when the central bank sank into red for the first time in its 100-year history. Officials there argue that losing money will not affect your ability to operate and implement monetary policy.
The Fed’s interest costs skyrocketed, surpassing the revenues of bonds owned when Fed Chairman Jerome Powell hiked in trying to curb ramp-stressed inflation during the Biden administration.
When the Fed makes a profit, the money will be passed on to the US Treasury Department and become part of the federal government’s budget.
That increased loss of about $178 billion is now summed up in what is known as the Fed’s “deferred assets” that must be repaid before spending money on other things like defense, education, and Medicare.
A 2023 study by experts at the St. Louis Fed Fed predicts that it will not occur early until mid-2027.
That means the 10x more expensive renovations spent on nearby Ronald Reagan Building could be under the microscope of a GOP Big Wig who is eager to crack down on excessive spending.
The latest revelation comes after President Trump revived the threat of firing Powell with a long-term spat, beyond the speed of the Fed’s interest rate cuts.
The overhaul, which was managed when Powell was Fed Governor, focuses on modernizing two downtown complexes on the Fed’s DC campus, known as the Eccles and Fed-East buildings.
The plans include a rooftop garden terrace, skylights, ornate water features, and a new elevator system that allows board members to be dropped directly into the VIP dining suite.
The planning document promises a refreshing feeling inspired by Eccles’ original style, designed by French-born Philadelphia architect Paul Crett.
Both buildings use Georgian white marble and say that they “create a place where exchanges between citizens proceed within the framework of the Republic’s facilities.”
The cost has risen by about 32% from the 2019 estimate of $19 billion, and is set to complete all work in 2027.
The planning document posted online condemns the “significant increase” in the costs of building materials “are well beyond the standard cost escalation.”
“The Fed is funding this construction project by borrowing it from the public,” said Levin of Dartmouth. “However, the Fed spending will not pass Congressional budgets and its borrowings are not included in the federal debt cap.”
The Fed’s 3,000 staff received previous upgrades completed in 2021, mainly from the William McChesney Martin Jr building.
The Wall Street Journal revealed that the basement held the Fed’s private art collection in March 2023, while Italian beehives were installed on the roof.
Joe Grogan, who worked for the Office of Management and Budget during President Trump’s first term, said spending $2.5 billion on a new office was “crazy.”
“It’s a longstanding axiom that whenever a company builds a new, luxurious headquarters, it’s time to sell stocks,” said Grogan, who oversaw domestic medical expenses $1.3 trillion during his two-year stint at the Expense Watchdog.
“I hope it doesn’t mean that the Fed’s new HQ is heading towards a crash,” he added.
