A critical report from a watchdog group took aim at the Federal Reserve on Wednesday, criticizing its management of the costly renovation of its headquarters, derisively dubbed the ‘Palace of Versailles.’ However, the inquiry found no evidence of criminal misconduct by former Fed Chair Jerome Powell.
The costly renovation, which ballooned to a staggering $2.5 billion, has left taxpayers footing the bill, drawing the ire of former President Donald Trump, who described the situation as “disgraceful.”
The harsh 120-page review by the Inspector General was initiated after an exclusive from a newspaper last year that highlighted the extensive financial losses. The report criticized the Fed’s “disgraceful” pay-as-you-go strategy, describing it as particularly troubling, especially given that initial estimates for the project were as low as $921 million.
While not a legal determination, the report ultimately exonerated Powell, concluding that there were “no reasonable grounds” for believing that federal criminal laws had been violated in relation to the renovation project.
In response to the findings, Trump stated on his social media platform that he urged Attorney General Todd Blanche to “study the report.” He went on to say, “Powell should be forced to resign from the Board. He can’t manage a building, and he certainly shouldn’t be allowed to manage his High Interest Rate Policy.”
The report pointed to significant mistakes that contributed to the budget overruns. In the course of the renovation, the Fed unexpectedly decided to eliminate open workspaces in favor of private offices, which stalled design plans for an astonishing 21 months.
Costs for mechanical and plumbing work surged by nearly $500 million, yet the Fed moved ahead with these expenditures, even when contractors did not secure the requisite three competitive bids.
The investigation also criticized the Fed’s leadership for not obtaining a fundamental cost estimate until January 2026, three and a half years after construction had kicked off. At that stage, about $2 billion had already been agreed upon for the lavish project.
The Fed typically channels its additional profits to the Treasury to support government funding; however, expenditures on this renovation diminish those payouts, placing a heavier burden on American taxpayers.
The report bluntly stated that the central bank had “not successfully managed and executed” the renovation work.
It emphasized that the lack of a defined total project cost and spending limit fostered a disorganized pay-as-you-go approach. “Without a cost ceiling, senior officials and oversight entities lacked a true measure of this critical performance metric,” read the Inspector General’s report.
The initial renovation plans, which included upscale marble interiors and a rooftop garden, were later deemed not to have “significantly contributed” to the rising expenses. In fact, some luxury features were cut from the design shortly after media and congressional stakeholders raised concerns about the project.
Former Chair Powell had faced accusations of lying under oath during his congressional testimony last June regarding the costs of the renovation. However, attempts by the DOJ to investigate these claims were ultimately halted by judges.
Senator Tim Scott (R-SC), who chairs the Senate Banking Committee, stated, “Inflation does not change the Fed’s responsibility to manage its resources prudently and be accountable to Congress.” His remarks seemed to hint at how Fed officials largely blamed escalating material costs during the COVID-19 pandemic for the project’s financial challenges.
The newspaper has reached out for comments from both the White House and the Federal Reserve.
