Justice Department Won’t Reopen Powell Probe After Watchdog Review

After President Donald Trump said Wednesday that he had asked Attorney General Todd Blanche to study the inspector general’s report and determine what to do, Attorney General Todd Blanche said Friday that the Justice Department will not reopen its criminal investigation into Jerome Powell over headquarters renovation cost overruns. Powell is the former Federal Reserve chair, and Trump has said he should resign from the Fed Board.

“We’re not reopening a criminal investigation into him.”

The Federal Reserve Office of Inspector General found no reasonable grounds for a criminal referral and no administrative misconduct in the report Trump asked Blanche to study. It identified management and oversight failures that contributed to major cost increases. Blanche said any future investigation would depend on a new independent audit uncovering evidence of criminal wrongdoing in the renovation project.

After interviewing Fed governors, senior board officials, staff and contractors, the inspector general identified four areas associated with the cost increases and issued seven recommendations. It faulted the Fed for failing to take numerous available steps that could have better controlled costs and mitigated some of the significant increases in construction spending. The review found that the Fed did not obtain a construction cost estimate from its general contractor, did not share a stated cost limitation with the contractor at the outset, and that internal project governance was insufficient to manage a large-scale multibillion-dollar project.

The review found that inflation contributed to rising costs but did not fully account for the overruns, which exceeded the rate of inflation. Sen. Tim Scott argued that higher prices did not alter the Fed’s responsibility to manage its resources prudently or its accountability to Congress.

The inspector general found that the design features it examined did not materially contribute to the construction cost increases. The features, which had attracted criticism including from the White House, included marble, water features, a garden terrace, skylights and a private elevator for the Fed chairman.

Political interpretations of the report

Although the inspector general found no administrative misconduct, the White House said the report reinforced allegations of gross mismanagement by the Fed’s previous leadership. Kush Desai argued that financial markets and working Americans deserve a Federal Reserve characterized by competence and accountability.

By contrast, Sen. Elizabeth Warren said the report gave the Justice Department no basis to restart what she called Trump’s “witch hunt” against Powell, while arguing that the findings underscored the need for greater transparency at the Fed.

Trump also argued that Powell should be forced to resign from the Fed Board and potentially be sued. Trump tied that demand to monetary policy, arguing that Powell’s handling of the renovation showed he could not manage a building and therefore should not be allowed to manage what Trump called a high-interest-rate policy.

Seeking remedies and changing oversight

Kevin Warsh said the Fed would commission a full audit and that the General Services Administration would serve as project executive going forward. Warsh said the full audit is intended to determine the value of services not received and pursue remedies, including reimbursement or credit for work paid for but not performed. It was not established whether the full audit Warsh described would be the new independent audit Blanche said could affect any future investigation.

The renovation is now slated for completion in December 2027, rather than its original mid-2024 target.