Fed watchdog finds renovation failures, but no grounds for criminal referral

• The IG found no violation of federal criminal law requiring referral to the U.S. Attorney General, despite allegations that Powell misled Congress in June 2025 testimony
• Renovation costs exceeded initial estimates by approximately $1 billion due to design changes and management issues, though the Fed board was not involved in day-to-day project decisions
• Current Fed Chairman Kevin Warsh said the central bank would adopt the report's recommendations following the review that began in July 2025

Summary: Fed IG Report on Headquarters Renovation Finds No Criminal Wrongdoing

The Federal Reserve's inspector general released a report Wednesday finding management and oversight failures led to major cost overruns in the central bank's headquarters renovation, but concluded no federal crimes occurred that would warrant criminal referrals to the attorney general.

Key Findings:

• Renovation costs ballooned by approximately $1 billion from initial estimates due to design changes and other project management issues
• No reasonable grounds found for criminal violations under the Inspector General Act
• The Fed Board of Governors was not involved in day-to-day project decisions, which the IG deemed appropriate for such large construction projects

Political Context:

The investigation was launched in July 2025 amid allegations by President Donald Trump and other critics that former Fed Chair Jerome Powell mismanaged the project and potentially misled Congress during June 2025 Senate testimony. Some critics accused Powell of perjury, though the IG report makes no misconduct claims related to his testimony.

Current Status:

Powell remains a Fed governor following the investigation. Current Fed Chairman Kevin Warsh stated the central bank would adopt the report's recommendations. The findings may defuse political attacks against Powell, as the report assigns responsibility primarily through his role as organizational head rather than specific wrongdoing.

Market Implications:

The report's release comes as Trump has criticized the Fed's recent interest rate increase, which he attributed to what he called a "rogue" board—despite the decision being supported by his own appointee, Chair Warsh. The findings were anxiously awaited by Fed officials concerned the report could provide ammunition for renewed presidential attacks on the central bank's independence.