Few people noticed when a former Federal Reserve economist published a report earlier this year about ballooning costs in the central bank’s headquarters renovation. Months later, that obscure budget critique has become the centerpiece of President Trump’s pressure campaign against Fed Chair Jerome Powell—and his potential attempt to remove him from office.
Trump might lack the legal authority to fire Powell for not lowering interest rates, but his advisers are seizing on the $2.5 billion building project as the next best thing: a concrete example of government waste that could erode the public trust Powell needs to function effectively.
On Wednesday, Trump said it was “highly unlikely” he would get rid of Powell, “unless he has to leave for fraud.”
The White House is pointing to cost overruns and marble construction not because it has any legal authority over the central bank’s buildings or budgets. Instead, administration officials are hoping to erode people’s trust in Powell, build a legal case to force him out, or both.
Trump floated the idea of trying to dismiss Powell in his first term and again this spring, but he abandoned the idea both times after advisers suggested it might be a loser in the courts and with financial markets.
That has led a band of Trump loyalists to sharpen their attack by spotlighting the building project, which has been under way for years, as a possible cudgel to humiliate Powell in the hope he would resign or to attempt an ouster that a court might be willing to bless.
The Trump administration, frustrated with the Federal Reserve chair, has turned to criticizing construction work at the Fed building. Photo: jonathan ernst/Reuters
The laws creating the Fed say policymakers can be removed only “for cause,” which has been interpreted to mean malfeasance or dereliction of duty. Legal experts doubt the administration has grounds for a court-sanctioned removal, suggesting the real strategy might be to inflict enough political damage that Powell either resigns or becomes more accommodating on interest rates.
The real battle is in the court of public opinion and not in a court of law. A recent Supreme Court order suggested that presidential power to dismiss certain federal commissioners doesn’t extend to the Fed. An institution that depends on credibility is suddenly defending spending choices and construction management—issues with greater public salience—instead of the more arcane details of monetary policy.
On Tuesday, a senior White House political adviser mocked the Fed’s building project by sharing on social media an image generated of Powell as Marie Antoinette. “Let them eat basis points,” wrote the adviser, James Blair. Last week, another Trump administration appointee issued a statement amplifying baseless internet rumors that Powell would resign.
The Fed says its renovation project has faced cost overruns in part because of unforeseen conditions. Photo: Al Drago/Bloomberg News
In public and private, Powell has made clear he sees protecting the Fed’s ability to set interest rates free from political interference as a critical objective for the remaining 10 months of his term. Central banks that lose their independence struggle to maintain credibility with financial markets and control inflation effectively, leading to higher long-term interest rates.
Resigning, or accepting dismissal without a fight, would make Powell complicit in degrading the independence he has consistently vowed to protect. For Powell, that stance reflects not personal ambition but rather a commitment to preserving institutional authority for future Fed chairs.
Some Republicans have warned the White House about removing Powell. On the Senate floor on Wednesday, Sen. Thom Tillis (R., N.C.) called it a “huge mistake.”
“The consequences of firing a Fed chair…will be to undermine the credibility of the United States going forward,” he said. “If it happens, you are going to see a pretty immediate response, and we’ve got to avoid that.”
Jerome Powell, chair of the Federal Reserve, has made clear he sees protecting the Fed’s ability to set interest rates free from political interference as critical. Photo: Al Drago/Bloomberg News
The mechanics of removing Powell could prove messy. The Fed controls its own buildings, finances and security, meaning Powell could continue operating as chair from Fed headquarters until either a court sanctions his removal or the Senate confirms a replacement named by Trump—creating the potential for a drawn-out institutional standoff.
The building brouhaha echoes an effort by President Richard Nixon ahead of the 1972 election to put pressure on his Fed chair, Arthur Burns, to keep interest rates low by planting a false story in the press that Burns was seeking a pay raise at the same time he was proposing national wage and price controls.
Congress created the Fed in 1913, and it operated out of the Treasury Department until lawmakers approved the construction of a headquarters in the 1930s. Congress gave the Fed full control over its headquarters, which was completed in 1937 and later named for then-Fed Chair Marriner Eccles. The Fed added a second office building on an adjacent vacant parcel in the 1970s, later named for former Fed Chair William McChesney Martin.
The Fed, which is self funded, secured explicit approval from Congress in a 2000 law to expand its footprint or to enlarge or remodel any buildings. It began contemplating a renovation of the Martin building to include conference space and ultimately completed a top-to-bottom refurbishment in 2021. Attention then turned to a similar renovation of the Eccles building plus a third vacant building across the street that it acquired a few years earlier.
The Fed says the project has faced cost overruns in part because of unforeseen construction conditions such as more asbestos than anticipated, toxic contamination in the soil and a higher-than-expected water table. The project was expensive to begin with because local building authorities secured design changes to make the renovation more compatible with the original building. To make up for lost space, the plans added square footage below ground level, which the Fed said sent up the price tag.
Construction work on the Eccles Federal Reserve building. Photo: Al Drago/Bloomberg News
Construction cranes for the project have been visible on the Washington skyline for two years, and The Wall Street Journal highlighted cost overruns in a 2023 news article.
The issue burst forth at a congressional hearing last month when Powell rebutted the implication that certain high-gloss finishes were driving up costs. Those features had been dropped from the building plans, he said.
Last week, White House budget director Russ Vought sent Powell a letter with pointed questions suggesting the Fed chief had either misled Congress or failed to properly notify a local planning commission about design changes. Vought demanded a reply within seven business days. Around the same time, Trump named three of his aides to the planning commission.
In a separate letter to leaders of the Senate Banking Committee this week, Powell explained how his answers to the panel last month about design changes had been truthful. The Fed’s collaboration with the planning commission had been voluntary and didn’t extend to financial oversight of the project, he said.
Blair, one of the Trump advisers named to the planning commission, renewed his request for a tour of the project in a social-media post on Wednesday, a sign that the administration plans to keep the building project in the public eye.
On Tuesday, Trump said he was surprised to learn about the costly building renovations, given his view that Powell is a boring and unintelligent person. “I think he’s a total stiff, but the one thing I didn’t see him [as] is a guy that needed a palace to live in,” he told reporters.
Write to Nick Timiraos at [email protected] and Brian Schwartz at [email protected]
