Fed watchdog clears Powell over headquarters renovation as Trump demands he resign

A Federal Reserve watchdog found no criminal wrongdoing by former chair Jerome Powell in its investigation of the central bank’s headquarters renovation, in a report released on Wednesday^1,9. The Office of Inspector General wrote that at no point during its evaluation did it find reasonable grounds to believe that a violation of federal criminal law had occurred requiring a referral to the US Attorney General^9,10.

The findings effectively clear Powell after the Justice Department opened a criminal investigation into the then-Fed chair, which became public in January⁹. The report was not a clean bill of health for the project itself: Reuters reported that the watchdog found problems but no misconduct, and the Washington Post reported that the Fed mishandled the renovations^2,5. Sources differ on the project’s size, with the Financial Times citing a $2.5bn renovation and ABC News citing a $2.4 billion building^3,7.

Why it matters to investors

The response was immediate. President Trump said Powell should resign after the watchdog cleared him, posting that this is Powell’s fault and that he should be forced to resign immediately, adding that if he does not resign he should be sued at the highest level^3,4,5. Trump also said he had asked Blanche to study the inspector general’s report⁴.

Powell left the chairmanship but remains on the Board of Governors, which is what makes the demand consequential rather than symbolic^3,4. France 24 noted that the campaign against the Fed’s independence has also seen the president attempt to unseat another governor, Lisa Cook, over mortgage fraud allegations⁶. The Straits Times reported the same effort to remove Cook over alleged wrongdoing in an unrelated matter¹⁰.

What to watch

The project’s governance is being handed elsewhere. Current Fed chair Kevin Warsh, who took office in May, concurred with the findings and proposed the remedy in his response to the inspector general’s report^7,8.

Two threads run from here. One is whether the Justice Department acts on the report it has been asked to study, after an inspector general explicitly found no grounds for a criminal referral^4,9. The other is the Cook case, which tests directly whether a sitting governor can be removed^6,10. For bondholders the renovation is a side issue; the removal question is not, because the market prices the Fed’s reaction function on the assumption that governors serve fixed terms⁶.