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

The Federal Reserve' s inspector general determined management and oversight failures contributed to major cost overruns in the central bank's headquarters renovation, but found no grounds for a criminal referral, it said in a report released Wednesday.

"At no point during our evaluation did we find reasonable grounds to believe that a violation of federal criminal law had occurred requiring a referral to the U.S. Attorney General in accordance with the Inspector General Act," the report from the Fed's inspector general states.

The independent watchdog's findings could defuse one line of attack against former Fed Chair Jerome Powell , whom President Donald Trump and other critics accused of mismanaging the project and misleading Congress about it.

The IG's report cedes little to Powell's critics beyond his responsibility for management of the project as head of the organization. Instead it details a renovation project of the Washington facility that ballooned in cost by roughly a billion dollars from initial estimates as the Fed struggled with design changes and other issues.

Some critics have alleged Powell perjured himself in testifying to the Senate about the project in June 2025. The IG's office didn't specifically set out to assess that claim, but the report said the watchdog had reviewed materials related to Powell's testimony. The report makes no claims about any misconduct related to that testimony.

The Fed's board wasn't involved in day-to-day decisions about the project, the report notes.

"Indeed, we would expect the [board] to delegate the day-to-day management of a large construction project," the report says.

Trump has blamed a recent interest-rate increase on what he called a "hostile" board at the Fed, even though the decision was supported by Trump's new appointee as Fed chair, Kevin Warsh . Fed officials and others in the central bank community have anxiously awaited the findings of the review that's been underway since July 2025, knowing they could present an opportunity for Trump to renew his attacks on Powell.

Trump sharply criticized Powell over the issue last year. That prompted months of speculation that the president might use it as a reason to fire Powell. The two men toured the construction site together in a tense visit captured on video in July 2025. Powell finished his term as chair on schedule after a judge blocked a federal criminal investigation into the renovations.

Trump has long argued the Fed ought to lower interest rates and said he would apply that litmus test to anyone he chose for chair. Powell said in January in an extraordinary video statement that a criminal investigation related to the renovation was a pretext to force him to lower interest rates.

The Department of Justice could reopen that investigation into Powell based on the new findings, or Warsh could ask for his resignation. Powell remains on the Fed's board as a governor with a term that ends in January 2028.

The Fed's Board of Governors declined to comment on the report. The publication includes a letter by Warsh who welcomed the findings and said the Fed would take steps to adopt the report's recommendations.

The investigation was led by Fed Inspector General Michael Horowitz. He was appointed by Powell in June 2025. Powell requested the investigation a month later.

Trump and his Republican allies have alleged Powell mismanaged the costly renovation and misled Congress about it during Senate testimony in June.

Congress designed the Fed to be independent from the rest of the executive branch. The agency is self-funded and manages its own budget.

Republican senators who were present for Powell's testimony last year have said they don't believe he committed a crime in his testimony.

"I was the one asking the questions," Sen. Tim Scott , R-S.C., said in an interview on Fox Business in February. Scott said he found Powell to be inept, but "I do not believe that he committed a crime during the hearing."

The president has nonetheless insisted that there was "criminality" involved in the renovation problem.

In December, U.S. Attorney for the District of Columbia Jeanine Pirro opened a criminal investigation into Powell and the Fed over the renovation issue. Chief Judge James E. Boasberg of the D.C. Circuit in March quashed subpoenas Pirro had issued to the Fed. The judge found there was evidence that the subpoenas were intended to "harass and pressure Powell" over interest rates, but no evidence of any wrongdoing on Powell's part.

Pirro in April agreed to drop the investigation to clear the way for Warsh's confirmation.

But Pirro said at the time she was awaiting the inspector general's report and would consider reopening the matter.

"I will not hesitate to restart a criminal investigation should the facts warrant doing so," Pirro said.

Pirro and the White House did not immediately respond to requests for comment about the IG's report.

Warsh described the cost overruns as "outrageous" in an interview with Fox before being selected for the job. After his confirmation, at a press conference in June, Warsh said he was looking forward to reading the report and said his focus was on "what we can to be good stewards of taxpayer money."

In his letter with the report, Warsh said he plans to conduct a full audit of the renovation and that he has asked the General Services Administration, which oversees other federal-government building projects, to serve as the project executive going forward.