Fed watchdog finds renovation failures, 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…