WASHINGTON (AP) President Donald Trump has asserted his intention to remove Federal Reserve Chair Jerome Powell, accusing him of mismanaging the U.S. central bank's extensive $2.5 billion renovation project. This move marks a continuation of Trump's campaign against Powell, who has resisted the president's pressure to lower interest rates due to concerns about inflation and tariffs impacting the economy.
On Tuesday, Trump indicated that Powell's handling of the renovation project could provide the justification for an unprecedented and potentially legally questionable dismissal. "When you spend $2.5 billion on, really, a renovation, I think it’s really disgraceful," Trump stated, emphasizing that he does not believe Powell requires a "palace" to work in.
The renovation project has been ongoing for several years, originating during Trump’s first term in office, but it gained significant attention from the White House only recently. While Trump believes that rate cuts could help reduce government borrowing costs, Powell has cautioned that premature cuts could exacerbate inflation, ultimately leading to higher borrowing costs.
The potential removal of Powell threatens to compromise the Federal Reserve's long-established political independence, a situation that could negatively impact financial markets and result in increased market volatility. Powell and the Fed's board operate under a dual mandate: maximizing employment and maintaining price stability, both of which sometimes necessitate unpopular decisions, such as increasing interest rates to combat inflation.
Efforts to oust Powell could undermine the Fed's operational integrity, leading to economic instability characterized by rising inflation and interest rates. The Supreme Court has recently indicated that the president cannot dismiss Powell merely for disagreeing on monetary policy but could do so "for cause," such as misconduct or dereliction of duties.
Trump's strategy to justify Powell's dismissal appears to hinge on claims that Powell misrepresented the renovation's costs and scope during congressional testimony. The Federal Reserve argues that the Marriner S. Eccles building, over 90 years old, is in dire need of updates due to outdated infrastructure such as electrical, plumbing, and HVAC systems dating back to the 1930s.
The lengthening renovation timeline and escalating costs have drawn criticism from Trump administration officials. The project has exceeded its original budget by approximately $600 million, prompting questions from the White House regarding fiscal responsibility. Notably, construction expenses have surged due to rising materials and labor costs, alongside unexpected complications like asbestos removal and local building regulations.
Russ Vought, the White House budget director, has specifically referred to the renovation as "ostentatious," highlighting lavish planned features such as rooftop terrace gardens, VIP dining rooms, and premium finishes, claims Powell has outright denied during congressional hearings. Furthermore, Powell asserted that no such luxury features are included in the plans, citing adherence to cost-saving measures over time.
The renovation has added scrutiny aimed at Powell from the White House, which contends that changes to the construction plans may violate the National Capital Planning Commission's original approval. White House officials argue that Powell has acted irresponsibly in managing taxpayer money and altered project terms without the necessary permissions from the planning commission.
In light of the ongoing controversy, the Federal Reserve is requesting an independent review of the renovation project. The Fed emphasizes its accountability is primarily to Congress rather than the executive branch and cites oversight from an independent inspector general. Powell has formally asked for this review to shed light on the project's costs and underlying issues.
