Trump weaponizes Fed headquarters renovation to pressure Powell on interest rates

Trump staged a confrontation with Powell during a July 24, 2025 construction site tour at the Fed headquarters. Trump claimed costs hit $3.1 billion; Powell fact-checked him in real time, explaining Trump had incorrectly added the Martin Building (completed five years earlier). The renovation actually rose from $1.9 billion (2021 estimate) to $2.5 billion due to supply chain disruptions, asbestos removal, soil contamination, and design changes mandated by Trump appointees.

Trump appointees to the US Commission of Fine Arts drove up renovation costs, then Trump weaponized those costs against Powell. DSDuncan Stroik (appointed 2019) pushed an amendment at the January 16, 2020 meeting requiring white 🍑Georgia marble instead of glass walls. Stroik stated he wanted the building to match great marble edifices on Constitution Avenue and align with Trump's proposed mandate for neoclassical federal architecture. Two other Trump appointees supported the marble requirement. Fed architects had proposed glass to symbolize transparency. Stroik admitted the commission had not discussed expenses when mandating the luxury material.

Russell Vought, Trump's Office of Management and Budget director, launched an investigation in July 2025 to find grounds for Powell's removal. Vought called the renovation a palace and accused Powell of grossly mismanaging the Fed. He claimed Powell misled Congress about luxury features like VIP dining areas and rooftop terraces that appeared in renovation specifications. Vought suggested the investigation could establish for cause grounds to remove Powell under 12 U.S.C. § 242, which allows removal only for misconduct or incapacity. Powell requested Inspector General MHMichael Horowitz review the project in mid-July to counter Vought's investigation.

Attorney General Pam Bondi served the Federal Reserve with grand jury subpoenas on January 10, 2026, threatening criminal indictment against Powell over his June 2025 Senate Banking Committee testimony about the renovation. Powell disclosed the investigation in a January 12 video statement, calling it unprecedented action and stating the criminal threat resulted from the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President. DOJ spokesperson said Bondi instructed her U.S. Attorneys to prioritize investigating any abuse of taxpayer dollars without naming Powell. U.S. Attorney Jeanine Pirro's office leads the investigation with FBI 🌲Washington field office agents.

Senate Banking Committee Chair Tim Scott grilled Powell about renovation costs during June 2025 testimony, comparing the project to luxury upgrades that feel more like they belong in the Palace of Versailles. Scott highlighted features including rooftop terraces, custom elevators opening into VIP dining rooms, white marble finishes, and a private art collection. Powell disputed details, saying there's no new marble and there are no special elevators. Scott joined Trump's July 24 site tour to examine cost overruns firsthand. The Balfour Beatty-Gilbane Building Co. joint venture manages construction.

Cost drivers beyond marble included unforeseen conditions Federal Reserve officials documented: more asbestos than anticipated, toxic soil contamination requiring remediation, a higher-than-expected water table, and a sinkhole discovered during excavation. COVID-19 supply chain disruptions and Trump's tariffs on construction materials drove up labor and materials costs. The project involves full overhaul of the 1937 Marriner S. Eccles Building and adjacent Federal Reserve East Building—the first comprehensive renovation since the 1930s. Work includes removing hazardous materials, replacing electrical/plumbing/HVAC systems, and upgrading structural elements to modern building codes. Completion scheduled for 2027.

Financial markets initially dropped on Powell investigation news, then recovered as investors bet the probe would fail. Nasdaq futures fell 0.8%, S&P 500 futures dropped 0.5% when the 🗽New York Times broke the story, but all three major indices closed at all-time highs that Monday. Gold jumped 1.7% to $4,578/ounce, silver surged 4%, reflecting demand for safe havens against political instability. The dollar slid against peers. Treasury yields spiked, suggesting concern about Fed independence and inflation management capacity. Market analysts said investor confidence reflected support from economists globally and Republican opposition in Congress, making investors view this as a passing flare-up of tensions rather than a tide-changing moment.

The Federal Reserve Act (12 U.S.C. § 242) allows presidential removal of Fed governors only for cause—defined by courts as misconduct, incapacity, or inefficiency, not policy disagreements. No president has ever attempted to remove a Fed chair or governor for any reason. Powell's term as chair expires May 2026 (Trump will nominate successor); his Board term runs until January 2028. Trump also attempted to remove Fed Governor Lisa Cook in August 2025 over mortgage fraud allegations. Cook sued, and a federal judge ruled she was substantially likely to succeed on claims Trump violated the Federal Reserve Act's for cause requirement. Cook remains in office pending litigation.