President Donald Trump has escalated his confrontation with the Federal Reserve, with the Justice Department investigating and threatening a criminal indictment of the independent central bank and serving subpoenas, according to the Associated Press.
The dispute is centered on Federal Reserve Chair Jerome Powell’s testimony to Congress in June about the cost of a renovation of Fed buildings in Washington. In a statement Sunday, Powell said the administration’s threat of criminal charges were “pretexts” in the president’s campaign to seize control of U.S. interest rate policy from the Fed’s technocrats.
The AP report said Trump has repeatedly criticized Powell and the Fed for not moving faster to cut rates. Economists have warned that a politicized Fed that caves in to presidential demands would damage the central bank’s credibility as an inflation fighter, and could lead investors to demand higher rates before investing in U.S. Treasurys.
The investigation threat, according to the report, is connected to a $2.5 billion Fed renovation project covering two Fed buildings in Washington. The work, which has its roots in Trump’s first term, drew little attention for years until, over the summer, the administration began complaining about cost overruns—at the same time as Trump increased pressure on the Fed to slash interest rates.
The Fed says taxpayers are not directly funding the renovations. Instead, the central bank draws on interest from its massive holdings of Treasury debt. The Fed also says the Marriner S. Eccles building—its headquarters—needed an upgrade because systems such as electrical, plumbing and HVAC are nearly obsolete, and some date back to the building’s construction in the 1930s.
The Fed has said it is removing asbestos, lead and other hazardous elements from the Eccles building and installing modern electrical and communications systems. It said the construction project identified key architectural features to preserve the historic integrity of the buildings, quoting: “The construction project identified key architectural features to preserve the historic integrity of the buildings, such as stonework, including marble, façades, meeting rooms, and other spaces. Historic preservation work in the Eccles Building also includes elevators that are original to the building, and historic conference rooms.”
The AP report said the project’s costs have ballooned from an initial budget of about $1.9 billion to a total that is about $600 million higher, with the reported total tied to the $2.5 billion figure. The Fed attributed the higher costs to factors including construction cost increases during the inflation spike of 2021 and 2022, more asbestos removal than expected, and added expenses from Washington restrictions on building heights, which required construction underground.
In June, at a Senate Banking Committee hearing, Chairman Tim Scott said the renovation included “rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes, and even a private art collection.” Powell disputed those details in his testimony, saying “there’s no new marble. … there are no special elevators.” Trump visited the building site in July while standing next to Powell and overstated the renovation cost, the AP report said. Later, Trump said: “they have to get it done … Look, there’s always Monday morning quarterbacks. I don’t want to be that. I want to help them get it finished,” and when asked whether the overruns amounted to a firing offense, said, “I don’t want to put that in this category.”
The report said Trump later shifted his stance. On December 29, he said his administration would “probably” sue Powell for “gross incompetence,” calling the project the “highest price of construction per square foot in the history of the world.” It also said the U.S. Supreme Court had signaled last year that Trump can’t fire Powell simply over disagreements about interest rates, though it could do so legally “for cause,” including misconduct or dereliction of duty.
The AP report said the controversy about the renovation had faded after the summer, but Trump continued pressing the Fed. In August, the president said he was firing Fed governor Lisa Cook, an unprecedented step connected to mortgage fraud allegations that Cook has denied; Cook sued to keep her job and courts ruled she could remain in her seat while the case plays out. The Supreme Court is scheduled to hear arguments in the case on Jan. 21.
Trump has also made claims on television denying any intent to pressure Powell through the investigation. Speaking briefly to NBC News on Sunday, the AP report said Trump claimed he knew nothing about the investigation into Powell. When asked if it was intended to pressure the Fed chair on rates, Trump said: “No. I wouldn’t even think of doing it that way.” White House press secretary Karoline Leavitt told reporters that Trump did not direct his Justice Department to investigate Powell.