WASHINGTON, D.C.: President Donald Trump has sharply intensified his standoff with the Federal Reserve, with the Justice Department investigating, threatening possible criminal charges against the independent central bank, and issuing subpoenas tied to a long-running building renovation.
The administration says the dispute centres on Jerome Powell's June testimony to Congress about the cost of a significant refurbishment of Fed buildings in Washington. In a statement on Sunday, Powell said the threat of charges was a set of "pretexts" aimed at wresting control of U.S. interest-rate policy from the Fed.
Trump has repeatedly criticised the Fed for not cutting rates faster. Economists warn that any perception the Fed is being politicised could undermine its credibility as an inflation fighter and push investors to demand higher yields on U.S. Treasurys.
A US$2.5 billion renovation at the centre of the dispute
The controversy stems from a $2.5 billion renovation of two Fed buildings that began during Trump's first term and drew little attention for years. The administration started questioning cost overruns over the summer, coinciding with Trump's renewed pressure on the Fed to slash rates.
The Fed does not receive taxpayer funding; instead, it finances itself through interest on its Treasury holdings. It states that the renovation of its headquarters, the Marriner S. Eccles Building, was necessary because core systems, such as electrical, plumbing, and HVAC, dated back to the 1930s.
The central bank is removing asbestos and lead, modernising communications systems, and preserving historic features, including stonework, elevators, and conference rooms. It is also renovating a neighbouring building acquired in 2018.
Costs Rise, Scrutiny Intensifies
Originally budgeted at about $1.9 billion, the project has grown by roughly $600 million. The Fed cites surging construction and labour costs during the 2021–2022 inflation spike, more extensive asbestos removal than expected, and local height restrictions that required costly underground construction. It cancelled renovations for a third building in 2024 due to rising costs.
At a June Senate Banking Committee hearing, Chairman Tim Scott alleged the project included luxury features such as rooftop terraces and VIP elevators. Powell disputed those claims, saying, "There's no new marble. … there are no special elevators."
Trump visited the site in July and overstated the renovation cost, later downplaying concerns and saying, "they have to get it done." Asked then whether the overruns were a firing offence, he replied, "I don't want to put that in this category." By December 29, however, Trump said his administration would "probably" sue Powell for "gross incompetence."
The Supreme Court has indicated Trump cannot fire Powell simply over policy disagreements, though dismissal "for cause" remains legally possible.
Renewed Flare-up and Political Context
The renovation row had largely faded before resurfacing. Trump has continued using investigations to pressure critics and rivals, and in August sought to remove Fed Governor Lisa Cook over fraud allegations she denies. Courts have allowed her to remain pending a Supreme Court hearing on January 21.
Trump told NBC News he knew nothing about the Powell investigation and denied it was meant to pressure rate decisions. The White House said Trump did not direct the probe.
The subpoenas come as Trump has hinted he may soon name a successor to Powell, whose term as chair ends in May, though his term as a Fed governor runs until 2028.
A Parallel Controversy
Trump has also faced criticism for his own $250 million renovation project: a 90,000-square-foot ballroom planned for the White House East Wing. Like the Fed's project, it will be privately funded, and Trump argues it is needed to replace tents used for significant state events.
