Trump says Powell should resign as Federal Reserve governor
The controversy surrounding the cost overruns of the Federal Reserve headquarters renovation project continues to escalate, with the Trump administration putting renewed pressure on former Chairman Powell.
On September 30, US President Trump posted on social media demanding that Powell immediately resign from his position as a Federal Reserve governor, and threatened that if he refused to resign, the US government would file a lawsuit against him for corruption or dereliction of duty.
This statement stems from a report released by the Federal Reserve's internal inspector general, which, while finding no criminal misconduct, revealed several management errors that led to significant cost overruns in the headquarters renovation project.
On the same day, Trump announced that he had instructed Attorney General Todd Blanche to study the Inspector General's report and "make a judgment on what to do next." This statement once again put Powell's future within the Federal Reserve under the spotlight.
Inspector General's report: No criminal violations, but significant management loopholes.
The Federal Reserve's Office of Inspector General released a report on Wednesday assessing the $2.4 billion renovation project for its Washington headquarters.
The report explicitly states that "during the assessment process, we found no reasonable grounds to conclude that there were any federal criminal violations that would require reporting to the Attorney General under the Inspector General Act," thus essentially ruling out the possibility of criminal prosecution.
However, the report also listed a series of management failures. The Inspector General found that the Federal Reserve Board of Governors failed to take effective action on the lessons learned from previous project cost overruns, failed to implement recommendations to set cost caps, and failed to request construction cost estimates.
What is even more noteworthy is that, four years after the project was launched and after the contract bidding was completed, in July of this year, the Federal Reserve still had not established a guaranteed maximum price mechanism.
Furthermore, a lack of competitive bidding in some projects led to a significant increase in costs, and the internal governance structure was deemed inadequate for a project of this size and complexity. Design changes, site conditions, and inflation were also cited as significant factors contributing to cost overruns.
The project was initially budgeted at $1.3 billion in 2020, but the actual cost has now climbed to $2.4 billion.
The new Federal Reserve chairman inherited a mess and promised a comprehensive overhaul.
In a response letter attached to the report, current Federal Reserve Chairman Warsh stated that the Fed will implement all recommendations made by the Inspector General.
Warsh announced that the General Services Administration (GSA) will serve as the project implementer, collaborating with the Federal Reserve to complete the follow-up work and reporting to the Board of Governors and Warsh himself. In a letter to Inspector General Michael Horowitz, Warsh wrote:
There are important lessons to be learned from this, and these lessons, combined with your conclusions and the GSA’s recommendations, will have lasting value for our successors.
Horowitz was appointed to this position by Powell in June 2025.
Warsh also stated that the Federal Reserve will hire an independent auditing firm to conduct a comprehensive review of all costs identified to date.
The Powell Debate: Legal Constraints and Political Pressure Coexist
After his second term as chairman expired in May of this year, Powell broke with convention and chose to remain as a member of the Federal Reserve Board of Governors, with his term extending until January 2028.
Trump repeatedly criticized Powell's monetary policy stance during his tenure as chairman and used the headquarters renovation issue as a pretext for attacking him. Powell had previously successfully withstood numerous pressures from Trump, including threats of dismissal.
From a legal perspective, Federal Reserve governors are nominated by the president and confirmed by the Senate. The Federal Reserve Act clearly stipulates that the president can only remove governors if there are "justifiable reasons".
Mark Spindel, founder of Potomac River Capital and a scholar specializing in Federal Reserve research, stated that although Trump did not explicitly threaten to remove Powell, the developments clearly indicate that the White House's intention to reshape the Federal Reserve's decision-making body remains unchanged. He said:
Trump's dissatisfaction with Powell knows no bounds, and so does his desire to control the Federal Reserve. Nevertheless, political forces such as Congress and the courts have consistently supported the Fed's independence and will continue to uphold this position under Trump's persistent pressure.
Columbia University law professor Kathryn Judge noted that the Inspector General's report devoted little attention to Powell's role in overseeing the renovation project. She said:
Given the numerous other responsibilities of the Federal Reserve Chairman, it is difficult to simply determine how much effort he should devote to such regulatory matters.
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