Fed Watchdog Clears Powell of Criminality in Renovation Probe Amid Management Failures

What Happened

On Wednesday, September 30, 2026, the Federal Reserve's Inspector General (IG) Michael Horowitz released a report concluding that former Federal Reserve Chair Jerome Powell and other Fed officials did not violate criminal law in their handling of the central bank's ongoing multimillion-dollar headquarters renovation project. The report, which followed an investigation initiated in July 2025 at Powell's request, acknowledged that the central bank "has not effectively executed" its construction management. While no grounds for a criminal referral were found, the IG detailed significant management and oversight failures that contributed to major cost overruns, with the project ballooning by approximately $1 billion from initial estimates. The report noted that the Fed's 2025 budget allocated $2.5 billion to the renovation of the historic Eccles building, a substantial increase from earlier projections. New Fed Chair Kevin Warsh welcomed the findings and committed to implementing the report's recommendations, including a full audit and involving the General Services Administration (GSA) as project executive.

The investigation's findings directly address accusations from critics, including President Donald Trump and U.S. Attorney for the District of Columbia Jeanine Pirro, who had alleged criminality and mismanagement. Pirro had previously opened a criminal investigation into Powell and the Fed in December, which Chief Judge James E. Boasberg of the D.C. Circuit quashed in March, citing evidence that subpoenas were intended to "harass and pressure Powell" over interest rates. Pirro had stated in April that she would consider reopening the matter pending the IG's report. The IG's review also considered materials related to Powell's June 2025 Senate testimony, where some critics alleged perjury, but the report made no claims of misconduct related to that testimony.

What the Evidence Establishes

The Federal Reserve Inspector General's report definitively establishes that no federal criminal law violations occurred regarding the central bank's headquarters renovation project. Specifically, the report states, "At no point during our evaluation did we find reasonable grounds to believe that a violation of federal criminal law had occurred requiring a referral to the U.S. Attorney General in accordance with the Inspector General Act." This finding directly refutes allegations of criminality made by President Donald Trump and U.S. Attorney Jeanine Pirro against former Fed Chair Jerome Powell and other officials. The report also reviewed materials pertinent to Powell's June 2025 Senate testimony, where some critics suggested perjury, but found "no claims about any misconduct related to that testimony."

However, the evidence also clearly establishes significant operational deficiencies. The IG report concluded that the central bank "has not effectively executed" its construction management, leading to "management and oversight failures" and "major cost overruns." The renovation of the Eccles building saw its budget increase by roughly $1 billion, reaching $2.5 billion in the Fed's 2025 budget. These overruns were attributed to factors such as design updates based on consultations with other federal agencies, discrepancies between estimated and actual costs for materials and labor, and unexpected environmental conditions at the building site. The report also clarified that the Fed's Board of Governors was not involved in day-to-day project decisions, which the IG deemed an expected delegation for a large construction project.

Where the Accounts Conflict

The primary conflict arises between the findings of the Federal Reserve Inspector General's report and the public accusations made by President Donald Trump and U.S. Attorney Jeanine Pirro. Trump repeatedly insisted there was "criminality" involved in the renovation project and accused Powell of mismanagement and misleading Congress. Pirro, acting on these allegations, opened a criminal investigation in December, issuing subpoenas to the Fed. However, the IG report directly contradicts these claims, explicitly stating it found "no grounds for a criminal referral" and no evidence of federal criminal law violations by Powell or other Fed officials.

Furthermore, while some critics, including Republican allies of Trump, alleged Powell perjured himself during his June 2025 Senate testimony, the IG report, after reviewing relevant materials, made "no claims about any misconduct related to that testimony." Senator Tim Scott, R-S.C., who questioned Powell during that hearing, stated in February that while he found Powell "inept," he did "not believe that he committed a crime during the hearing." This aligns with the IG's implicit finding on the perjury claim. The IG report acknowledges management failures and cost overruns, which partially align with critics' claims of mismanagement, but it fundamentally diverges on the presence of criminal intent or action, which was the core of the accusations.

Context and Stakes

The Federal Reserve renovation controversy unfolded against a backdrop of intense political pressure on former Chair Jerome Powell, primarily from President Donald Trump. Trump had sharply criticized Powell over interest rate policies, advocating for lower rates, and had publicly linked the renovation issue to his desire to remove Powell from his position. This dynamic was evident in July 2025, when Trump and Powell toured the construction site in a tense visit, and later in January 2026, when Powell issued an extraordinary video statement asserting that a criminal investigation related to the renovation was a pretext to force him to lower interest rates. The independence of the Fed, designed by Congress to be self-funded and manage its own budget, was a central theme throughout this period, with Trump's actions seen by some as an attempt to undermine that autonomy.

The stakes of the IG report were significant. A finding of criminality could have reignited a federal criminal investigation, potentially leading to charges against Powell and further destabilizing the Fed's leadership. U.S. Attorney Jeanine Pirro had explicitly stated her intent to reconsider reopening her investigation based on the IG's findings. The report's clearance of Powell on criminal charges defuses a major line of attack against him and potentially against the institution's perceived integrity. For current Fed Chair Kevin Warsh, who previously described the cost overruns as "outrageous," the report provides a framework for addressing the management issues and demonstrating fiscal responsibility, as evidenced by his commitment to a full audit and GSA involvement. The controversy highlighted the vulnerability of independent institutions to political pressure and the importance of internal oversight mechanisms.

What to Watch Next

The immediate focus will be on U.S. Attorney for the District of Columbia Jeanine Pirro's response to the Inspector General's report. Pirro had previously stated in April that she would "not hesitate to restart a criminal investigation should the facts warrant doing so," pending the IG's findings. Given the IG's explicit conclusion of no criminal wrongdoing, her decision on whether to pursue the matter further will be a key indicator. Any public statement or action from Pirro or the White House regarding the report will be closely scrutinized in the coming days. The Department of Justice could theoretically reopen an investigation, though the IG's findings make such a move less likely without new, compelling evidence.

Concurrently, attention will turn to the actions of current Fed Chair Kevin Warsh. Warsh has already welcomed the IG's findings and announced plans to conduct a full audit of the renovation project. He also stated his intention to involve the General Services Administration (GSA) as the project executive going forward, a move aimed at improving oversight and management. Monitoring the progress of this audit and the integration of GSA into the project's management structure will reveal the Fed's commitment to addressing the identified "management and oversight failures." Any concrete steps taken by the Fed to implement the IG's recommendations, such as changes in procurement processes or project management protocols, will be important to observe in the medium term. Powell remains on the Fed's board as a governor until January 2028, and any further political maneuvering related to his position could also emerge.

Bottom Line

The Federal Reserve's internal watchdog has definitively concluded that no criminal laws were violated by former Chair Jerome Powell or other officials in connection with the central bank's multi-million dollar headquarters renovation. This finding directly refutes politically charged allegations of criminality and perjury that had been leveled against Powell by President Donald Trump and U.S. Attorney Jeanine Pirro. While the report clears Powell of criminal wrongdoing, it concurrently highlights significant "management and oversight failures" that led to approximately $1 billion in cost overruns for the Eccles building project, which now totals $2.5 billion.

The report's release effectively defuses a major line of attack against Powell and the Fed's institutional integrity, at least on criminal grounds. New Fed Chair Kevin Warsh has committed to addressing the identified management deficiencies by conducting a full audit and integrating the General Services Administration into the project's executive oversight. The immediate focus shifts to whether U.S. Attorney Jeanine Pirro will accept the IG's findings or attempt to reopen a criminal investigation despite the lack of evidence for criminality. The broader implications underscore the persistent political pressures faced by the independent Federal Reserve and the ongoing need for robust internal accountability mechanisms in large-scale government projects.