Introduction to the Conflict
A top Trump administration official accused Federal Reserve Chair Jerome Powell of leading an "ostentatious" office renovation project that may be "violating the law" on Thursday, a new broadside against the central bank chief as President Trump tangles with him over interest rates. The Office of Management and Budget Chair Russell Vought wrote in a letter Thursday, "The President is extremely troubled by your management of the Federal Reserve System."
Background on the Issue
The letter came after months of criticism from Mr. Trump over the Fed’s decision not to slash interest rates. Economists say lowering rates may accelerate economic growth, but also runs the risk of causing inflation to spike. That has led the Fed’s interest rate-setting committee — which Powell chairs — to keep rates steady so far this year after cutting rates slightly last year. Mr. Trump has called on Powell to resign from his post, and last month, the president called Powell a "numbskull" over his interest rate decisions and said "maybe" he’ll try to fire Powell — though federal law states the Fed chair can only be fired "for cause," which typically refers to firings due to specific misconduct or performance issues.
The Renovation Project Controversy
Vought’s letter took aim at Powell and the central bank over its years-long office renovation project in Washington, D.C. The letter said plans for the project "called for rooftop terrace gardens, VIP private dining rooms and elevators, water features, premium marble, and much more." Vought also asked whether the Fed has made changes to its plans without seeking approval from a government commission that oversees D.C.-area federal building projects. Powell has testified to the Senate that some descriptions of the renovation project are "misleading and inaccurate," denying the inclusion of new marble, special elevators, new water features, or rooftop gardens.
Legal Compliance and Independence
The Federal Reserve operates with a high degree of independence, and federal law gives the Fed the power to make decisions about acquiring and remodeling buildings in Washington to serve as its office spaces. However, Vought’s letter argued that Powell’s comment to the Senate "appears to reveal that the project is out of compliance with the approved plan," suggesting the Fed may have run afoul of a law requiring D.C.-area projects be approved by the National Capital Planning Commission. The Fed has previously acknowledged that the price tag for its office renovations had jumped due to "significant increases in raw materials costs," along with higher labor costs.
Reactions and Accusations
Last week, Bill Pulte, the Trump-nominated head of the Federal Housing Finance Agency, accused Powell of "deceptive" testimony to the Senate about the office project. Asked about the allegation in a Cabinet meeting Tuesday, Mr. Trump said: "Then he should resign immediately. We should get somebody in it that’s going to lower interest rates." The Federal Reserve has said the two headquarters buildings that are getting overhauled "have not been comprehensively renovated since their construction in the 1930s," and the project will refurbish old elevators and conference rooms, including ones that are sometimes "used for mealtime meetings."
Conclusion
The conflict between President Trump and Federal Reserve Chair Jerome Powell continues to escalate, with the latest issue being the office renovation project. While Powell denies any wrongdoing and claims that descriptions of the project are misleading, the Trump administration remains critical of his management and interest rate decisions. The independence of the Federal Reserve and the legality of the renovation project remain at the center of the controversy. As the situation unfolds, it is clear that the relationship between the Trump administration and the Federal Reserve will continue to be a topic of interest and debate.
