Trump budget chief Vought ramps up criticism of Powell, vows investigation into Fed renovations

Office of Management and Budget Director Russell Vought vowed Friday to press an investigation into renovations at the Federal Reserve building, which he called a “palace” where costs are running amok.

In a potential escalation of President Donald Trump’s feud with Fed Chair Jerome Powell, Vought told CNBC that an investigation is warranted into whether Powell has been misleading about the $2.5 billion project.

“When you go to the nation’s mall, you see the construction of this palace … upwards of $2.5 billion massive cost overrun, and we want to make sure we have facts as to the largesse and the extent to which it’s overrun,” Vought said during a “Squawk Box” interview. “I think it just points to the fundamental mismanagement of the Fed under the chairman.”

In a letter issued Thursday, Vought charged that Powell “had grossly mismanaged the Fed” and misled Congress about the price and scope of renovations at the central bank’s headquarters in Washington, D.C.

Vought said the Fed is over budget on the project and misled a congressional panel in June when he said some of the loftier aspects of the renovation, such as a VIP dining area and rooftop terrace gardens, are not included though they appear in specifications for the redesign.

The accusations represent another front in Trump’s ongoing campaign against Powell. Trump has charged that the central bank leader is playing politics by not lowering interest rates, and has called on Powell to resign.

“The problem with Chairman Powell is he has been late at every turn,” Vought said. “It’s time to lower rates. You have a problem there. But again, this is about the largesse and the fact that he has systemically mismanaged the Fed, and that is evident by what we’re seeing with regard to this monstrosity, this Palace of Versailles, on the National Mall.”

Fed officials declined comment.

The renovation project is under the jurisdiction of the National Capital Planning Commission. In recent days, Trump has appointed three new members to the board, all with direct ties to the White House — Will Scharf, the new chair who also is White House staff secretary, James Blair, the White House deputy chief of staff, and Stuart Levenbach, a policy analyst at the OMB.

Powell has said politics don’t play a part in Fed rate decisions. He and his colleagues have held the key overnight borrowing rate in place since December, though markets largely expect a cut is on the way not at the Fed’s July meeting, but in September.

A recent Supreme Court ruling stated that presidents can’t fire Fed officials at will. However, the accusations over the building renovations could possibly help Trump build a case to dismiss Powell for cause.

In any event, Powell’s term as chair expires in May 2026, though he can stay on as governor until 2028. Trump nominated Powell for chair during his first term, in November 2017. The Senate confirmed Powell the following February, and former President Joe Biden nominated Powell for a second term that began in 2022.

During the CNBC interview, Vought did not directly address a question as to whether the charges regarding the building renovation are linked to Powell’s position on interest rates.

“This certainly has to do with the fiscal mismanagement of the Fed, of which [interest rates] is one aspect of it,” he said. “We are going to zoom in over the last several days on this. We have new commissioners at the National Capital Planning Commission who are asking very tough questions.”

While the commission oversees the specifications of the process, there are questions over whether the finances are within the OMB’s purview.

The Federal Reserve Act allows the central bank to “maintain, enlarge or remodel” its buildings, and the Fed alone “shall have sole control over such building or buildings and the space therein.”

The Fed is a quasi-governmental agency and receives no direct taxpayer funding. While salaries are set by Congress, the pay comes through the Fed’s self-funding mechanism, largely from interest it receives on its investments.

Under normal circumstances, the Fed remits excess profits to the Treasury. However, in recent years, rising Treasury yields have caused the Fed to operate at a loss as it pays out more interest on its liabilities, such as bank reserves, than it earns on its long-term bond holdings.

Trump has complained that the Fed’s refusal to cut rates is costing the government in terms of the interest it pays on the national debt.