By Dan Burns

(Reuters) – The White House launched a fresh critique of Federal Reserve Chair Jerome Powell. A senior Trump administration official accused Powell of “grossly mismanaging” the central bank, specifically highlighting a deficit and cost overruns on building renovations.

Office of Management and Budget Director Russell Vought, in a letter directed at Powell and shared on the social media platform X, stated: “Instead of attempting to right the Fed’s fiscal ship, you have plowed ahead with an ostentatious overhaul of your Washington, D.C., headquarters.”

This letter introduced new criticism regarding cost overruns in the building renovations, following longstanding complaints by President Trump and his aides about Powell’s decision to maintain steady interest rates since Trump resumed office in January.

According to Vought’s post, the Fed is operating at a deficit for the first time in its history since FY23, struggling with renovation costs that have ballooned to $2.5 billion—approximately $700 million over budget. The renovations include luxury features such as terrace gardens, water features, VIP elevators, and high-end marble, bringing the renovation cost per square foot to $1,923, which Vought noted is double that of typical federal historic buildings. He even compared the renovation expense to that of the Palace of Versailles in today’s dollars.

Despite the critiques, Chicago Fed President Austan Goolsbee defended the project, indicating it was crucial rehabilitation rather than a luxury overhaul. He remarked, “The Fed building is not a luxury building. It is a very old building; they needed to be renovated.”

By law, the Fed must return any excess earnings to the Treasury, but it has been in a deficit for about three years. The Fed’s higher interest rates, aimed at tackling inflation since 2022, have led costs to exceed earnings from its diminished bond portfolio. As reported on Wednesday, the deficit surpassed $235 billion.

Currently, the Fed is renovating two buildings near its headquarters. During his recent testimony to congressional committees overseeing the Fed, Powell faced questions about the cost overruns but disagreed with characterizations of the renovations as lavish, acknowledging the budget overrun nonetheless. “The cost overruns are what they are,” he stated, emphasizing responsible stewardship of public funds.

Vought’s letter also insinuated serious questions about the project’s adherence to the National Capital Planning Act, prompting him to seek answers to 11 questions regarding the renovations within seven business days.

The Federal Reserve Act provides the Fed considerable autonomy concerning its buildings. Section 10 notes the Fed Board of Governors may construct and manage buildings it deems adequate for its purposes, raising uncertainty about the White House’s authority to intervene.

The Fed last reduced interest rates in December and has since maintained rates between 4.25% and 4.50%, awaiting potential inflationary shifts from Trump’s global tariffs. While cuts are widely anticipated in September, Trump has urged for immediate rate reductions.

Trump, who has contemplated attempts to fire Powell, stated that if Powell’s congressional testimony was misleading, he should resign. Notably, Powell’s term as chair extends until May 15.

According to the Federal Reserve Act, the Fed chair or board members can only be removed for cause, indicating that the administration may be attempting to establish grounds for Powell’s removal due to fiscal mismanagement. A recent Supreme Court decision regarding Trump’s firings of Democrats from independent boards suggests that top officials at the Fed possess some protection from presidential removal.