Fed Watchdog Finds No Crimes In $2.4 Billion Renovation, Just Everything Else

After more than a year of drama, subpoenas, surprise site visits, hard-hat photo ops and one very public fight over beehives, the Fed’s internal watchdog has finally weighed in on the central bank’s headquarters renovation. The verdict: nobody committed a crime, but almost nobody was minding the budget either.

According to a report released Wednesday by the Fed’s Office of Inspector General, there were no “reasonable grounds to believe that a violation of federal criminal law had occurred,” and no administrative misconduct.

What the OIG did find was a long list of management failures that helped the cost of renovating the Eccles Building and the adjacent 1931 federal building balloon from a budgeted $1.3 billion in 2020 to $2.4 billion:

• The Board never acted on the OIG’s earlier recommendation, made after the Martin Building renovation overran, to set a stated cost limit. It also never asked for a construction cost estimate.
• As recently as July, four years in and with contracts already awarded, the Fed still had not set a guaranteed maximum price.
• Some work drew few or no bids, which pushed costs up substantially.
• Internal governance “wasn’t equipped” to run a project of this size and complexity.
• Design changes, site conditions and, of course, inflation. The OIG said “inflation was clearly a factor,” which is a notable admission from an institution whose one job is controlling inflation.

As for the marble, water features and rooftop garden that critics fixated on, the OIG said they “did not materially drive” the cost surge (so Powell was vindicated on the beehives, if not on the budget).

The new Marriner Eccles sheriff, Fed Chair Kevin Warsh, said the Fed will adopt all of the recommendations, hand management of the project to the General Services Administration (reporting to the Board and to Warsh), and bring in an independent auditor to review every cost awarded to date. “There are important lessons to be learned,” Warsh wrote to IG Michael Horowitz, whom Powell appointed in June 2025.

Frequent ZH readers will remember how this saga played out. In July 2025, with Trump publicly pressing for rate cuts, the renovation became the administration’s preferred lever: Trump said he wouldn’t fire Powell “unless there is fraud w/ renovation” (July 16, 2025). Days later, Powell was criminally referred to the DOJ for perjury (July 21, 2025) over his June 2025 testimony that there was “no VIP dining room, there’s no new marble… there’s no beehives and there’s no roof terrace gardens.” Trump then toured the site in a hard hat alongside Powell (July 24-25, 2025), producing the most awkward cost-overrun negotiation in central banking history. At the time, OMB’s Russ Vought insisted the criticism was “not about firing Powell” but “about holding the Fed accountable.”

Things escalated in January, when the Fed was served with grand jury subpoenas and Powell vowed to “stand firm” (Jan 12, 2026), accusing the administration of using the probe to punish the Fed for not cutting rates:

“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”

Federal prosecutors followed up with a surprise visit to the renovation site, with US Attorney Jeanine Pirro saying any project with “cost overruns of almost 80 percent” deserved “serious review.” Then in March, Judge Boasberg quashed the DOJ subpoena (March 13), calling it “pretextual.” After Republican senators held up Warsh’s confirmation over the probe, Pirro dropped the investigation (April 24), deferring to the very IG report that came out today.

So case closed? Not quite

Pirro said at the time that she would scrutinize the IG’s findings, leaving open the option to reopen the case. And Powell, who broke with tradition by staying on the Board as a governor after his term as chair ended in May, said he would not leave “until this investigation is well and truly over, with transparency and finality.”

Well, Powell can now leave as today’s report gives him the “finality” part. Whether it gives him a reason to leave is another question. And whether a clean bill of health from an IG that Powell himself appointed and whose review Powell himself ordered will satisfy Pirro or the White House is… well, we’ll find out soon enough: keep an eye on Trump’s Truth Social account (especially if like Jane Street and the HFTers you are paying $100,000 to get them 20 millisecond before everyone else).

One thing is certain: a building project that nearly doubled in cost thanks to poor planning, no price cap and “inflation” is a perfect metaphor for the institution it will house.